Judge Appears to Strike Down Majority of New York Cannabis Regulations; Switches Course a Day Later

Cannabis Blog Apr 4, 2024 New York, NY

In a decision published on Wednesday, the Honorable Kevin R. Bryant appeared to eviscerate the vast majority of the cannabis regulations promulgated by the New York Office of Cannabis Management (“OCM”) and Cannabis Control Board (“CCB”). But what exactly did it mean, and why did he seemingly walk it back the following day in an amended order that is currently pending?

Both decisions agreed with petitioner Leafly Holdings, Inc. and found that the regulations were “arbitrary and capricious” and violated New York’s constitution. According to both decisions, the state failed to provide evidence to rebut the arguments presented by Leafly and “nothing to establish the rationale or reasoning behind OCM and CCB decisions.” The court continued its admonishment of the New York regulators finding that “[t]here is nothing in the record to establish precisely how OCM developed the regulations, which staff members participated in the process or how they addressed the litany of issues that were raised not only by Petitioners but by other individuals who submitted comments.” As a result, the court initially struck down “Parts 118 through 121, 123 through 125, and 131 of Chapter II of Title 9 of the Official Compilation of Codes, Rules and Regulations.” If that seems like a lot, that is because it is. Those parts of the regulations are essentially all of the regulations that regulate the operations of cannabis retailers operating (or looking to operate) in New York. Included in the stricken parts of the regulations is the definition of “true party of interest,” the ownership restrictions on the number of licenses someone can hold, the ownership restrictions on the types of licenses someone can hold, and the proximity protections afforded licensed retailers that have already identified their real estate. In other words, the initial decision went well beyond the marketing regulations that Leafly was challenging.

That decision sent shockwaves through the cannabis industry that lasted nearly 24 hours. “The judge appears to have struck down ALL OF THE ADULT USE REGS,” Cannabis Association of New York Board President Damien Cornwell said in a statement, but he also went on to speculate that he believed Judge Bryant would narrow the reach of his order to just the regulations challenged by Leafly. His statement continued, “It is likely that the judge may narrow his order to just the regulations governing third-party platform, marketplace or aggregators, or I would assume the OCM will appeal the decision and request an emergency stay on enforcement of the judge’s decision.” Mr. Cornwell was absolutely correct.

Today, Judge Bryant placed an amended order on his docket that limited his decision to only those regulations challenged by Leafly’s petition that remains listed as “pending” as of this communication. That makes sense because the initial order went beyond what even Leafly was asking for and there was no analysis as to what steps the OCM or CCB took in promulgating the other regulations. Even so, the cat is out of the bag. As many have suspected (or known) for some time, the regulations are not a model of clarity and could have used some additional analysis prior to being published. That has now been laid bare in black and white in Judge Bryant’s decision. As a result, it is likely we will see additional lawsuits challenging other specific parts of the regulations like the one that was filed last week challenging the proximity protection as unconstitutional.

This is a developing story and there will likely be additional details coming out over the course of the next few days. Be sure to follow our blog for more information on this decision and all cannabis developments in New York. If you have any questions or would like to contact the authors, please email David Standa ([email protected]).

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Judge Appears to Strike Down Majority of New York Cannabis Regulations; Switches Course a Day Later

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