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Judge Puts New York Dispensary Licenses On Pause On Dormant Commerce Clause Grounds



On November 10, 2022, a federal judge temporarily stopped the Office of Cannabis Management (OCM) from issuing conditional adult-use retail dispensary (CAURD) licenses in certain parts of New York. The reason: the CAURD application contained NY residency requirements that may violate the U.S. Constitution (specifically, a court-created doctrine called the “dormant commerce clause”). A copy of the full decision is available here.


OCM plans to issue 150 CAURD licenses to qualifying applicants. A CAURD licensee will be able to operate an adult-use recreational cannabis retail store in the state of New York. The CAURD application window closed in September, but OCM has not issued any CAURD licenses yet.

OCM divided the state of New York into regions and plans to issue a specific number of CAURD licenses in each region. In their applications, CAURD applicants ranked their top 5 regions.


The CAURD Regulations include New York residency requirements. For example, an applicant must demonstrate “a significant presence in New York State, either individually or by having a principal corporate location in the state.” Also, qualifying CAURD applicant (or their parent, guardian, spouse, child, or dependent) must also have been “convicted of a marihuana-related offense in New York State” before March 31, 2021 (There are other NY-specific CAURD requirements, but we don’t need to go through them all here.)


CAURD applicant Variscite NY One, Inc. is 51% owned by an individual with a cannabis conviction in Michigan (and not New York). Variscite selected as its five preferred regions the Finger Lakes, Central New York, Western New York, Mid-Hudson, and Brooklyn.

In September, Variscite sued the state of New York on grounds that the CAURD rules are unconstitutional. Specifically, Variscite claims that the CAURD rules violate the “dormant commerce clause,” a court-created legal doctrine that is grounded in the Constitution’s Commerce Clause.

In a previous Green Light Law Blog post, we summarized the dormant commerce clause as follows:

The U.S. Constitution contains a passage, commonly referred to as the “Commerce Clause,” which provides that “Congress shall have Power . . . to regulate Commerce . . . among the several States[.]” The U.S. Supreme Court has long interpreted this clause to include a corollary or “dormant” Commerce Clause which has the effect of prohibiting states from enacting laws inhibiting trade among the states.

In a recent case, Tennessee Wine and Spirits Retailers Association v. Thomas, decided in 2019, SCOTUS invalidated a two-year residency requirement for Tennessee retail liquor stores. In applying the DCC to case at hand, the Court wrote “if a state law discriminates against out-of-state goods or nonresident economic actors, the law can be sustained only on a showing that it is narrowly tailored to advance a legitimate local purpose.” SCOTUS determined that “Tennessee’s 2-year durational-residency requirement plainly favors Tennesseans over nonresidents, and found that the law was not “narrowly tailored” to advance a legitimate local purpose and invalidated Tennessee’s residency requirement as unconstitutional.

Put simply, the Constitution grants the federal government jurisdiction over any interstate commerce and if a state law or regulation prohibits or prevents interstate commerce by favoring its residents over the residents of other states, it violates the Constitution.


In a 29-page decision, the Honorable Gary L. Sharpe of the United States District Court for the Northern District of New York granted Variscite’s motion for a preliminary injunction. Variscite essentially asked the court to stop OCM from issuing CAURD licenses in five geographic areas where it applied, while the lawsuit was pending.

Court’s do not issue preliminary injunctions lightly because it requires the court to act before each party has the opportunity to make its case at trial. A plaintiff seeking an injunction must meet several criteria, including their likelihood of success on the merits. As such, the court’s analysis in this case began with the question of whether Variscite was likely to succeed on the merits of its dormant commerce clause argument.

New York cannabi
Photo by Anton Petrus/Getty Images

In evaluating a dormant commerce clause challenge, a court first evaluates whether the challenged law discriminates against interstate commerce in favor of intrastate commerce or whether it regulates evenhandedly. The court determined that requiring CAURD applicants to demonstrate a significant presence in New York will have a “discriminatory effect on out-of-state residents.”

RELATED: What Will New York Do If Dispensaries Do Not Open In Time?

When a law or regulation has such an effect, it can only survive a legal challenge if it is “narrowly tailored to advance a legitimate local purpose.” It turns out that this was all that was required because, according to the court, OCM “not even attempt” to explain how its rules are narrowly tailored. When asked directly by the court, “defendants offered no cogent response.”

This is surprising. Whether or not you agree with OCM’s CAURD requirements, they should be able to at least develop several arguments as to WHY those regulations are narrowly tailored so not to violate the dormant commerce clause. After establishing a likelihood to succeed on the merits, Variscite succeeded in meeting the other criteria necessary to obtain a preliminary injunction in the geographic areas it applied.


New York regulators have made it a priority to issue CAURD licenses before the end of the year. While this preliminary injunction could be overturned and is limited to five geographic areas, it does not bode well for New York’s timeline. It could also open the door to other challenges to New York’s cannabis residency requirements.

We’ll continue to monitor this case and report as it develops.

