New York Cannabis Shops Challenge State Over Distance Rule Change

A group of twelve cannabis shops in New York has initiated legal action against the state Office of Cannabis Management, claiming that a recent alteration to school-distance regulations poses a significant threat to their operations and undermines the state’s objectives for equity in the cannabis industry. The lawsuit, filed in Albany Supreme Court, contests a reinterpretation of a state law which mandates that cannabis dispensaries must operate at least 500 feet from any school.

Previously, since 2022, the Office of Cannabis Management measured this distance from the entrance of a school. However, in July 2023, the agency changed its approach to measure from the school’s property line instead. Although dispensaries currently in violation of the new rule can remain operational, they must secure new locations before their licenses can be approved or renewed, as stated on the Office of Cannabis Management’s website.

The plaintiffs assert that the rule change, which affects at least 152 dispensaries, produces “catastrophic” consequences that are “legally indefensible.” Jorge Vasquez, the attorney representing the dispensaries, emphasized the profound impact of the new regulations, stating, “This is truly irreparable harm. This goes beyond financial harm to small businesses. This is time. This is resources. This is energy. This is building relationships with communities.”

In supporting affidavits, dispensary owners have detailed the potential loss of their customer base and substantial financial investments, predicting job cuts if forced to relocate. The lawsuit seeks to halt the enforcement of the new rule and requests a judicial ruling to annul the change entirely.

The plaintiffs argue that the rule change violates the State Administrative Procedure Act by circumventing the required “notice-and-comment” period and infringes upon the dispensaries’ rights to due process and equal protection. Many affected dispensaries have invested hundreds of thousands of dollars, with some expenditures exceeding $1 million, in establishing their retail spaces.

State officials have indicated that they have reached out to 44 applicants and 108 licensees notifying them of conflicts with the new distance requirements. In response to the challenges posed by the rule change, New York has established a $15 million relief program that allows impacted dispensary applicants to receive up to $250,000 to assist in finding new locations.

In a statement, Kristin Devoe, spokesperson for Governor Kathy Hochul, expressed the governor’s commitment to support these businesses. Devoe stated, “The governor has been clear that she will work with the Legislature to ensure these hardworking businesses are able to continue to operate without interruption.”

As the legal proceedings unfold, the dispensaries’ future remains uncertain, with the potential for significant ramifications for both the businesses in question and the broader landscape of cannabis regulation in New York. Spokespersons for the Office of Cannabis Management did not provide a comment at the time of this report.