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Injunction halting marijuana licensing sparks confusion in industry

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ALBANY — Marijuana retail store operators and applicants hoping to become one have been left confused after a judge granted an injunction Friday that will halt New York’s marijuana licensing program while a court challenge of the system unfolds.

State Supreme Court Justice Kevin R. Bryant decision continued an earlier restraining order and injunction that has blocked regulators from processing new applications for retail licenses under a program that the judge said is in “legal jeopardy.”

The decision left open the door for exemptions from the injunction, including “any licensees who, prior to Aug. 7 … met all requirements for licensing.” Legal experts said that the ambiguity in how requirements are defined in the multi-step licensing process has left applicants and operators of dispensaries unsure of their standing.

Bryant found that marijuana regulators had “failed to follow the clear language of the applicable legislation” that legalized cannabis when they veered from the plain language of the 2021 statute and created a program to award conditional retail licenses exclusively to applicants with past marijuana convictions.

The judge noted that New York regulators continued their preferential licensing program, and even expanded it, in the face of mounting legal challenges asserting that it was unlawful and violated the constitutional rights of other “social equity” applicants, including minority- and women-owned businesses, as well as disabled military veterans.

The injunction also said that applicants can seek court intervention on a “case-by-case” basis to gain exemption from the halting of licensing activity already being processed.

Robert DiPisa, the chair of the cannabis law group at Cole Schotz, said their clients have been left frustrated by the confusion over whether they will be exempted and allowed to proceed in opening their businesses.

“The only one who can give that answer is the court and the judge,” DiPisa said. “As of right now, we’re all just speculating.”

The injunction also called on the state Office of Cannabis Management to submit a list by the end of Tuesday of all licensees who meet the exemption requirements.

The plaintiffs in the case — four service-disabled veterans — filed their lawsuit earlier this month accusing regulators of unlawfully prioritizing applicants with prior drug convictions while excluding others. The judge gave them until Thursday to file any objections to the state’s list.

On Friday, Bryant is scheduled to hear arguments in the case before issuing a decision on the list of applicants who would be allowed to continue with the process to open retail marijuana stores, while others would need to wait for the litigation to play out.

The judge’s order last week also directs the state Cannabis Control Board to promptly finalize its regulations for recreational marijuana to move forward with the “application process for all identified groups set forth in the (Marihuana Regulation and Taxation Act).

The Office of Cannabis Management was ordered to continue to keep the judge apprised of the situtation in anticipation of the opening of the application process to all parties, which is tentatively scheduled for Oct. 4.

Bryant asked representatives to “provide updates and to ensure that appropriate progress is being made to ameliorate whatever impediments exist to the approval of a process that arguably will make these proceedings moot.”

The beginning of that application period may actually take longer, legal experts said. If rules regarding the regulation of cannabis sales are revised, the Cannabis Control Board will need to meet to approve the rules before they would be posted for a public comment period that could take months.

In addition, the injunction is expected to cause slowdowns to an already delayed rollout process in the two years since New York legalized marijuana and began shaping its nascent retail market.

“Effectively, we’re frozen until Friday,” said Ryan McCall, an attorney for the Tully Rinckey firm who specializes in cannabis law.

While the injunction will not affect all who have received licenses, the line dividing who is exempted from the injunction and who is not has not been clarified, legal experts said.

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