Judge walks back cannabis ruling
ALBANY — A state Supreme Court justice amended his order late Thursday that had struck down New York’s cannabis regulations, limiting his decision only to those sections that ban third-party marketing.
However, the crux of state Supreme Court Justice Kevin R. Bryant’s decision that found New York’s cannabis regulators had failed to provide any evidence buttressing their decision to adopt the full regulations exposed a constitutional weakness in the process that opens the door for any future court challenge.
The amended order was issued in a case filed last year by a Seattle company that provides third-party marketing for marijuana businesses and had challenged the constitutionality of the state’s ban on that type of advertising.
Bryant found the state failed to provide any evidence, including “actual transcripts of meetings of the (Cannabis Control Board) or other documentation regarding the development of the challenged regulations or the presentation of the proposed regulations to the (board).
“They have also failed to submit any transcripts or meaningful minutes of (Cannabis Control Board) meetings that would enable this court to determine the factual basis or the reasoning supporting their decision to adopt the regulations,” Bryant added.
The Office of Cannabis Management’s assertion in the case that it had done its research and considered public input before drafting the regulations that were adopted by the Cannabis Control Board — more than two years after marijuana was legalized in New York — relied heavily on an affidavit submitted by John Kagia, who is the policy director for the Office of Cannabis Management.
But Bryan’s ruling noted that it’s unclear whether Kagia
worked for the office at the time the regulations were drafted.
“While Mr. Kagia outlines his own beliefs regarding the factual and policy issues before this court, there is no indication in the record that he presented these opinions to the (cannabis board) during their deliberations regarding the regulations or that any of the studies that he references were made part of the record and considered by the (board) prior to their action to approve the contested regulations,” Bryant wrote.
Leafly Holdings, the Seattle company that brought the case along with a cannabis business, Stage One, and an individual cannabis consumer from Erie County, accused the state Office of Cannabis Management of refusing to consider the public comments it submitted more than two years ago when the regulations were being finalized.
Indeed, critics in the industry have said the machinations of the Office of Cannabis Management have often been conducted behind-the-scenes with little public disclosure of how decisions on regulations were formulated.
Bryant agreed with Leafly’s arguments that there was no “evidentiary basis” for how cannabis regulators drafted their regulations, including whether they gave due to consideration to the input they received during the public comment period from companies like Leafly.
“In point-of-fact, there is nothing in the record to establish precisely how (the Office of Cannabis Management) developed the regulations, which staff members participated in the process or how they addressed the litany
of issues that were raised not only by petitioners but by the other individuals who submitted comments,” Bryant wrote. “For these reasons, there is no legal basis for this court to consider the (cannabis office’s) staff’s purported ‘expertise’… when determining whether the challenged regulations as approved by the board were consistent with the policy goals of the (Marijuana Regulation and Taxation Act).”
Bryant initially ruled the eight sections of the state’s cannabis regulations “governing the adult-use cannabis market are hereby declared unlawful and void as arbitrary and capricious.”
He subsequently amended the order to throw out only the regulations governing third-party marketing firms such as Leafly Holdings.
The state Office of Cannabis Management issued a statement saying they are “reviewing the decision and exploring all possible legal options.”
Leafly Holdings issued a statement Thursday saying the company hopes the decision “ultimately leads to a healthy, stable adult-use market in the state.”
“It’s impossible to overstate the importance of providing consumers with choices and educational
information when making purchasing decisions,” the statement added. “It is critically important that licensed-retailers have equal access to important advertising and marketing tools to help them succeed in a competitive landscape.”
For more than a decade, Leafly, which is incorporated in Delaware, has operated a marketing platform that enables consumers to “make informed purchasing decisions regarding cannabis,” including about prices, business hours and available products.
It’s the latest setback for an office that has been beset with problems and, according to Gov. Kathy Hochul, done a poor job rolling out the state’s struggling retail marijuana industry.
In February, six members of the state Senate’s Subcommittee on Cannabis sent a letter to the Cannabis Control Board and New York’s top regulator urging them to do better.
The letter was sent less than four months after their subcommittee conducted its first hearing on the state’s struggling retail cannabis rollout, which is behind schedule and has left many stakeholders in financial peril, including growers, cultivators and those on a waiting list to open a retail store.