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An Albany County Supreme Court judge yesterday struck down marketing and advertising regulations, ruling that cannabis regulators’ advertising standards are “arbitrary and capricious.”
Judge Kevin Bryant wrote a decision on Wednesday that invalidated the Office of Cannabis Management’s entire slate of adult-use regulations, but amended his decision on Thursday to void only the rules banning third-party advertising.
Bryant’s ruling came from a lawsuit filed by cannabis-focused tech company Leafly Holdings, adult-use retailer Stage One Dispensary and a customer who uses Leafly to make informed decisions about her cannabis purchases.
“It is the finding of this court that the administrative record and affidavits submitted in support of the agency’s action constitute a post-hoc rationalization … rather than the necessary showing that the agency considered sufficient evidence,” Bryant wrote.
In his decision, Bryant wrote that regulators essentially wrote and approved stringent regulations regarding third-party platforms without demonstrating any factual basis.
Leafly’s lawsuit, which was filed in mid-September, argued that the OCM’s regulations surrounding non-plant-touching third-party platforms would essentially bar Leafly from doing business in New York.
In a court petition alleging the regulations are unlawful, Leafly cited several rules, including one that prohibits retail dispensaries from paying for “marketing or promotion through a third-party platform, marketplace, or aggregator that lists cannabis products for sale”; and one that prohibits licensees from contracting with a “person or entity performing any function or activity directly involving the licensed activities authorized for the license type.”
In his decision, Bryant noted that Leafly submitted comments outlining their concerns with these rules when the OCM and Cannabis Control Board were considering draft regulations, but regulators went ahead and approved them without addressing the problems Leafly identified.
Bryant also found deficient the evidence OCM attorneys presented defending the rules. OCM’s filings included an article from Yale Law Journal entitled, “Did Ticketmaster’s Market Dominance Fuel the Chaos for Swifties?” and an article from Mission and Local entitled, “Restaurants left on their own after SF nixed delivery fee cap.”
“Notably, there is no foundation in the record for any of these articles, nor is there any basis for this Court to pass on the accuracy of this information or the reasonableness of the conclusions set forth therein,” Bryant wrote.
The OCM did not submit any documents or transcripts showing how they developed the regulations regarding third-party marketing, Bryant wrote.
Additionally, the judge wrote, there is no indication any of the articles the OCM submitted as rationality for the regulations were ever brought before the CCB, or considered during deliberations.
“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,” Bryant wrote.
Bryant called the regulations “impermissible restrictions on petitioners’ right to free speech,” and “unconstitutionally vague.”
It’s not the first time a court has expressed frustration with the OCM.
Bryant previously oversaw a lawsuit filed last summer, and notoriously issued an injunction that prevented regulators from approving most new dispensaries. During that case, Bryant repeatedly criticized regulators and their attorneys for sloppy rulemaking and inaccurate court filings.