Judge blocks New York pot regulators from issuing recreational use licenses in Brooklyn, Westchester and other regions

Slow your roll, Brooklyn.

A federal judge in Albany has blocked state marijuana regulators from issuing recreational pot licenses in the borough and four other regions in New York.

The ruling by Northern District Judge Gary Sharpe Thursday prevents the state Office of Cannabis Management from giving conditional adult-use retail dispensary licenses to vendors in Brooklyn, the Finger Lakes, Central New York, Western New York, and the Mid-Hudson area, including Westchester County.

It comes as New York prepares to issue 150 licenses on Nov. 22. That number was whittled down from the 903 applications the state received between August and September. An additional 25 licenses will be given to nonprofit agencies involved in communities with high arrest and conviction rates for pot offenses.

Sharpe’s temporary order was issued in a lawsuit brought by Variscite NY One, Inc., a New York LLC created by Michigan man Kenneth Gay. The license pause will be in effect while the case is pending.

Gay filed suit against New York in September, challenging the eligibility requirements for recreational pot licenses.

The program approved by state regulators in July will grant the first Conditional Adult-Use Retail Dispensary licenses to minority owners in low income and primarily Black and brown communities.

It intends to level the playing field in New York’s burgeoning marijuana market by giving a head start to people in neighborhoods that have historically borne the brunt of stringent drug laws. Applicants must prove they or a relative have a pot-related conviction in New York, strong local ties, and experience running a business.

Gay, of Battle Creek, Mich., doesn’t qualify for one of the early licenses because he’s not a New Yorker and was convicted of a marijuana offense in his home state. His lawsuit filed on Sept. 26 argues the program violates his constitutional interstate commerce rights.

He says he’ll face irreparable harm if excluded from the first batch of licenses and that New York should balance the scales of justice in a way that would include him and other out-of-state business owners.

Opposing the injunction, New York lawyers said it would come right as 260 state-sanctioned cannabis cultivators have grown fields of bud ripe for picking at risk of spoiling or diversion to the black market.

Sharpe’s ruling found the state’s arguments were undercut by the fact the temporary order only closes off five of 13 regions. It doesn’t affect Manhattan, the Bronx, Queens, Staten Island or Long Island.

State cannabis regulators declined to comment on pending litigation. They will propose draft regulations for other non-conditional licenses in the coming weeks, which it expects to finalize by mid-2023.

Dan Livingston, the executive director of the Cannabis Association of New York, which includes 80% of New York’s licensed cannabis processors and cultivators in its membership, has advised members to proceed cautiously in the uncertain landscape.

“Anything that puts a damper in the rollout of recreational retail sales is a huge problem for the industry,” he said. “We know from watching other states roll out their legal cannabis industry that lawsuits are part of the rollout.”

Indeed, the case is not the first effort by Gay challenging a cannabis-related social equity program.

A federal lawsuit filed in the Eastern District of California in February — which named Peridot Tree, Inc. a Gay-connected company — accused the Sacramento Office of Cannabis Management of violating interstate commerce rights when it rejected his dispensary license application because he lives in another state.

Veteran pot lawyer Stanley Cohen said he’s come across similar lawsuits brought by everyday people that were quietly backed by powerful interests.

“There are guys named Dalai Lama and Megan Mush from the Hamptons or from Colorado, who are putting together money — largely white money, largely hedge fund money, largely inheritances — trying to find a person of color or someone who went to prison to be the face of the project and to get a license,” he said.

Cohen thinks Gay’s New York case will fail. He said citizens of different states have varying rights in multiple areas.

“It is not this blanket invitation for people from Germany, from France, from Michigan, and from Arkansas to get a license to sell pot in New York,” he said. “I think he had a better chance of winning the $2.1 million lottery last week.”

Gay declined to comment through his attorney.

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