A group of Alaska hemp growers and manufacturers has filed a lawsuit against the state challenging its new hemp regulations, arguing that they are unconstitutional and contrary to federal law. The new rules, which were approved in October and went into effect last week, are designed to regulate intoxicating hemp products. The lawsuit brought by plaintiffs including the Alaska Industrial Hemp Association and four businesses, was filed Thursday in U.S. District Court in Anchorage, naming the Alaska Department of Natural Resources (DNR), its commissioner, the state director of agriculture and Lt. Gov. Nancy Dahlstrom as defendants in the case.

The 2018 Farm Bill legalized hemp nationwide, defining the crop as cannabis with a THC concentration no greater than 0.3% by dry weight. But under Alaska’s new regulations, the DNR is prohibited from approving “an industrial hemp product that contains delta-9-THC.”

Critics of the new rules believe the regulations go too far and will likely stifle the hemp industry. Christopher Hoke, an attorney representing the plaintiffs in the lawsuit, says that the regulations will make nearly all of the state’s hemp products, including beverages, gummies and other edibles, illegal. 

“We’re just harming our own here,” Hoke told local media, adding that he has filed for a temporary restraining order to stop the new regulations from being enforced while the case makes its way through the legal system.

“We’ve asked for expedited consideration,” Hoke said.

In the complaint filed in the lawsuit, he argues that the new rules are a violation of the U.S. Constitution’s commerce clause.

“All hemp is federally lawful to possess, and hemp that fits the federal definition may not be interfered with as it flows through interstate commerce,” the complaint reads.

Industry Experts Weigh In On Legal Action

Michelle Bodian, partner at the cannabis law firm Vicente LLP, explained the legal basis of the lawsuit, noting that the legal action brings up some of the same issues argued in a similar case filed in Florida last week.

“This is the second hemp product-related lawsuit this week and highlights yet again the need for a consistent national framework. The plaintiffs here make similar arguments as the plaintiffs in the other lawsuits to date, mainly that the amended Alaska regulations interfere with interstate commerce and are violations of the 2018 Farm Bill and the Constitution’s dormant commerce clause, and that federal law preempts state law.” 

Bodian added that it is “hard to say for certain the chances of success, but so far with these lawsuits, the wins outpace the losses.”

The lawsuit is supported by the U.S. Hemp Roundtable, a national trade group for the hemp industry. Jonathan Miller, general counsel for the group, says that the regulations go to far and put the growing hemp industry at risk.

“We strongly support the hemp growers’ lawsuit. Alaska’s new regulations, while introduced under the guise of restricting impairing products, would virtually eliminate the non-intoxicating hemp and CBD industries,” Miller writes in an email. “By banning products with any level of THC from the retail marketplace, Alaska would be prohibiting the vast majority of safe, healthy, non-intoxicating products that contain traces of THC but not at levels that would potentially impair consumers. This smacks of an unscrupulous effort to reduce competition while hiding behind false claims of consumer protection.” 

Alaska’s new regulations on hemp products are supported by representatives of the state’s regulated cannabis industry, who say the rules will subject intoxicating hemp products, which are currently unregulated, to the same regulations as THC products.

“For one, it keeps intoxicating products out of the hands of minors, which is a big thing,” said Ryan Tunseth, president of the Alaska Marijuana Industry Association, “and two, it makes sure that if you are selling intoxicating products, that you’re following all the same regulations that Alaskans expect, and (the state) is able to capture tax revenue from that.”

The lawsuit has been assigned to Judge Sharon Gleason, who has not yet established a schedule for written arguments on the requested restraining order. Hoke said that he believes his clients will prevail once the case is heard.

“I think this should fall our way,” he said.

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A group of four military veterans last week filed suit against New York’s Office of Cannabis Management (OCM), claiming that the agency’s rules that prioritize applicants with prior marijuana convictions for cannabis dispensary licenses violate the state’s 2021 marijuana legalization statute. In a complaint filed in the New York State Supreme Court, the four plaintiffs argue that state regulators failed to follow the Marijuana Regulation and Taxation Act (MRTA) when it did not issue cannabis retail licenses to disabled veterans and members of other minority groups. The lawsuit seeks a temporary restraining order barring the state from issuing further licenses under the Conditional Adult-Use Retail Dispensary (CAURD) program, which have been reserved for applicants with a marijuana-related criminal conviction.

The MRTA included provisions that set a goal of awarding at least half of the state’s recreational marijuana dispensaries to social and economic equity applicants. Under an initiative spearheaded by New York Governor Kathy Hochul last year, the state’s first licenses for retail cannabis shops have been reserved for “individuals most impacted by the unjust enforcement of the prohibition of cannabis or nonprofit organizations whose services include support for the formerly incarcerated.” 

To be eligible for a CAURD license, applicants are required to either have had a cannabis conviction or be the family member of someone with a cannabis conviction, among other criteria. Nonprofits with a history of serving formerly incarcerated or currently incarcerated individuals were eligible to apply for a CAURD license. So far, the OCM has issued 463 CAURD licenses, although less than two dozen dispensaries have opened across the state so far.

“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 statement on behalf of the veterans bringing the legal action.

Lawsuit Argues OCM Rules Unconstitutional

The lawsuit was filed by four U.S. veterans who have served a combined more than two decades in various branches of the military. They argue that restricting retail licenses to those with cannabis convictions was not approved by the legislature and violates the state Constitution.

“It’s out of character for a veteran to sue the state to uphold a law,” William Norgard, one of the plaintiffs in the case and a U.S. Army veteran, said in a statement quoted by the Olean Times Herald. “We take oaths to defend the laws of our nation, and trust — maybe naively — that government officials will faithfully and legally execute those laws. What the Office of Cannabis Management is doing right now is in complete breach of that trust. As veterans, we know that someone has to hold the line.”

