Complaints are piling up around the Office of Cannabis Management’s selection process for general licenses, and not just from those stakeholders who are suing the state over this portion of the industry rollout.
Legacy operators, minority women and industry consultants are calling the OCM’s licensing scheme “alarming” and say the agency has again shifted the goalposts at the last minute.
“Honestly, at this point, I just feel like giving up,” said Christian Torres, a native New Yorker and longtime legacy operator who applied for a microbusiness license. “There are so many issues happening.”
Northern District of New York Judge Anne Nardacci, who was appointed by President Biden, rejected arguments to block the rollout on Friday brought on by a pair of entrepreneurs who argued in a lawsuit that New York’s licensing rules unfairly discriminate against out-of-state residents in violation of the U.S. Constitution, according to Politico.
Gov. Kathy Hochul this week called the rollout a “disaster” and pointed to conflicts between the Cannabis Control Board and OCM leadership. Additionally, the CCB and OCM are facing two more lawsuits that take issue with this current round of licensing — both of which seek an injunction.
“I just have zero faith,” said Torres, who said he is paying $6,000 a month to lease space in Brooklyn in the hope that he’ll receive a license. “I think this industry is never going to be a successful industry.”
A problem in the queue
Less than two months after attorneys for the New York Attorney General’s Office settled a lawsuit that prevented regulators from issuing new cannabis retail licenses for months, seven plaintiffs filed suit on Monday, arguing that the OCM’s licensing plan is defective in ways that weren’t clear until after application deadlines had passed.
The methodology regulators are using to select candidates’ applications for review and approval – or rejection – involves a randomized queue via lottery. Applications are divided into pools (i.e. one pool of applicants for cultivators, another for processors, etc.), and then applicants from each pool receive a queue number.
Regulators then review applications in the order of the queue numbers, and will stop when they’ve approved a certain number for licensure. OCM projected the number of licenses for each category in a November FAQ document.
But it wasn’t until the OCM released the queuing order on Jan. 12 when applicants found out that members of certain social equity groups receive three spots in the lottery, while everyone else gets one, said Joseph Levey, an attorney representing the seven women who applied for retail licenses and are now suing the state.
Levey’s clients all fall under the MRTA’s definition of social equity applicants, since they’re women – but only people from communities disproportionately impacted by the War on Drugs (CDIs) and justice-involved individuals who have been charged with certain cannabis offenses are eligible for “extra priority,” Levey said.
“If they would have known that in advance … they could have certainly changed their approach to some things, given that they would understand that their positions were going to be that much more diluted, and the odds against them were going to be that much higher,” Levey said.
Additionally, Levey pointed out that one applicant on the public queue list appears to have received 10 spots – which should be mathematically impossible.
Each applicant may apply for a maximum of three licenses, which means – with extra priority status – the maximum number of spots in the queue that any individual applicant should be able to get is nine.
But Buds R Us, LLC, has 10 spots.
This, Levey said, isn’t solvable by simply removing one of that company’s spots, because it raises too many questions about the methodology and other possible errors.
That alone should send regulators back to the drawing board in reviewing applications, he said.
“We feel that the queue is fundamentally flawed,” Levey said. “Even if we were going to assume that [regulators] could make their own rules, they’re not playing by them.”
Complaints about the selection process, however, aren’t limited to objections to the queuing system.
Proof of control
The initial FAQ document the OCM released in November said the agency expected to approve up to 1,000 retailers and up to 220 microbusinesses in the first round.
However, in a webinar the agency hosted a couple weeks ago, Chief Equity Officer Damian Fagon said those numbers remain the same, but then said the number of first-round retail licenses would only be about 250, and 110 for microbusinesses.
“In our initial FAQ that we released about adult-use applications, we specifically stated some of the numbers of licenses that we’re planning to issue,” Fagon said. “Those numbers remain the same: 250 retail dispensary licenses, 110 microbusiness licenses.”
An OCM spokesperson told NY Cannabis Insider that regulators released the initial FAQ projecting up to 1,000 retail licenses when the Conditional Adult-Use Retail Dispensary program was still under injunction, and when it was possible CAURD licensees that were ready to open wouldn’t be able to do so with a CAURD license.
