Cannabis Watch: Federal judge shuts down New York State cannabis license rollout in some regions

United States

An injunction granted by a federal judge in response to a lawsuit against the New York State Office of Cannabis Management threatens to severely impact the full launch of the state’s cannabis licensing program, an analyst said Monday.

Jefferies analyst Owen Bennett flagged a threat from a suit by Variscite NY One and its Michigan-based owner Kenneth Gay. The suit accuses New York State’s plan to award the first 150 licenses to business applications to in-state residents impacted by the War on Drugs breaches the state’s constitution’s dormant commerce clause that protects interstate commerce.

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U.S. District Court Judge Gary Sharpe on Thursday temporarily blocked the state from issuing about 63 of the 150 licenses in Brooklyn and parts of update New York cited in the Variscite NY One lawsuit.

Sharpe’s ruling said New York’s application structure “will have a discriminatory effect on out-of-state residents,” according to a report by the Associated Press.

Jefferies analyst Bennett said some of the first licenses from New York were expected to be issued by Nov. 21.

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The lawsuit could benefit larger operators of the state’s existing medical cannabis companies, including Curaleaf Holdings CURLF, +3.14%, Green Thumb Industries GTBIF, +3.03%, MedMen Enterprises Inc. MMNFF, -2.57% and Etain, which is being acquired by Scotts Miracle-Gro SMG, +6.45%, Bennett said.

“We are now in a situation now that many of the hemp cultivators are about to harvest, but there is a risk that they won’t have any stores, or very few stores, to sell it through,” Bennett said. “To save face, and to prevent a complete disaster, the Office of Cannabis Management may allow incumbents to put it through their own medical stores.”

Prior to this development, incumbent medical operators had been expecting to wait until at least the second half of 2023 to get licenses to sell cannabis to adults 21 and over.

Over the summer, Ascend Wellness Holdings Inc. AAWH, -2.79% said it would no longer move ahead with its deal to buy MedMen’s New York properties, partly because of the uncertain regulatory environment in the state. At the time, Ascend said scrapping the deal would leave it with $ 70 million in cash.

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