Medical pot companies are suing cannabis regulators

A trade group representing medical marijuana companies filed a lawsuit Thursday challenging the state’s decision to phase out recreational retail licenses.

The Coalition for Access to Regulated and Safe Cannabis filed a lawsuit in state Supreme Court in Albany, asking that the first type of retail license be deemed “unconstitutional” and that dispensary applications be immediately opened to all businesses. The 2021 cannabis legalization measure notes that “the initial application period for a dispensary license to sell adult cannabis will be open to all applicants at the same time,” the suit notes.

But regulators created a conditional program to give New Yorkers affected by old marijuana laws a head start. So far, the state has approved 66 conditional business licenses, including 13 on Long Island, for entrepreneurs who have — or are related to someone who has — a marijuana-related conviction. The applications are not open to other retailers, and the proposed regulations could ban medical marijuana companies from selling to recreational users until the end of 2025.

“Regulators have neglected their responsibilities to enforce [law] as written and instead focuses on high-level policies — a role that is reserved for our state’s elected officials,” coalition counsel David Feuerstein said in a statement.

The Cannabis Regulatory Authority, which oversees the industry, declined to comment on pending litigation.

The coalition includes a doctor, two people who want to join the cannabis field in New York and some of the businesses licensed to sell medical marijuana in New York, including Curaleaf, Green Thumb Industries, Acreage and PharmaCann, a spokesman said. Those firms have operations in other states and all but PharmaCann are publicly traded, according to their websites.

In court filings, the coalition argued that the state has been slow to introduce legal, recreational businesses, exacerbating users’ dependence on the now-thriving unregulated marijuana market. The group wants the court to declare conditional retail licenses “unconstitutional,” immediately open retail licenses to all applicants and require regulators to step up efforts to crack down on unlicensed cannabis businesses.

The lawsuit was widely anticipated, according to Neil Kaufman, whose Hauppauge-based law firm, Kaufman McGowan PLLC, represents cannabis investors and companies. He said medical marijuana companies are required to be vertically integrated — that is, to handle everything from cultivation to processing to sales — when the substance becomes legal for patients. Regulators are now limiting vertical integration in the entertainment sector and looking to rein in medical players, Kaufman said.

“These companies bought these licenses for $50 or $100 million and then invested tens or hundreds of millions of dollars more in building their infrastructure,” Kaufman said, adding that with full legalization, they expect to “realize the full fruits of their investment.”

“Lo and behold, they were frozen,” Kaufman said. “What do you expect them to do?”

Osbert Orduña, a Suffolk resident licensed to open a conditional retail store in Queens, said opening applications to everyone would “create chaos.”

“They know they’re in the best position with resources and money, and they’re able to push their way to the front of the line and leave everyone else behind,” said Orduña, co-chairman of the tri-state chapter of the trade group of the National Spanish Cannabis Council.

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