A New York court ruled in favor of Leafly Holdings and other plaintiffs that the state’s ban on third-party cannabis marketing is unconstitutional, striking down advertising rules, after the ruling initially invalidated all of the state’s adult-use regulations.

Last September, a lawsuit filed by the plaintiffs Leafly Holdings, adult-use retailer Stage One Dispensary, and a customer who uses Leafly to inform her decisions about cannabis purchases challenged New York’s ban on third-party advertisers. Specifically, the plaintiffs sued over rules that banned third-party marketing for cannabis companies—think apps and platforms like Weedmaps and Leafly. Leafly documents over 5,000 cannabis strains and shows their terpene profiles, lineage, and effects among other data that can make choosing a strain safer.

The Office of Cannabis Management (OCM) regulations on non-plant-touching third-party platforms, as is, would essentially block Leafly from doing business in New York. In the lawsuit, Leafly cited several allegedly problematic rules including one that bans retailers from paying for “marketing or promotion through a third-party platform, marketplace, or aggregator that lists cannabis products for sale”; and another that bans licensees from contracting with a “person or entity performing any function or activity directly involving the licensed activities authorized for the license type.” 

State Supreme Court Justice Kevin R. Bryant ruled in favor of the plaintiffs Thursday, declaring that the New York cannabis industry’s rules are arbitrary, capricious, and therefore unconstitutional. Bryant’s April 4 decision invalidates OCM cannabis regulations parts 118-121, 123-125, and 131, saying that the OCM failed to show evidence to justify how the rules were developed.

“We are reviewing the decision and exploring all possible legal options,” a representative of the OCM told High Times Friday morning.

Leafly Holdings, Inc., et. al v. New York State Office of Cannabis Management, et. al reads, “For the foregoing reasons, the petition is granted, and the following sections are hereby declared null and void as arbitrary and capricious; The Third-Party Marketing Ban, Parts 9 N.Y.C.R.R. §§123.10(g)(21) and 124.5(a); the Pricing Ban, 9 N.Y.C.R.R. §124.1(b)(5)(ii) the Third-Party Order Ban, 9 N.Y.C.R.R. §123.10(g)(23); the Third-Party All-Licensee Listing Mandate, 9 N.Y.C.R.R. §124.l(b)(2); and the Third-Party Distributor Listing Mandate, 9 N.Y.C.R.R. §124.l(c)(l)-(2),” Honorable Kevin R. Bryant, J.S.C. Ruled. The original sweeping order appeared to invalidate all of New York’s adult-use rules, however the ruling was quickly clarified to apply only to marketing rules by the end of the day.

Leafly was more than pleased with the news. “It’s impossible to overstate the importance of providing consumers with choices, and educational information when making purchasing decisions,” the company said in a statement. “It is critically important that licensed retailers have equal access to important advertising and marketing tools to help them succeed in a competitive landscape.” Leafly didn’t immediately respond to High Times for comment.

Did the Ruling Invalidate New York’s Cannabis Regulations?

For a few hours on Thursday, the ruling invalidated or appeared to invalidate the whole of New York’s cannabis regulations as it was originally written. Syracuse.com reports that Judge Bryant’s “jaw-dropping decision” applied to the regulations broadly, and it “strikes down all New York recreational cannabis rules.” Chris Roberts for MJBizDaily wrote that the decision could send New York’s into “chaos” as it was unclear if cannabis businesses could be operated without any rules in place, or what else might happen.

Some people were happy to see the rules get tossed. Why? Lawsuits and bureaucratic problems have left New York’s adult-use cannabis market in bedlam. Only about two dozen legal dispensaries are open, as oversupply from farmers stacks up and black market shops step in to fill the void. Even Gov. Kathy Hochul called it a “disaster” so some didn’t exactly shed a tear when it appeared the rules were invalid.

State Sen. Jeremy Cooney, chair of the Senate’s cannabis subcommittee, was among those who quickly slammed the ruling, before the ruling was amended.

“Today’s State Supreme Court decision was another setback in a series of blows New York’s adult-use cannabis market has faced since legalization, three years ago,” he wrote in a statement. “While some changes to marketing regulations are needed, the decision by the Court to throw out all agency regulations will ultimately slow progress at a time when we need to more aggressively combat illicit shops to grow a stronger, more-equitable legal market.”

Fox News reports that the court “dramatically scaled back his order from the previous day that had invalidated most of the state’s cannabis regulations in a case challenging rules for advertising marijuana.”