“Service-disabled veterans are the only social equity group in the law not born into priority status, but a group to which anyone could belong,” said Carmine Fiore, who served eight years in the U.S. Army and New York Army National Guard and is also one of the four plaintiffs in the case. “We are also the only priority group in the (law) that achieved its status by helping communities.” 

“It feels like we were used to get a law passed — a good law, one that helps a lot of people, as well as the state,” Fiore added. “Then, once it was passed, we were cast aside for another agenda.”

The other plaintiffs are Steve Mejia and Dominic Spaccio, who both served six years in the U.S. Air Force.

Lucas McCann, co-founder and chief scientific officer at cannabis compliance consulting firm CannDelta Inc., notes that there is no mention of the CAURD program in the MRTA. When the program was created, the definition of social equity was defined to exclusively include those with previous cannabis-related convictions and previous business experience. But a broader definition of social equity may be appropriate, and future rounds of licensing could include members of other groups, McCann says.

“The grievances brought forward by the four military veterans highlight another facet of the ‘social equity’ conversation that cannot be ignored. Veterans, particularly disabled ones, face their own set of challenges and hurdles,” he wrote in an email. “Their dedicated service to the nation warrants recognition and inclusion in the emerging industry, especially when considering the potential therapeutic benefits of cannabis for a myriad of health issues commonly faced by veterans.”

Michelle Bodian, a partner at the leading cannabis and psychedelics law firm Vicente LLP, said that is too early to determine how the lawsuit will affect the continuing rollout of New York’s regulated marijuana industry. 

“There is always a chance the lawsuit will succeed, and the CAURD program will be halted; however, it’s equally as likely the state will settle with the plaintiffs and award them a license,” Bodian said in a statement to High Times. “As the TRO hearing is scheduled for later this week, we should know in short order whether the CAURD program is frozen in place or whether new provisional or final licenses can be awarded.”

When asked about the legal action, an OCM spokesperson told local media outlets that the agency does not comment on pending litigation.

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Regulators in New York announced this week that the state would double the number of cannabis retailer licenses, bringing the total number of Conditional Adult-Use Retail Dispensary (CAURD) Licenses for recreational marijuana dispensaries to 300 instead of the 150 originally planned. The new licenses, which will be selected from an existing pool of qualified business applicants, will be issued proportionally throughout New York, doubling the number of licenses in each of 14 regions of the state.

In a statement released on Tuesday, the Cannabis Control Board and the Office of Cannabis Management announced that increasing the number of licenses “will further advance New York State’s Seeding Opportunity Initiative, which provides for the state’s first legal adult-use retail dispensaries to be operated by those most impacted by the prohibition of cannabis or by nonprofit organizations whose services include support for the formerly incarcerated.”

“With this expansion, more entrepreneurs will be able to participate in the first wave of this industry, allowing them to capitalize on the growing demand for cannabis products,” said Tremaine Wright, chair of the Cannabis Control Board. “As more businesses enter this market, the innovation and competition will increase, leading to better quality experiences for consumers. The expansion of New York’s cannabis market will benefit everyone involved in this exciting industry.” 

New York’s Office of Cannabis Management (OCM) received about 900 applications for CAURD licenses from prospective business owners. To date, the Cannabis Control Board has issued 66 provisional CAURD licenses, with the first shop opening in late December. In April, the OCM will make recommendations to the board on the majority of the remaining applications in the areas of the state not impacted by a November court injunction blocking the agency from awarding retail dispensary licenses in five regions of the state.

$200 Million Fund To Support New York Licensees

The CAURD program, which provides licenses to justice-involved individuals, initially allowed for up to 150 businesses to receive a provisional CAURD license. This effort was enhanced through the creation of the New York State Social Equity Cannabis Fund, a $200 million public-private partnership providing renovated, ready-to-open retail locations to the 150 licensees. The OCM characterized the fund as a first-of-its-kind effort in the nation designed to help reduce the barriers independent entrepreneurs face in raising capital to launch a business in the cannabis industry.

“Doubling the amount of available Conditional Adult-Use Dispensary Licenses will help kickstart the growth of New York’s cannabis industry,” said Damian Fagon, the OCM’s chief equity officer. “More stores means more locations for New York farmers to sell their harvests, more convenience for New York customers to make the right decisions and purchase safer and legal products, and twice as many opportunities for New Yorkers harmed by over-policing during cannabis prohibition.”

In December, the OCM announced that CAURD licensees would also be allowed to secure their own business locations without seeking support from the social equity fund, potentially freeing up resources for some of the newly authorized CAURD licenses announced today. The initial 150 approved CAURD licensees will be prioritized to receive resources if they choose a location supported by the fund. Applicants chosen for the additional 150 CAURD licenses announced this week will be given access to any remaining fund resources.

“New York is doing something special when it comes to launching our cannabis industry, and now we’re doubling the impact of our Conditional Adult-Use Retail Dispensary program,” said Chris Alexander, executive director of the Office of Cannabis Management. “It’s been truly exciting to see the positive energy around our efforts to support entrepreneurs who previously suffered at the hands of New York State. We will continue creating real opportunities for qualified applicants who’ve been shut out from legal cannabis markets across the country.” 

Michelle Bodian, a partner at the cannabis and psychedelics law firm Vicente LLP, said that Thursday’s announcement offers new opportunities for entrepreneurs eager to enter New York’s cannabis industry.

“Doubling the number of available CAURD licenses drastically changes the calculus for hopeful CAURD applicants,” Bodian wrote in an email to High Times. “As only a limited number of licenses have been awarded to date, this expansion provides a huge first mover advantage for the remaining approximate 230 licenses to be awarded.”

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