A New York judge has once again ordered the Cannabis Control Board (CCB) to stop issuing retail licenses after the state agency lifted requirements that certain retail applicants secure locations prior to license approval. The court ruling came one day before the Office of Cannabis Management’s Cannabis Advisory Board recommended limits on the number of retail licenses approved over the next 18 months.
The court order from Organic Blooms LLC et. al. v. New York State CCB et. al. in New York’s Albany Supreme Court applies only to Conditional Adult-Use Retail Dispensary (CAURD) and provisional licenses. It follows a lawsuit filed by four applicants from the state’s December 2023 queue.
Earlier this year, OCM created a provisional license type that didn’t require a secured property while an application was under review. They also created a waiver for CAURD applicants, the earliest licensing group for applicants with a prior New York cannabis conviction, who lost their location during the delayed review process. The change was made in an attempt to ease the hardship of having to continuously pay rent on a property for months, and in many cases over a year, before they have a chance to obtain a license and open for business.
That change created an unfair advantage, according to plaintiffs, against applicants who had to secure locations and continue paying rent regardless of their current licensing status.
“Standing alone, petitioners’ market share/first-mover advantage claims might not be enough to carry the day in terms of irreparable harm,” wrote Judge Sharon Graff in her 14-page order. “As noted, however, petitioners also point to the risk of loss of the proximity protection of their secured locations and thus being ‘ousted’ from those locations by CAURD and other provisional license applicants who are permitted to designate a secured location after their provisional license has been granted.”
At this point, OCM is still allowed to review applications for general operators from the November and December 2023 queues, while CAURD and provisional applicants have to wait for a court resolution.
Advisory board recommends license limits to protect existing market
Regardless of how long that resolution may take, OCM could be looking to limit the number of license approvals moving forward, based on a recommendation from the agency’s Cannabis Advisory Board (CAB).
The advisory board is composed of an assortment of experts in the cannabis space who provide guidance to the control board, which approves licenses and CAB rule recommendations.
About a year after CAURD applicants were given the first shot at New York’s adult-use market, OCM opened applications for all license types at the end of 2023. Applications were collected in two cohorts, one in November and the other in December. The CCB is still reviewing those November applications, approving at least 100 each month throughout 2024.
There were 261 adult-use stores open in New York as of Dec. 10, with hundreds more approved licenses working to open up shop.
As the CCB finished up its review of November applications, the CAB unanimously voted Oct. 12 to recommend limiting licenses to no more than 1,000 retail from the December cohort and no additional cultivation licenses.
“We are not recommending issuing any more cultivation licenses until we at least have a better sense of the outlook and state of production moving forward,” said OCM Policy Director John Kagia. “One of the things that we have learned from other jurisdictions is that when you have a hyper-saturated market of production, cultivators generally don’t reduce how much they produce, and then you start seeing products seeping out of the back of the barns and falling off the back of trucks into the illicit market.”
Currently, the state estimates there are about 75,000 people per operating dispensary. If all of the roughly 800 approved licenses from the November cohort were to open, that ratio would drop to about 25,000 per store. Adding an additional 1,000 from the December cohort would bring the state’s total number of retail shops to about 2,000, which would lower the ratio to about 10,000 people per store.
“That would put us right in line with some of the most mature and competitive markets,” said Kagia, comparing New York to Colorado, Maine and Michigan.
Despite Michigan’s oversupply woes, the state has 1,013 active retail licenses averaging about 9,900 residents per store, based on data from both CRB Monitor and the U.S. Census. Maine averages about 8,300 residents for each of its 168 shops, while Colorado has 961 retail licenses, amounting to 6,100 residents per store.
Comparatively, California has 24,800 residents per store, based on the 1,568 active retail licenses, and Massachusetts, which started to see a rise in shuttered shops this year, has 18,100 residents per store for its 386 retail licenses. On the other end of that spectrum, New Mexico only has about 2,600 residents per store with that state’s 806 retail licenses.
