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New York Regulators Face Lawsuit Over Social-Equity Rules

Cannabis regulators in the state of New York have been hit with a new lawsuit filed earlier this month in the Albany County-based Supreme Court against the state’s Cannabis Control Board and Office of Cannabis Management. The issue is the state’s Conditional Adult-Use Retail Dispensary (CAURD) program, which gives priority to people who were impacted by the war on drugs. The suit was filed by four plaintiffs: Windward Management, Organic Blooms, Blackmark and Niagara Nugget.

The plaintiffs stated that the applicants under the program could file initial requests for a license without informing the local municipality or having to secure real estate. This, they allege, weren’t privileges that were extended to other parties that had applied for general licenses during the application window that ran from October to December.

According to the suit, the plaintiffs filed their adult-use applications during the aforementioned application period. The plaintiffs also revealed that they hadn’t yet received a decision from the state on the status of their applications.

The lawsuit argues that this controversial program is a capricious and arbitrary application of state law, adding that any license issued under the program is invalid. This means that the 460 permits issued under CAURD could be revoked, which includes a good number of the 127 adult-use stores licensed currently.

Almost all the cannabis retail stores open in the state are CAURD licensees.

The CAURD program was focused on fulfilling promises made by legislators to award initial business permits to social equity applicants. While it has done that, it has also been subject to multiple suits.

For instance, a group of disabled veterans challenged New York’s recreational cannabis licensing process. The suit alleged that the Office of Cannabis Management had acted ultra vires under the state’s 2021 legalization law.

The group recently reached an agreement last year, with plaintiffs expecting that it would put an end to a temporary injunction that was placed in August. The injunction, which was placed by the New York State Supreme Court, barred more than 400 CAURD licensees in the state from launching their businesses for months.

Some of these issues contributed to the delayed rollout of recreational cannabis sales in New York, which Governor Kathy Hochul described as a disaster. The first adult-use cannabis store opened for business in December 2022, more than 18 months after New York legalized recreational cannabis.

The governor recently announced that Chris Alexander, executive director for the Office of Cannabis Management, wouldn’t be returning after the end of his term in September.

These successive lawsuits are playing a role in delaying the full rollout of the adult-use marijuana program, and this is likely to be of concern to major industry actors such as Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) that wish to see robust markets sprouting and maturing as they serve consumers around the country.

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