This post was originally published on this site.
This guest column is from Timmie Elsner, a retired NYC Housing Court Judge and former Associate General Counsel for the New York State Division of Housing and Community Renewal. Elsner is also a former board member and officer of New York Small Farma, a cannabis advocacy and education nonprofit organization. The views and opinions expressed in this article are those of the author, and do not necessarily reflect the views or positions of NY Cannabis Insider.
All interested participants in the New York State adult-use cannabis roll out have experienced a roller coaster of emotions resulting from the actions of the Office of Cannabis Management (OCM), the Cannabis Control Board (CCB), and the governor’s office during the cannabis regulatory process.
The promise of the MRTA seems to be a fairy tale as the reality of a road to legalization filled with unpredictable stop and go moments and procedural delays becomes the norm. This has led to financial hardship and frustration rather than generational prosperity and an open and safe marketplace.
It is easy to criticize OCM, the CCB, and the governor, who, unfortunately, do not appear to have learned from past mistakes and once again may be on a regulatory path which collides with the constitutional rights of those the MRTA is intended to support, and which leads to disaster for the cannabis industry.
Rulemaking is the process by which administrative agencies use their power to create regulations which clarify laws enacted by the legislature.
In New York, the State Administrative Procedure Act (“SAPA”) codifies this process. Failure by agencies like OCM to precisely follow SAPA may lead to litigation, including legal challenges which prevent regulations from taking effect.
These lawsuits jeopardize the livelihoods of those the regulations were intended to assist as the result of agency actions which trample the constitutional rights of others. SAPA mandates that OCM and the CCB carefully consider comments elicited from interested parties and amend proposed regulations, prior to their enactment, even if these actions result in delay.
Unfortunately, OCM and the CCB propose a hasty review of comments, lack of timely amendment and faulty regulatory approval in an effort to speed licensing. The same actions resulted in the faulty CAURD program, where regulations were approved without change despite warnings of constitutional challenges. This history highlights dangers ahead in the form of lawsuits and injunctions as well as potential declarations that improperly adopted regulations are invalid.
While delay by OCM so that they can carefully review comments and consider amendments would certainly be unpopular and result in some hardship to interested parties, stakes in properly following SAPA are particularly high with regard to current proposed regulations. These proposed regulations are 350 pages long and contain rules which govern the adult-use cannabis industry as a whole.
One challenge may result in a declaration that the entire docket is invalid.
Unfortunately, OCM appears to be choosing to expedite ratification of the regulations over compliance with SAPA procedures. Statements made by OCM executives during a May 11, 2023, Cannabis Control Board meeting show that the agency intends to give a green light to the proposed rules, with the improper intent of amending them after they are approved.
As further evidence of this intent, during court proceedings last week in the case of Fiore et al vs. New York State Cannabis Control Board, (which is based on a Constitutional challenge of CAURD regulations enacted by the same authorities) the Attorney General’s Office, which is appearing on behalf of the defendants, repeatedly stated proposed regulations would be effective by the end of this month, would not be amended, and that permanent licenses would be issued soon thereafter.
These statements show that regulators are choosing speedy enactment over a proper consideration of comments, which may well be a disastrous course of action.
Even if SAPA challenges are not litigated, additional Constitutional challenges appear inevitable if the regulations are enacted without further amendment. Of particular concern are the provisions relating to licensure of Registered Organizations (ROs) shortly after the market opens to small businesses. These organizations have huge advantages over mom-and-pop operations given their capitalization, experience and previous licensure by New York State in the medical cannabis arena.
They, unlike other licensees who are limited to one licensing tier, will be able to grow, process and dispense adult-use cannabis. In other states, ROs have successfully driven small businesses out of the market, results contemplated by the legislature during enactment of the MRTA and abhorrent to the legislative purpose of the MRTA.
It is essential that OCM and the CCB review the Constitutional claims made by the plaintiffs in Fiore, et al, relating to improper rulemaking and agency overreach. They highlight the MRTA’s clear establishment of certain social and economic equity “priority” groups, including individuals from communities disproportionately impacted by the enforcement of cannabis prohibition, minority and women-owned businesses, distressed farmers, and service-disabled veterans.
These are the same groups most likely to be most harmed by early entry of ROs into the market and the same groups most likely to challenge the regulations if the rules are approved as proposed.
CCB and OCM are in the unenviable position of making a choice between unpopular courses of action: the first, delaying licensure for a short period of time to avoid foreseeable Constitutional challenges; the second, to expedite the regulatory process and repeat prior rulemaking mistakes, actions which may well lead to indefinite injunctions, destruction of livelihoods of stakeholders, disappointed consumers, depletion of an anticipated tax base and bolstering of a burgeoning gray market.
It is my hope they choose wisely.