Some New York Cannabis License Hopefuls Unhappy With Permit Process

An online informational webinar held this past week by the New York Office of Cannabis Management, to help keep marijuana business license applicants in the loop, left some feeling short-changed and ready to sue.

During the webinar, OCM’s Chief Equity Officer Damian Fagon and Director of Policy John Kagia laid out the current status of marijuana permitting for stakeholders, and said the plan for now is to issue permits for 250 retailers and 110 microbusinesses beginning at the Cannabis Control Board’s next meeting on Jan. 24. The pair didn’t specify how many other license types may be awarded in coming weeks, but applications for processors, cultivators and distributors are also being reviewed.

The recent application window ran from Oct. 4 to Dec. 18 and netted the state 6,875 applications from hopeful cannabis entrepreneurs, Fagon and Kagia said.

That included 1,850 applications for retailers submitted by Nov. 17 that also had secured locations for cannabis shops, and another 5,024 received by the December deadline for cultivator, processor, distributor, retailer and microbusiness permits.

Of the total 6,875 applications, those include:

4,303 for retailers
1,320 for microbusinesses
537 for processors
365 for cultivators
350 for distributors

“Over the coming months, from this cohort, we are targeting issuing a little over 1,000 licenses across this market, across all of these categories,” Fagon said.

The OCM also this month published its randomized queue of retail license applicants, which includes 2,232 business applications, including qualified social equity entrepreneurs such as service-disabled veterans, women and minority-owned businesses, and a few other demographics.

One of the key developments that has some stakeholders unhappy, however, is that Fagon said the applications will be reviewed in numerical order until the state gets to only 250 retailers and 110 microbusinesses.

At that point, he said, the current licensing for retail permits – the most competitive sector – will conclude until the next application window opens. Anyone who doesn’t win a retail license this time around will have to put in another application, pay another application fee, and simply keep their fingers crossed that they receive a more favorable place in the lottery-like queue.

“There is one pool of applicants. You have it. We posted it. It’s that queue. If you fail to be selected for review … you will not ultimately receive an opportunity to receive a license in this round. You’ll have to apply in the future,” Fagon said.

“We are going to review and issue licenses as we move through the queue until we reach those numbers. Those numbers are our goal,” Fagon said of the 250 retailers and 110 microbusinesses. “That doesn’t mean it’s just the top 360 people in the queue. There may be people who are ineligible.”

Fagon added there will be more than the 360 awarded when the December applications are also evaluated, but he didn’t say how many. Those permits will likely begin to be awarded in March, he said.

“There will be the same amount, I believe more, retail dispensary licenses in the December round,” Fagon said.

But it’s unclear when the next application window will open, leaving many wondering whether they’ve wasted their time and money applying, said Phillip Barody, a military veteran who put in for a retail license in Saratoga.

Barody said he’s already spent about $40,000 on the application process, with most of that money having gone toward rent for a shop. He and others were expecting regulators to award far more than 360 retail licenses, given that the agency had previously stated it intends to issue up to 1,000 retail permits and 220 microbusiness licenses, Barody said.

But Barody’s place in the randomized queue is about midway down, he said, and out of more than 2,200 applicants, he doubts he’ll realistically have a chance at a marijuana store license for the current round since the OCM will only be granting 250.

Barody also doesn’t think he and his partners have the capital to keep paying rent for an unknown number of months until the next licensing window, which means he said they have little other option than to sue, if he and his partners want to recoup the tens of thousands they’ve spent already.

“We thought we had a pretty good shot, and as of right now, it seems like there’s no possible way to get licensed,” Barody said. “We’re probably not going to continue our lease, and maybe just count it as a loss, and possibly file litigation to try to get some of our funds back.”

Barody said he keeps in touch with a lot of other military veterans who have also applied, and said many of them are also contemplating litigation, for similar reasons, and in part because he was under the impression that the SEE applicants would have a real leg up. Instead, he and others learned this week that non-social equity applicants were put in the randomized queue alongside those with demonstrable harms from the war on drugs.

All of that combined means there’s likely a new wave of litigation prepping to hit the OCM, Barody predicted.

“We believe there’s going to be quite a few lawsuits coming within the next couple of weeks,” Barody said.

That would be in addition to at least one other lawsuit the OCM is already facing this year, and which could threaten the ongoing permit process, by a social equity group from California that contends the New York residency requirement for its social equity program is unconstitutional.

Barody said part of the confusion was that the OCM extended the application window last year by two weeks after it got hammered with an influx of applications in October, which he and others took as an indication that the state would act quickly to hand out its previous estimate of 1,500 total new cannabis licenses within this first wide-open round.

Instead, it seems the OCM intends to move more slowly, perhaps to the detriment of many social equity applicants such as himself.

“I feel like we were left out to dry,” Barody said. “They took the money. It was almost like a money grab by the state, to get as many applications as possible. They took it from the SEE applicants, to fund the OCM.”

Fees for social and economic equity (SEE) were $500 for this past round, and $1,000 for non-SEE applicants. About 70% of the applications were from qualified SEE entrepreneurs, Kagia and Fagon reported.

The two OCM leaders also said during the webinar that fees were kept deliberately low for applicants, but that the agency needed to charge some amount in order to pay for its operations.

“What we’re doing here costs money and staff,” Fagon said. “It’s definitely not a cash grab.”

Kagia also defended the OCM’s process, and said that with the limited licensing approach by the state that a randomized queue is the most fair way to give each applicant a similar chance at licensure.

“We are doing this in a kind of systematic first in, first out order,” Kagia siad. “We can’t reshuffle things. The queue is what it is, and we’re going to follow that process in order to make it fair for everyone.”

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