But, since the state settled the case, those licenses are still valid.
The changing numbers are frustrating for Joe Rossi, leader of the Cannabis Practice Group at Park Strategies, as is the agency contradicting its earlier guidance when it comes to control over property.
The OCM will grant half of first-round retail licenses (about 250) to applicants with control of property, but some applicants are reporting the OCM is accepting letters of intent as proof of control. Yet an OCM FAQ document says applicants can prove they have control over a property by showing an executed deed or lease agreement.
“They don’t follow their own process,” Rossi said. “After a while, if New Yorkers don’t feel like they’re being treated on the level, they get pissed … that’s what’s going on right now.”
An OCM spokesperson could not immediately answer whether regulators have accepted letters of intent as proof that an applicant controls a location.
But Christian Torres, the legacy operator who applied for a microbusiness license, has also heard that the OCM is allowing letters of intent – an incredibly frustrating development, considering the money and effort he spent to get an official lease agreement for his application, he said.
Torres signed a lease for a Brooklyn space for his company, Excelsior Legacy LLC, after he submitted his application. When he asked OCM officials if he could add the lease agreement to his submission materials, they told him he had to re-apply – incurring the non-refundable application fees a second time.
Now, with a queue number of 1,856, Torres is paying $6,000 per month to lease space, when others may have received (possibly higher) queue numbers without having to pay rent or buy a space.
Even before the license application period started, Torres said he felt like OCM officials weren’t being straight with him. He applied for the Cannabis Compliance Training & Mentorship Program, but was rejected, he said. When he asked OCM officials why he was rejected, they told Torres – who previously held a license in California – that he was too experienced for the program.
“I got the sense from them like, ‘don’t worry, you will be fine,’” Torres said of his interactions with OCM in late 2022 and early last year. “Now, in 2024, there’s no pathway for me to get a license.”
Early in New York’s legal cannabis rollout, OCM Executive Director Chris Alexander spoke about the importance of including legacy players in the state’s legal market, but to Torres, the agency’s actions suggest this isn’t a priority.
“They said, ‘everyone calm down, don’t do anything rash, you will have your chance [at a license],’ and they reneged,” Torres said. “They’re making zero effort to bring in the legacy market, to make a bridge and to essentially unite both industries – and that’s going to be to their fault.”
Between the lack of clarity in the licensing process, multiple instances of regulators making commitments and later reneging, and difficulty for applicants to get basic answers from the OCM, Torres is far from confident about the long-term prospects for New York’s legal weed marketplace.
“If they don’t legalize these people who have been operating and created a sophisticated market that is New York State, then that’s going to be their competition forever,” Torres said. “Most of the people they’re banking on are not legacy operators or previous operators, they’re just new people joining the green rush … an industry like that will usually fail.”
Retail applicants
Retail applicants are also frustrated with the application process, said Britni Tantalo, president of the New York Cannabis Retail Association, and an applicant for a retail license.
The lottery was so opaque that few understand the process by which regulators assigned queue numbers, Tantalo said. That retail and microbusinesses were combined into one pool surprised her, as did assigning three spots to certain social equity candidates.
“Everybody’s very confused about their methodology, and the lack of transparency and explanation of how this was all going to go,” Tantalo said. “It’s just very, very unclear still,”
Tantalo, an Asian American woman, found it especially troubling that women and minorities were not given “extra priority” via three spots on the queue.
An OCM spokesperson said social equity applicants who don’t qualify for extra priority still received benefits in the form of discounted application fees and access to free technical assistance in preparing their applications.
Tantalo said she’s happy that Gov. Kathy Hochul has recently criticized New York’s legal weed rollout and hopes the governor’s involvement results in a smoother system.
But from what Tantalo and others in the industry have experienced so far, she said she’s not optimistic.
“I feel my chances are so minute in a social equity program … that is so alarming.” Tantalo said, pointing out that she’s both a woman and a minority. “I don’t know any social equity program, ever, that did not factor in women and minorities, and consider them a priority.”