Now that the court has clarified that the ruling only applies to marketing and advertising rules, it demonstrates how Leafly’s win will open up the doors to third-party companies looking to expand into New York’s market.

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A New York Judge recently issued a court order that allows just two cannabis retailers to open for business, while hundreds of others are put on hold.

On Oct. 6, Judge Kevin Bryant permitted Manhattan-based ConBud LLC and Queens-based Kush Culture LLC (also known as Terp Bros) to be exempt from the current hold on cannabis business operations.

Bryant initially issued the injunction in August, which prevents retail cannabis licensees from opening. Currently, more than 400 conditional adult-use retail dispensary licensees are on hold, and while no more licenses are being awarded by the Office of Cannabis Management (OCM). Only 23 cannabis businesses are operating throughout the entire state.

“While today’s ruling is a disappointment, we are committed to working with the Cannabis Control Board to find a way forward that does not derail our efforts to bring the most equitable cannabis market in the nation to life,” the OCM said in a response to Bryan’s decision.

Bryant stated that any licensees who were already ready to open by Aug. 7 would be allowed to request an exemption from his injunction. In response to this, the OCM sent a list of 30 retailers who were ready to open and seek exemption, although Bryant did not agree that most of them were actually ready. ConBud and Kush Culture are the only approved licensees so far.

According to attorney Jorge Vasquez, representing both ConBud and Kush Culture, there’s a light at the end of the tunnel in regard to the injunction. “We’re certainly pleased with the decision,” Vasquez said. “It’s certainly a step in the right direction for the CAURD program and for CAURD licensees, and we hope that these two are just the first of more to come.”

Vasquez added that there isn’t a specific date that the two businesses will open, but with Bryant’s approval, it could be as soon as tomorrow.

According to a statement from attorney Wei Hu, obtained by Green Market Report, he expressed his excitement that Bryant had approved two licensees so far, and expects possibly 14 more exemptions to be announced in the very near future. “With open applications, there is no basis for the injunction to remain against any provisional CAURD licensee… There is no basis for this litigation to continue to impose unprecedented pain against hundreds of families,” said Hu. “That being said, I am thrilled my clients Jeremy Rivera and Alessandro Cottone can resume the commitment to bringing access to licensed cannabis to the Astoria Queens community, and the dozens of living-wage jobs that come along with it.”

Kush Culture/Terp Bros also told Green Market Report about being one of few to be exempt so far. “We’re ecstatic. We’re going to try to move as fast as we can,” said Jeremy Rivera about Terp Bros. “It’s been long enough. We’ve been holding off for two months almost since the injunction started back in August. Now, it’s getting the staff trained, getting inventory in.”

Another attorney involved in representing the CAURD licensees, Duncan Delano, added that the situation is hopeful, but not entirely reassuring at the moment. “If you’re not one of those two [licensees], you’re still pretty frustrated. I have many clients in that boat. But it is hopeful, and I’m portraying that to my clients, as a sign of hope.”

A group of four military veterans also filed a lawsuit against the state of New York in August regarding the first approved licenses being awarded to individuals with cannabis convictions, and no disabled veterans or members of a minority group received a license. “The MRTA had already established a goal to award 50% of all adult-use licenses to social and economic equity applicants. But instead of following the law, OCM and CCB created their own version of ‘social equity’ and determined for themselves which individuals would get priority to enter New York’s nascent adult-use cannabis market,” reads a joint statement on behalf of the veterans.

In September, new rules were approved by regulators to open up license applications for social equity applicants (which includes veterans, minority and women-owned businesses, and struggling cultivators starting on Oct. 4. “It’s about time,” said Carmine Fiore, one of the veterans in the case. “We finally have an equitable playing field. We are finally being prioritized—as we should have been under the law.”

According to Delano, cases such as these could lead to additional lawsuits in the future. “It’s part of a strategy that continues to be working: playing hardball and OCM being on the defensive,” he said. 

While the landscape of the New York cannabis industry remains tumultuous for the time being, the city of Rochester is preparing for the influx of cannabis jobs. At the end of September, the Rochester Public Library announced a five-week cannabis certification program to help prepare city residents to embark on new careers in cannabis. “As we prepare for legal cannabis dispensaries to operate in our region, it is important to make sure we have a pool of qualified employees ready to start working in these businesses as soon as they open,” said Rochester Mayor Malik D. Evans. “The City of Rochester puts a lot of consideration into our processes to make sure cannabis businesses are set up to succeed in our city, especially for Black and Brown people who were most negatively affected by the war on drugs.

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