Ramsey Chamie is a corporate and litigation attorney who focuses on complex cannabis and non-cannabis transactions and litigations. Daniel Shortt is a corporate and regulatory attorney based in Seattle, WA who works extensively with entrepreneurs in the cannabis industry. You can reach Ramsey and Daniel at (917) 764-4896 or This article originally appeared on Green Light Law Group and has been reposted with permission. 

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Bill Would Make Cannabis Companies Eligible For SBA Loans




A Democratic senator has formally introduced a bill that, if successful, would make U.S. cannabis companies fully eligible for federal loans through the Small Business Administration.

According to a news release, Sen. Jacky Rosen of Nevada put forth the Fair Access for Cannabis Small Business Act, which would reverse the current prohibition on financial assistance for marijuana businesses.

cannabis banking money
Photo by jirkaejc/Getty Images

“The unfair barriers to basic federal support and resources have hurt our state’s legally operating cannabis small businesses,” Rosen said in the announcement. “This legislation will level the playing field so that cannabis small businesses — including those owned by people of color, women, and veterans — have access to the same federal resources and loans that other legal businesses are entitled to.”

RELATED: Here Are The Products That Drove Green Wednesday Sales (And The Ones That Tanked)

Barriers to SBA assistance were a major complaint from cannabis companies during the COVID-19 pandemic, despite the fact that the entire industry was designated as “essential” by nearly every state with a functional marijuana market. And the overall lack of access to traditional financial services and banking has been an ongoing hurdle.

Rosen’s bill, according to the release, would give marijuana businesses access to “7(a) loans, disaster loans, microloans, the Small Business Investment Company (SBIC) program, and SBA’s resource partners including SCORE, Veterans Business Outreach Centers, and Women’s Business centers.”

Several industry leaders hailed the bill and said it could be a major financial boost to much of the cannabis sector.

RELATED: Will New York Be Able To Control Its Underground Market?

The bill, however, likely faces an uphill climb given the political dynamics in the Senate, where Democrats only hold a slim majority. A 60-vote majority would be needed to break a Republican filibuster.

Earlier this year, the Nevada senator urged the Senate Appropriations Committee to push for similar reforms through federal spending bills and also advocated with House Armed Services Committee leaders for the passage of the SAFE Banking Act.

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Black Friday

Here Are The Products That Drove Green Wednesday Sales (And The Ones That Tanked)




By Debra Borchardt, Green Market Report

The joke about going for a walk with your cousin every Thanksgiving may be a thing of the past. With so many new forms of cannabis consumption, that “walk” to go smoke a joint with your cool cousin undetected could become Thanksgiving lore.

Beverages, edibles, and, in some cases, the convenient vape pen dominated Green Wednesday sales, as the day before Thanksgiving has come to be called.

Inflation also seemed to rear its ugly head this year. Sales transactions were up, but the amount customers spent was less. Data from both Headset and Jane Technologies demonstrate that Green Wednesday continues to be a winner for cannabis consumption.

Headset ran the numbers to see if Green Wednesday sales popped versus previous Wednesdays for dispensaries — and indeed they did. Combined sales data from California, Colorado, Massachusetts, Michigan, Nevada, Oregon, and Washington state saw sales jump by 48% compared with previous Wednesdays in November.

Headset also found that this year’s Green Wednesday was the third-highest grossing day of sales after 4/20 and the Friday before the 4th of July. Green Wednesday overtook Black Friday as the highest-grossing day during the Thanksgiving holiday stretch. In 2021, Green Wednesday saw a 61% increase in sales compared to a typical Wednesday.

As expected, sales fell on Thanksgiving Day as many dispensaries closed for the holiday, and Black Friday only experienced a slight increase of 1%. It looks as if consumers stocked up before heading out to relatives for the weekend.

Secret Stoners

Category Performance

The products that people could consume without Aunt Gertrude being any wiser grew. Headset noted that topicals (15.7%), beverages (13.2%), and edibles (6.1%) all experienced sales growth during the holiday stretch. Popular inhalable products, such as concentrates (-11.4%) and flower (-10.8%), took the biggest hit.

In Jane’s data, vape cartridges were the top-selling category, beating out flower by 20%. Vapes are easy to carry and not nearly as stinky as smoking flower.

Sales Lift

Jane Technologies looked at nationwide sales and in particular the new market of New Jersey. Jane found that Green Wednesday’s total sales increased by 77% compared to the previous four Wednesdays in a nationwide view. The average store saw sales increase by 20% over last year.

In New Jersey, sales increased by 100%. More mature markets saw sales fall or grow only slightly. California sales fell by 8%, Colorado fell by 7%, and Massachusetts dropped by 30%. Illinois’ Green Wednesday average store sales increased by 9%.

RELATED: Green Wednesday: Here’s What A New Survey Reveals About Cannabis Shopping Trends

It seems consumers were on a budget this year. Transactions were up, but shopping carts weren’t full. Nationwide, Jane Technologies said that the average cart size fell by 8% from last year. In California, the cart size fell by 18%, in Colorado by 8%, Massachusetts carts fell by 17% and in Illinois, shoppers’ carts dropped by 14%.

