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Conditional Adult-Use Retail Dispensary Licenses Blocked in Five Regions

Michael Roche

  585.231.1364

  mroche@hselaw.com

On Thursday, November 10, 2022, a federal judge issued a preliminary injunction that will prevent the Office of Cannabis Management (“OCM”) from issuing Conditional Adult-Use Retail Dispensary (“CAURD”) licenses in five regions throughout New York State. As we previously noted, OCM has established 14 geographic regions throughout the state, with a certain number of CAURD licenses available for each region. The injunction impacts the Finger Lakes, Central New York, Western New York, Mid-Hudson and Brooklyn regions. These five regions account for 63 of the 150 CAURD licenses available for issuance.

The plaintiff, Variscite NY One, Inc. (“Variscite”), alleged that the requirement that an applicant for a CAURD license have a significant presence in New York State, be incorporated in New York State, or have a majority of its ownership held by residents of New York State, violated the so-called Dormant Commerce Clause of the U.S. Constitution. The Dormant Commerce Clause prevents states from unduly restricting interstate commerce in favor of intrastate commerce. Variscite had applied for a license in the Finger Lakes, Central New York, Western New York, Mid-Hudson or Brooklyn region and was denied because it did not satisfy the New York presence requirements.

This preliminary injunction aligns with injunctions that have been granted in other states, including one issued by the First Circuit Court of Appeals in connection with Maine’s cannabis program.

The injunction does not strike down the CAURD license scheme but will prevent OCM from issuing licenses in the five regions while the case proceeds. It also indicates that the court believes Variscite is likely to succeed when the court ultimately determines whether the New York presence requirement is constitutional.

If you have any questions regarding this LEGALcurrents, please do not hesitate to contact any member of the firm’s Cannabis Law practice group at 585.232.6500 or 716.853.1616.

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