The New York Medical Cannabis Industry Association (NYMCIA) has filed a lawsuit against the state’s Office of Cannabis Management (OCM) and Cannabis Control Board (CCB), challenging a $20 million licensing fee imposed on medical marijuana operators seeking entry into the adult-use market. The association contends that this fee is punitive and unconstitutional, arguing that it violates the separation of powers doctrine and constitutes an impermissible tax disguised as an administrative fee.
Under the Marijuana Regulation and Taxation Act (MRTA) of 2021, medical marijuana operators, known as Registered Organizations (ROs), were permitted to transition into the adult-use market upon payment of a one-time special licensing fee. The MRTA specified that this fee should adequately fund social and economic equity initiatives. However, the NYMCIA asserts that the $20 million fee is disproportionately high compared to other states and was established without proper legislative authority.
The lawsuit also claims that the fee has financially burdened medical operators, with only four of the nine ROs able to make the initial $5 million payment required to convert their licenses. The remaining organizations have either delayed their transition or opted for wholesale-only licenses, foregoing retail opportunities. The NYMCIA seeks to have the fee invalidated and any payments refunded, emphasizing that the fee has decimated enterprise value, amounting to a regulatory taking of their business.
This legal action adds to the challenges facing New York’s cannabis industry, which has experienced a tumultuous rollout of its adult-use program. The state’s approach aimed to prioritize social equity applicants but has encountered delays and legal disputes, leading to a proliferation of unlicensed dispensaries. The entry of well-capitalized medical operators into the recreational market, despite the steep licensing fee, is viewed by some as a necessary step to stabilize the industry and combat illicit operations.
As the lawsuit progresses, its outcome could significantly impact the structure and accessibility of New York’s cannabis market, influencing both existing medical operators and prospective entrants.
