The New York Medical Cannabis Industry Association (NYMCIA) has filed a lawsuit against the New York Cannabis Control Board (CCB) and the Office of Cannabis Management (OCM), alleging that the $20 million fee imposed for an adult-use cannabis license is unconstitutional. According to a report by Crain's New York, the association is advocating for the ten original Registered Organizations (ROs) that were tasked with setting up the state’s medical marijuana program under strict and costly conditions back in 2014 after the passage of the Compassionate Care Act.

The ROs, having invested heavily to comply with the state's regulations, which included the operation of indoor-only grows and the establishment of a pharmacist-staffed dispensary network, found themselves facing financial burdens, after the adoption of restrictive medical cannabis policies led to fewer patients and reduced revenue. Many ROs anticipated a transition into the adult-use market as a way to recoup their losses—a common progression in other states. However, the lawsuit contends the path forward was not as clear-cut, citing the steep fee as punitive and not aligned with the social equity objectives outlined in the Marijuana Regulation and Taxation Act (MRTA) of 2021, Green Market Report explains.

Furrows deepened when, according to the NYMCIA via the Green Market Report, "New York State has not appropriated a single dollar of the special licensing fee collected to date for 'the administration of incubators and other assistance to qualified social and economic equity applicants including the administration, capitalization, and provision of low and zero interest loans.'" The complaint purports that the fee was meant to support social and economic equity initiatives, yet the state seemingly failed to allocate the funds accordingly.

The NYMCIA further argues that the OCM's and CCB's decision to impose the $20 million fee seems detached from its intended purpose of providing social equity and incubator assistance. Instead, it acts as a significant barrier for the remaining ROs looking to convert to RODs (Registered Organization Dispensary), forcing some to opt for the wholesale-only ROND (Registered Organization Non-Dispensary) licenses, and thus, forfeiting retail opportunities in the adult-use market. This has had the added consequence of impinging on the quality of service for medical cannabis patients, with dispensaries reducing hours or closing entirely. The NYMCIA is calling for an end to the fee and the refund of any fees paid thus far, describing the cost as more of a punitive tax than an administrative fee, as obtained by the Green Market Report.

Amid this legal battle, statements from former OCM leaders have surfaced, revealing a clear intent to exclude ROs from participating in the market—and these revelations are bolstered by quotes such as that of Axel Bernabe, OCM’s then Chief of Staff and Senior Policy Director, who is referenced in the lawsuit for his role in shaping New York’s cannabis market. Chris Alexander, the former executive director of OCM, is also mentioned for his adverse remarks concerning the ROs presence in the cannabis sector.