A federal judge has rejected a challenge to New York state’s licensing program for selling legal marijuana, a system two California applicants say unconstitutionally discriminates against out-of-state residents.
The ruling Friday by Albany Judge Anne M. Nardacci may spur New York into issuing hundreds of licenses in a state where most marijuana is sold by unlicensed businesses.
Nardacci said the public interest in letting properly licensed businesses take over the market in New York outweighed concerns raised in the lawsuit.
She said the main purpose of the dormant Commerce Clause plaintiffs argued should allow them to access New York's market doesn’t apply to the federally illegal cannabis trade. The clause is supposed to stop states from creating protectionist measures to restrict interstate commerce in the absence of rules from Congress.
Two companies controlled by Los Angeles residents had sought a temporary restraining order and preliminary injunction in their mid-December lawsuit. They aimed to stall the state's licensing process while the lawsuit proceeded.
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Nardacci rejected the requests in a written ruling, saying an injunction would allow the illicit store operators who now control the market to continue dominating it as the rollout of regulated licenses to sell cannabis products would be delayed.
A lawyer for the plaintiff’s did not immediately respond to requests Sunday for comment. New York state Attorney General Letitia James said in a statement that she was “pleased” with the court decision.
"This is an important victory in our efforts to ensure that disproportionately impacted communities are given their fair share in the legal cannabis industry,” James said.
The state launched its program in October, saying it intended to grant many of the first licenses to individuals with past drug convictions. The system was meant to offer people harmed by the war on drugs a chance to succeed in the market before competitors rushed in.
Lawyers for the state had argued that over 1,000 retail storefronts were expected to be licensed this year and they maintained that the state's application process allows out-of-state residents to prove that they reside in an area disproportionately impacted by cannabis prohibition.
The moves were expected to boost the number of legal dispensaries in a market now dominated by black-market sellers who simply opened retail stores without a license.
Critics blame New York’s slow retail growth partly on bureaucratic issues, like delays in setting up a $200 million “social equity” fund to help applicants open shops. The rollout also was hobbled by lawsuits on behalf of people and businesses excluded from the first wave of retail licenses.
