Four New York City marijuana dispensaries with social equity licenses are taking state regulators to court, accusing them of issuing covert exceptions to a 1,000-foot distance rule meant to separate dispensaries. They claim the move threatens their businesses and undermines the cannabis program’s integrity.
This lawsuit is the latest chapter in New York’s struggle to stabilize its cannabis industry, which has been plagued by bureaucratic delays, an unregulated market, and legal battles.
The Basis of the Lawsuit
The lawsuit, filed in Manhattan state court, alleges that the state Office of Cannabis Management (OCM) and Cannabis Control Board (CCB) “secretly” allowed some new dispensaries to bypass the rule requiring at least 1,000 feet of separation between cannabis stores in cities with populations exceeding 20,000.
The four dispensaries behind the lawsuit—L.O.R.D.S., Actualize Dispensary, Astro Management, and R&R Remedies—argue that these unannounced waivers were issued without proper consideration of legal requirements.
Astro Management CEO Jillian Dragutsky expressed frustration, saying these decisions jeopardize the viability of her business, which is weeks away from opening. She emphasized that regulators must enforce cannabis laws uniformly, without unauthorized flexibility.
Social Equity Operators in Jeopardy
The plaintiffs are part of New York’s Conditional Adult-Use Retail Dispensary (CAURD) program, created to support “justice-involved” individuals and nonprofits by giving them early access to cannabis licenses. This initiative aimed to address social inequities caused by previous marijuana laws.
However, the OCM’s decision to issue some licenses before operators secured real estate has led to conflicts. In cases where new licensees leased locations near existing stores, the 1,000-foot rule became a sticking point.
One waiver allowed a dispensary, Taozen, to operate only 750 feet from L.O.R.D.S. on Sixth Avenue in Manhattan. The plaintiffs argue that this waiver ignored the nine specific factors required by law to grant exceptions, such as promoting “public convenience and advantage.”
The Bigger Picture: New York’s Cannabis Challenges
This lawsuit highlights broader issues in New York’s cannabis industry, which was initially touted as a $1 billion market but has faced numerous obstacles since its launch:
- Licensing Delays: Bureaucratic inefficiencies delayed the rollout of retail licenses, frustrating many prospective operators.
- Illicit Market Competition: Illegal cannabis businesses have thrived, undermining legal retailers struggling to establish their foothold.
- Overlapping Litigation: This latest legal action joins other lawsuits challenging the OCM and CCB’s decisions, further complicating the regulatory landscape.
Currently, 285 adult-use dispensaries are operational statewide, with an additional 31 licenses approved last week. Hundreds more licenses have been issued but are pending store openings.
Waivers Spark a Turf War
To avoid conflicts stemming from the 1,000-foot rule, regulators quietly issued waivers, effectively triggering a turf war among dispensaries. The plaintiffs argue that these exceptions give some operators an unfair advantage, violating the principles of the CAURD program.
- Waivers were granted without proper transparency or adherence to the nine required legal factors.
- The lack of consistency in rule enforcement has left businesses in an unstable and unpredictable position.
- Social equity operators, already at a disadvantage, face heightened risks due to these decisions.
What’s Next for the Industry?
The lawsuit sheds light on the growing pains of New York’s cannabis market, which still has enormous potential but remains mired in controversy. As the industry matures, balancing regulation, equity, and business interests will be crucial.
Meanwhile, the OCM and CCB have remained silent on the lawsuit, declining to comment on the accusations. Operators like Dragutsky are calling for an immediate halt to these waivers to protect their businesses and the broader goals of the cannabis program.