New York's cannabis industry is bracing for another legal challenge that could put the industry in limbo for the third time.

Two companies that applied for an adult-use retail dispensary license filed a federal suit Monday in the U.S. District Court in New York's Northern District against the state Office of Cannabis Management and its Cannabis Control Board. The suit was filed the same day the Office of Cannabis Management's application window closed for its first round of adult-use retail licenses.

Variscite New York Four LLC and Variscite New York Five LLC claim the department's adult-use retail dispensary cannabis license program is unconstitutional, arguing the board's system of approving licenses favors New York residents and violates the federal Dormant Commerce Clause, which prevents states from discriminating against interstate commerce.

"Defendants violated plaintiffs’ rights by depriving [them] of the opportunity to fairly compete for a license to operate a storefront retail cannabis dispensary, in violation of the dormant Commerce Clause," according to the lawsuit.

Lawsuit_NY_Cannabis_1 by Matthew


The marijuana dispensary companies spearheading the latest court challenge want a federal judge to block more cannabis licenses from being awarded in New York — fewer than three months OCM settled the last lawsuit that held up the issuing of more licenses in October.

They want their application to be processed in the "extra priority" pool of applicants, because the businesses satisfy the other requirements except the preference for New York residency, according to the suit.

Variscite Four and Variscite Five are owned by a person with a previous marijuana conviction in the state of California.

"Because plaintiffs should have received 'extra priority' over all other applicant classes — whether general adult use, priority adult use or Conditional Adult Uuse Retail Dispensary — the court should enjoin defendants from issuing any licenses," according to the lawsuit.

The companies argue their businesses should be considered in the pool of applicants seeking a license to open a dispensary in the state who are given extra priority because they've already secured a retail location to open up shop. The first window of priority applications for people with a store space closed Nov. 17.

The state's Adult Use Application Program is divided into three pools: general; social and economic equity priority; and social and economic equity “extra priority.”

They argue the state's Marijuana Regulation and Taxation Act, which legalized adult-use recreational cannabis in New York, says applications are supposed to be open to everyone at the same time, not a certain category of people.

The Office of Cannabis Management declined to comment, citing the pending litigation.

The Cannabis Control Board was scheduled to meet Wednesday, but was postponed, with officials citing last-minute scheduling conflicts. 

Department officials say the suit did not impact the board's decision not to meet, as the group has met and conducted business within a day or two of past court rulings that impacted the state's marijuana industry.

A company by a similar name filed the first lawsuit against OCM last year, which prevented retail dispensaries from coming online in half the state, alleging comparable complaints about the state's adult-use cannabis program violating the Commerce Clause and giving preference to New Yorkers.

The ongoing delays from lawsuits have left New York farmers who have grown cannabis to be sold in legal dispensaries in a bind, with hundreds of thousands of pounds of flower waiting to be sold. Office of Cannabis Management allowed farmers to partner with a licensed adult-use retailer at public events this year called Cannabis Grower Showcases, but that program sunsets at the end of the year.

Senate Cannabis Subcommittee chair Jeremy Cooney has said he's open to working with OCM to draft legislation to make the showcases permanent.

"The most important thing out of these cannabis growers showcases is that you're purchasing tested, safe materials from the state of New York," said Cooney, a Rochester Democrat. "You're not just going down some back alley and buying weed from someone who says that they are a legal seller, right? You can feel confident that what the product that you're ingesting is safe for you to consume. And that's what we want more access to in New York state."

The next conference date for this case is scheduled three months from the filing date for 10 a.m. March 18.