Federal judge thwarts effort to stop New York weed licensing

A federal judge on Friday rejected an effort to halt New York’s cannabis licensing process, allowing the troubled rollout of the state’s recreational weed market to continue even as the state faces more legal challenges.

The ruling stems from a lawsuit brought by a pair of entrepreneurs who argued that New York’s licensing rules unfairly discriminate against out-of-state residents in violation of the U.S. Constitution.

They sought a court order halting the licensing process.

But Northern District of New York Judge Anne Nardacci — who was appointed to the bench by President Joe Biden — rebuffed their arguments, concluding that more harm would come from impeding the rollout of the state's adult-use market.

“The balance of equities tips in Defendants’ favor,” Nardacci wrote, noting that thousands of cannabis entrepreneurs have made significant investments in seeking to win business licenses. “Defendants have laid out the significant harm Plaintiffs’ requested injunction would cause to New York’s adult use cannabis industry.”

The attorney handling the case, Jeffrey Jensen, did not immediately respond to a request for comment about whether the plaintiffs plan to appeal.

The arguments

Various state cannabis programs have been challenged in federal court under the Dormant Commerce Clause, which bars states from interfering in interstate commerce. The courts have split over whether the legal doctrine applies to state-legal cannabis markets given that the drug remains illegal under federal law.

While New York’s cannabis market doesn’t have a residency requirement, license applicants can receive “extra priority” if they meet certain criteria, including having a past cannabis conviction in New York state. The plaintiffs in the case before Nardacci argue that this creates an unfair advantage for New York residents.

Key context

The courts have previously blocked the state’s progress on issuing cannabis licenses in two separate cases — one in state court and one in federal court. In both prior cases, the state settled with plaintiffs, which ultimately allowed licensing to move forward.

Fewer than 60 licensed dispensaries are open, however, while thousands of illicit storefronts sell weed without a license in New York.

What’s next

New York still faces more legal hurdles. Most notably, another lawsuit filed in state court earlier this week is also seeking to halt the licensing process.