Marijuana e-commerce platform Leafly has filed a lawsuit challenging the New York Office of Cannabis Management’s ban on third-party marketing and advertising services in the state’s nascent recreational cannabis industry. A recent report from Spectrum News 1 revealed that Leafly Holdings is a plaintiff in a suit against state cannabis regulators.
The Albany County state Supreme Court lawsuit argues that the state’s rollout of cannabis has been “disastrous” and has essentially hampered the fledgling industry’s growth. The suit comes at a time when New York cannabis regulators are dealing with litigation from several parties, which has held back the rollout of recreational cannabis sales in the state.
It claims that the state’s Office of Cannabis Management adopted advertising and marketing regulations that target third-party platforms such as Leafly Holdings and that these regulations are actively limiting the industry’s ability to promote and market its products. A statement from Leafly noted that the “unprecedented restrictions” place major restrictions on the ability of small business owners to reach their consumers.
Leafly is a Seattle-based company that functions as a “customer acquisition tool” for 4,600 cannabis retailers and more than 7,800 brands. The company’s main bread and butter for the majority of its life was cannabis industry reporting. However, it recently pivoted to customer-oriented content such as cannabis product descriptions and information. Leafly currently features more than 11,000 cannabis resources and stories as well as more than 5,000 marijuana strains.
Players in the state-level cannabis industry already deal with a wide variety of barriers due to federal prohibition, and Leafly argues that the Office of Cannabis Management’s advertising rules add even more barriers for small business owners. The Seattle-based company said that every customer should have the right to compare prices and shop wherever they please, but New York chooses to ignore this right, according to several court cases related to commercial speech.
Now that New York is set to launch recreational sales with a ban on third-party marketing in place, Leafly is the primary plaintiff in a suit seeking to overturn the third-party marketing ban. Ryan McCall, the deputy cannabis practice chair at Tully Rinckey LLC, says the rule limits the number of businesses that could be involved in New York’s recreational cannabis industry in the future.
He theorizes that Leafly and other plaintiffs are suing the state now because it is preparing to implement cannabis regulations in and roll out recreational sales. McCall says this recent lawsuit will likely result in a reasonable compromise for both parties. However, he notes that it could affect marketing rules moving forward if a compromise isn’t reached.
The marijuana industry is constantly engaged in advocating for improved conditions akin to what other industries enjoy, and cannabis industry players such as Aurora Cannabis Inc. (NASDAQ: ACB) (TSX: ACB) will be watching how this particular case pans out since it could chip away another form of unfair treatment targeting marijuana industry actors.
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