Partner David Holland‘s letter to Stakeholders in the Cannabis Space is the subject of an extensive November 15th New York Law Journal article which questions the constitutionality of recent guidance from the Office of Cannabis Management regarding the avoidance of undue influence on retail license holders. Partner Andrew Schriever is also quoted in the article. David, who is also executive director of the Empire State arm of the National Organization for the Reform of Marijuana Laws (NORML), positioned his writing as an “open letter” to stakeholders who want to advance New York’s legal marijuana marketing.
The article begins, “As New York braces to award its first 150 marijuana retail licenses to people who were penalized for past pot offenses, a law firm with ‘significant’ cannabis clients in the Empire State warned on Tuesday that regulators of the emerging market recently put forth guidance that unconstitutionally excludes out-of-state operators. Prince Lobel Tye partner David Holland wrote a letter to the New York Office of Cannabis Management outlining that the ‘Marihuana Regulation & Taxation Act’ of March 2021 includes people and entities that operated successfully in other states.”
David explains in the letter that the act allows people and entities to hold licenses in more than one tier of the state’s two-tiered market structure. But a section of state guidance published on November 8th seeks to limit undue influence over cannabis retailers by prevention an entity in one license from influencing the actions of an entity in another tier. While David states he recognizes this as a legitimate goal, the legal problem arises from the portion of the provision that states: “Retail dispensaries, their true parties of interest, passive investors, and any management service providers cannot have any interest in any business anywhere that cultivates, processes, or distributes cannabis.” The article continues, “The provision goes on to explain that applicants with such an interest across license tiers, regardless of how small that interest is, will not be approved—and if approved, may face revocation of their license if a prohibited interest is later discovered.”
Attorney Holland states in the letter that this part of the law is unconstitutional in light of the Dormant Commerce Clause of the U.S. Constitution, which gives Congress the power to regulate commerce among states, Indian tribes and foreign nations.
The article continues, “Another Prince Lobel partner, Andrew Schriever, called a recent federal ruling from the Northern District of New York ‘a discrete threat to only those regions that were the subject of the injunction.’ But he said it could be something that could get picked up in both state and federal courts, with a ‘negative domino effect because it’ll encourage other types of challenges’ that would slow the new market.”
“While I completely understand and recognize that New York has legitimate interest in helping its entrepreneurs in this market get off to a good start, and helping New Yorkers in the market to develop businesses, they have to keep an eye on where the lines are, in terms of helping your own state’s population but also making sure that you’re not taking measures that would subject you to a challenge that would then result in not only potentially keeping others from out of state out of the market, or making it harder for them to get in,” Schriever said.
Prince Lobel’s cannabis team has extensive experience with cannabis issues in New York State, New Jersey, and New England.
Read the full article Here.