Cannabis sales
Photo by Ivan-balvan/Getty Images


Headset noted that discounts increased across the board during the holiday stretch with the average discount increasing 7.3 percentage points to 21.8% across the three days of holidays.

While Green Wednesday was the largest sales day, it had the smallest average discount (19.8%), though an increase of nearly 6 percentage points from a typical Wednesday. Thanksgiving (22.2%) and Black Friday (23.7%) saw the largest average discounts both with an increase of more than 8 percentage points compared to a typical Thursday and Friday.

In Closing

Grabbing a beverage or munching an edible during the holiday may have replaced the annual walk with your cousin. It might lower the tensions that come with some family gatherings and even boost the munchies so that you can avoid insulting Granny by not eating that second piece of pie.

Ultimately, the cannabis industry, which has seen declining sales in some markets, must’ve been pleased to see customers pouring in on Wednesday. Let the holidays begin! And let’s keep that tradition of walking with your cousin — just bring them a gummy instead.

This article originally appeared on Green Market Report and has been reposted with permission.

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Why Cannabis Beverages Are Not Yet Quenching Their Share Of The Market




Cannabis beverages have come a long way in a very short time. Technology and science has made it possible to emulsify THC and help these beverages hit the bloodstream quicker, getting the drinker high almost as quick as a joint, and hours faster than a gummy.

At the same time, there is even growing interest from major alcohol brands, with companies like Pabst Blue Ribbon dipping into the cannabis beverage market with their High Seltzer

cannabis beer
Photo by rgbspace/Getty Images

There is lots of momentum, plenty of buzz and all the necessary tools for cannabis beverages to make a huge splash in the cannabis market pool. Yet cannabis beverages only make up about 1.1% of the total legal U.S. cannabis market, according to Headset. That’s not exactly a cannon ball; it’s barely a ripple.

So with all these great things working in its favor, why haven’t cannabis beverages caught on in a more mainstream way as of yet?

The first reason is not so shocking — cannabis in all its forms is still illegal on a federal level. With a federal prohibition still in play, it means there is all sorts of red tape to navigate. States have different laws when it comes to edibles and cannabis beverages. You also can’t transport cannabis over state lines like you can with beer or any other canned beverage. This poses all sorts of logistical issues, and all of these hurdles add up. And according to CNBC,  “This keeps many companies from growing in a significant way, which has led to some pulling back on their efforts in the market and others giving up completely.”  

There is also the convenience factor to consider, and when it comes to discretion and convenience, edibles win or beverages every time. “One reason for this is the category dominance of candy edibles, particularly gummies, which have an advantage over beverages because they offer convenience and portability, two factors that are top product choice influencers according to BDSA Consumer Insights,” BDSA’s chief commercial officer Jessica Lukas told Beverage Industry.

She then added another reason, which has less to do with consumer interest, and more to do with cost. “Another reason is that cannabis beverages present more logistical issues to distributors and retailers, as most beverage products are more costly to transport and store at retail than smaller and lighter edible form factors,” Lukas continued. Cannabis beverages are heavy and bulkier than almost any other type of weed product. This makes them more expensive to ship. 

RELATED: Can Cannabis And Hemp-Infused Beverages Replace Your Boozy Drinking Habits?

The size and volume of cannabis beverages can lead to other challenges in addition to shipping costs. There is also the struggle of finding space on the often-small retail portion of a dispensary to showcase the products to consider.

cannabis beverages
Photo by IURII BUKHTA/Getty Images

“If canned cannabis beverages were allowed in grocery stores, I think it would become a top-five beverage category,” Petalfast CEO Jason Vegotsky told Beverage Dynamics told Beverage Dynamics. “Instead, right now the main channel for cannabis beverages is dispensaries,” Vegotsky continued. He explained in the interview that dispensaries pose all sorts of selling challenges for cannabis beverages. After all, most dispensaries have limited to zero refrigeration space (cold beverages are much more appealing after all). 

RELATED: Drinking THC: What To Know Before You Try

Also, each can takes up significantly more space than an entire pack of gummies. Some states don’t even allow the beverages to be showcased at dispensaries, and if they do, the odds of a dispensary giving up much of their limited real estate for this still-small portion of the market is pretty unrealistic.

While getting the cans on shelves and in the hands of new customers is definitely a challenge currently, many are optimistic that this is a temporary issue, sort of like a growing pain. “It’s so hard to get your elbow in the door, but if you have a product that has repeat purchase or loyalty, within two to three months, the retailer gets it,” Luke Anderson, co-founder of cannabis drink brand CANN, told Bloomberg.

After all, while cannabis beverages have had a slow start, the market has big goals, and even bigger backers.

As cannabis lounges start to open and more mainstream brands launch their twist on a cannabis beverage, it’s hard to see this trend going anywhere but up. “There have been multiple false starts for anointing beverages the next big thing,”  Travis Tharp, CEO of Keep Brands, told CNBC. “But I think we’ve gotten to a point where we are showing that the year over year growth is something that is substantial.”

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