Medical pot firms sue cannabis regulators

A trade group representing medical marijuana firms filed a lawsuit Thursday challenging the state's decision to issue recreational retail licenses in phases.

But regulators created a conditional program to give a head start to New Yorkers impacted by the old marijuana laws. So far, the state has approved 66 conditional business licenses, including 13 on Long Island, for entrepreneurs who have — or are related to someone who has — a marijuana-related conviction. Applications are not open to other retailers, and proposed regulations could bar medical marijuana companies from selling to recreational consumers until late 2025. 

"Regulators have neglected their responsibilities to enforce the [law] as written and instead focused on high-minded policymaking — a role that is reserved for our State's elected officials," coalition counsel David Feuerstein said in a statement.

The Office of Cannabis Management, which oversees the industry, declined to comment on pending litigation. 

In court papers, the coalition argues the state has been slow to usher in legal, recreational businesses, exacerbating consumers' reliance on a now-flourishing unregulated marijuana market. The group wants the court to declare the conditional retail licenses "unconstitutional," immediately open up retail licenses to all applicants and require regulators to step up efforts to combat unlicensed cannabis businesses.  

The lawsuit was widely expected, according to Neil Kaufman, whose Hauppauge-based law firm, Kaufman McGowan PLLC, represents investors and cannabis firms. He said medical marijuana firms were required to be vertically integrated — that is to handle everything from cultivation to processing to sales — when the substance became legal for patients. Now regulators are limiting vertical integration in the recreational sector and looking to hold back medical players, Kaufman said.

"These companies bought these licenses for $50 or $100 million and then they invested tens or hundreds of millions of dollars more building their infrastructure," said Kaufman, adding that with full legalization, they expected to "realize the full fruits of their investments."

"Lo and behold, they were frozen out," Kaufman said. "What do you expect them to do?" 

Osbert Orduña, a Suffolk resident licensed to open a conditional retail shop in Queens, said opening applications up to everyone would "create pandemonium."

"They know that they are best situated with resources and money and able to work their way to the front of the line and leave everybody else behind," said Orduña, co-chair of the tristate chapter of the National Hispanic Cannabis Council trade group.

By Sarina Trangle

sarina.trangle@newsday.comSarinaTrangle

Sarina Trangle covers affordability and cost of living issues and other business topics. She previously worked as an editor and reporter at amNewYork.