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. Even stores that were just waiting for the final green light to open have now been prevented from doing so.

Here’s why a state judge put the rollout 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 awards 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.

Since then, Justice Bryant has granted some licensees’ requests to testify at a hearing next week in favor of lifting the restraining order. In the same proceeding, lawyers for the veterans will have to argue why the order should not be lifted for those licensees and why the court should not award them monetary damages.

No one knows yet. It depends on whether regulators and those suing them can reach an agreement and how long that takes.

If they don’t, Justice Bryant could lift the order if he feels the veterans are unlikely to win their case. Or, if he thinks the state’s defense is weak, he could grant the veterans’ request for a stricter injunction that would extend the pause on licensing until the case is resolved.

The next hearing is scheduled for Aug. 25.

The issue could also be resolved if the Legislature called a special session to write the new dispensary licenses into law, erasing any doubt about the regulators’ authority to issue them. A major industry group has publicly called for lawmakers to take that step.

If the case drags out too long, state regulators will have to postpone an expansion of the market planned for the fall.

A package of regulations that were scheduled to be made final in September would have to be revised, and the application period for a broader variety of licenses, like plant nursery, co-op and distributor permits, would not open in October as planned.

Instead, if this is not resolved by November, regulators will have to start over, which would push the expansion into next year.

Hundreds of licensees working to open dispensaries are also at risk of going out of business and being 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.

The Office of Cannabis Management provides a list of upcoming showcases on its website.

By admin

Leave a Reply

Your email address will not be published. Required fields are marked *