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Why There Are Still So Few Places Sell Marijuana in New York

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Court challenges and bureaucratic roadblocks have created hurdles for would-be cannabis sellers in the state.

Since New York State legalized marijuana two and a half years ago, its effort to set up the industry has been a slow and bumpy ride.

By now, there were supposed to be more than 150 licensed dispensaries in the state selling products like edibles, smokable flower and vapes to everyone 21 and above. But — and this may come as a surprise to anyone seeing the bevy of smoke shops that have cropped up across the state — there are only 23 legal dispensaries, and many of them only offer deliveries.

The latest setback for the expansion of the retail program occurred this month when a state court order temporarily barred regulators from awarding and processing licenses for new stores. On Friday, a judge replaced the order with an injunction that carves out an exception allowing stores that were just waiting for the final green light to open.

Here’s why a state judge put licensing on hold, and what it could mean for the future of the industry.

Earlier this month, a group of veterans who became disabled during their military service filed a lawsuit challenging how the state was awarding its first dispensary licenses.

To qualify, individuals had to have been convicted of a marijuana-related offense before legalization, or have a close relative, like a parent or spouse, who was. They also had to have owned a profitable business for at least two years.

The veterans each met the business requirement, but they did not meet the conviction criterion. In the lawsuit, they argued that state cannabis regulators did not have the authority to create a new license for only one class of applicants. They said that power belongs to the Legislature, which mandated that everyone be able to apply for licenses at the same time.

Another group, led by companies currently licensed to sell marijuana to medical patients, filed a lawsuit centered on the same claim in March. But they did not ask to put a stop to licensing.

The veterans did. And the judge presiding over both cases, Justice Kevin R. Bryant of State Supreme Court in Kingston, N.Y., put a temporary hold in place. He instructed the state and the veterans to negotiate a settlement in the meantime.

Then on Friday, Justice Bryant issued an injunction that freezes licensing until regulators open up applications to the general public in the fall, a process that he said would make the main legal argument in both lawsuits moot. But he allowed regulators to move forward in granting final approval to current licensees who were just waiting to be told they could open their dispensaries. He also ordered the Cannabis Control Board to speed up plans to finalize regulations that are required to be in place before the new application process can begin.

It is not yet clear.

The regulations governing the next round of licensing were scheduled to be made final in September, but they may now have to be revised. That would delay the release of applications for more dispensary licenses, as well as those for businesses like plant nurseries, co-ops and distributors. Those applications were supposed to open in October.

The Office of Cannabis Management may need to revise the rules to integrate current licensees who cannot move forward because of the injunction. Then regulators would be required to accept public comments for 45 days, and wait another 30 days before approving the final rules. Only then could they open applications for new licenses.

However, if the process is not completed in November, by the one-year anniversary of when the regulations were first proposed, officials will have to scrap them and start all over.

The delays put hundreds of licensees working to open dispensaries at risk of going out of business. Many of them are on the hook for millions of dollars collectively because they took out loans, signed storefront leases or hired contractors.

Beyond the dispensaries, there are more than 300 farmers and manufacturers with few places to sell their goods. Only about 18,000 pounds of cannabis have been sold in legal dispensaries since the first licensed retailer opened in December, a rate that would leave 564,000 pounds of cannabis sitting in the state’s stockpile by the end of the year, regulators have said.

For nearly five months after legalization, former Gov. Andrew Cuomo and the Legislature were at an impasse over who should lead the new cannabis regulatory agency and its governing board. After Mr. Cuomo resigned in scandal, Gov. Kathy Hochul appointed the leaders of the Office of Cannabis Management and the Cannabis Control Board.

Since then, regulators like to say they have been building a plane as they’re flying it.

The agency spent the next year hiring staff, drafting regulations and setting up the cannabis supply chain with growers and manufacturers. Then, in March 2022, Ms. Hochul announced her plan for the rollout’s final piece: dispensaries that would be owned by entrepreneurs with marijuana convictions.

Before licensing could begin, a Michigan man sued in federal court over the program’s residency requirements and obtained an order that initially blocked licensing in five of the state’s most populous regions. Regulators later agreed to give him a license in exchange for his dropping the suit.

That wasn’t the only hurdle. A crucial part of the governor’s plan was for a state-led investment fund to provide start-up loans and secure storefronts to help the first 150 licensees open quickly. But that plan struggled for months to find an investor and willing landlords with suitable properties, so regulators loosened restrictions to allow licensees to find and use their own resources.

At the same time that regulators began issuing dispensary licenses, they proposed rules for expanding the market. After a major revision and a legally mandated review period, the board is scheduled to vote to finalize those regulations in September.

In the absence of licensed retail stores, the state has allowed retailers and producers to partner up and host farmers’ market-style showcases across the state. There, consumers can meet with farmers and manufacturers who grow and make legal products, smell their flower and taste drinks and candies that have not been infused. But only retailers can sell directly to consumers.

source : nytimes.com

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