Harris Beach: Judge Strikes Down New York’s Cannabis Marketing Rules

Harris Beach PLLC

In a sharp rebuke to New York’s Cannabis Control Board, state Supreme Court judge Kevin R. Bryant dealt a blow to the adult-use cannabis industry when he issued a decision in Leafly Holdings, Inc. et al. v. NYS Office of Cannabis Management, et al., striking down nearly the entirety of the Office of Cannabis Management regulations governing recreational cannabis as “unlawful and void as arbitrary and capricious.” Shortly after the ruling was filed to the public docket and met with public alarm, the judge amended the decision to invalidate only the state’s rules regarding third-party marketing.

The lawsuit was filed by Leafly Holdings, a Seattle third-party marketing company, who accused the state of operating secretly and not considering its public comments on the marketing rules developed after state residents passed the Marijuana Regulation and Tax Act (MRTA) in 2021. The company claimed there is no evidence of how regulators drafted their marketing regulations and whether they considered Leafly’s (and other commentators) input. It called the rules vague and alleged the strict regulations barring third-party marketing platforms from operating in the adult-use cannabis space violated the company’s free-speech rights.

Leafly operates a marketing platform that exposes customers in the United States to more than 7,800 brands and 4,600 marijuana retailers. It claims to process more than 4 million orders annually. New York’s regulations would ban businesses located in the state from advertising on the platform.

In his ruling, Bryant criticized state regulators for not providing evidence documenting the development or crafting of the harsh regulations.

“They have also failed to submit any transcripts or meaningful minutes of meetings that would enable this court to determine the factual basis or the reasoning supporting their decision to adopt the regulations,” Bryant opined.

“In point-of-fact, there is nothing in the record to establish precisely how OCM 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. For these reasons, there is no legal basis for this Court to consider the staff’s purported “expertise”…when determining whether the challenged regulations as approved by the Board were consistent with the policy goals of the MRTA.”  Bryant added, “…it is the finding of this Court that the aforementioned regulations constitute impermissible restrictions on Petitioners right to free speech and that they are unconstitutionally vague.”

New York Continues to Lose in Cases Challenging Cannabis Rules

Bryant’s original ruling contained this passage: “Moreover, for the reasons set forth by Petitioners, based on the record before this Court, particularly the complete lack of justification and/or support in the administrative record, it is the finding of this Court that the regulations constitute impermissible restrictions on Petitioners right to free speech and that they are unconstitutionally vague.”

After public outcry that he had declared all of the state’s rules unlawful and thrown the state’s program into chaos, Bryant removed the passage and amended his ruling to specify it pertained to the marketing rules.

Still, his initial assessment seems to align with the state’s insurmountable challenges to the cannabis industry rollout. Numerous lawsuits, some already garnering unfavorable rulings for the state, have been filed challenging the adult-use regulations. Justice Bryant himself previously issued a critical ruling in August 2023 in another case that temporarily prohibited the state from issuing retail cannabis licenses, finding a group of veteran plaintiffs were likely to be successful in their lawsuit alleging regulators acted unconstitutionally by prioritizing cannabis retail licenses for those with past cannabis convictions.

The state is now three years from the MRTA’s passage and still does not have a fully operating licensing system to capitalize on a market projected to generate billions of dollars. Meanwhile, an illicit cannabis market flourishes in New York.

https://www.jdsupra.com/legalnews/judge-strikes-down-new-york-s-cannabis-5219787/

Top 200 Cannabis Lawyers

We Support

Cannabis Law Journal – Contributing Authors

Editor – Sean Hocking

Author Bios

Canada
Matt Maurer – Minden Gross
Jeff Hergot – Wildboer Dellelce LLP

Costa Rica
Tim Morales – The Cannabis Industry Association Costa Rica

Nicaragua
Elvin Rodríguez Fabilena

USA

General
Julie Godard
Carl L Rowley -Thompson Coburn LLP

Arizona
Jerry Chesler – Chesler Consulting

California
Ian Stewart – Wilson Elser Moskowitz Edelman & Dicker LLP
Otis Felder – Wilson Elser Moskowitz Edelman & Dicker LLP
Lance Rogers – Greenspoon Marder – San Diego
Jessica McElfresh -McElfresh Law – San Diego
Tracy Gallegos – Partner – Fox Rothschild

Colorado
Adam Detsky – Knight Nicastro
Dave Rodman – Dave Rodman Law Group
Peter Fendel – CMR Real Estate Network
Nate Reed – CMR Real Estate Network

Florida
Matthew Ginder – Greenspoon Marder
David C. Kotler – Cohen Kotler

Illinois
William Bogot – Fox Rothschild

Massachusetts
Valerio Romano, Attorney – VGR Law Firm, PC

Nevada
Neal Gidvani – Snr Assoc: Greenspoon Marder
Phillip Silvestri – Snr Assoc: Greenspoon Marder

Tracy Gallegos – Associate Fox Rothschild

New Jersey

Matthew G. Miller – MG Miller Intellectual Property Law LLC
Daniel T. McKillop – Scarinci Hollenbeck, LLC

New York
Gregory J. Ryan, Esq. Tesser, Ryan & Rochman, LLP
Tim Nolen Tesser, Ryan & Rochman, LLP
Cadwalader, Wickersham & Taft LLP

Oregon
Paul Loney & Kristie Cromwell – Loney Law Group
William Stewart – Half Baked Labs

Pennsylvania
Andrew B. Sacks – Managing Partner Sacks Weston Diamond
William Roark – Principal Hamburg, Rubin, Mullin, Maxwell & Lupin
Joshua Horn – Partner Fox Rothschild

Washington DC
Teddy Eynon – Partner Fox Rothschild