On November 10, 2022, Judge Gary L. Sharpe of the New York Federal District Court in Syracuse entered an order enjoining New York’s retail cannabis dispensary application process in five regions of the state (Brooklyn, Central New York, Finger Lakes, Mid-Hudson and Western New York) for the Conditional Adult Use Retail Dispensary (“CAURD”) licenses (the “November Decision”). The November Decision follows similar decisions from other states’ federal courts: cannabis licensing rules that favor in-state residents over out-of-state residents violate the “dormant commerce clause” of the U.S. Constitution.
As we previously discussed here, all applicants for the CAURD license were required to demonstrate a significant presence in New York, either individually or by having a principal corporate location in New York. For entities, the New York “presence” requirement can be met by a majority ownership interest in the entity being held by individuals who are physically present in New York for at least 180 calendar days in the current year, or 540 calendar days over the past three years.
During the Plaintiff Variscite’s application process, Variscite selected Brooklyn, Central New York, the Finger Lakes, the Mid-Hudson area and Western New York as its regions for possible licensure. As such, the judge ruled that New York could not issue CAURD Licenses to operate dispensaries in those five (5) regions while the case is pending.
In late-January, Judge Sharpe denied motions to drop the injunction, writing that the state didn’t meet standards to reverse or mitigate any part of his November Decision.
The Second Circuit Decision
The State of New York appealed the November Decision and on March 28, 2023, the United States Court of Appeals for the Second Circuit issued a decision that narrowed the effects of the November Decision. This decision lifted the injunction that prevented the Office of Cannabis Management (“OCM”) from issuing the CAURD Licenses. The decision will enable the OCM to issue licenses for businesses in Central New York, Western New York, Mid-Hudson and Brooklyn as the court continues to hear the appeal. However, the injunction on CAURD licenses in the Finger Lakes Region remains in full force and effect.
We suspect that the OCM will begin reaching out to applicants in the four (4) regions that were previously affected by the injunction and commence issuing licenses accordingly.