The new lawsuit could halt the expansion of New York’s adult-use cannabis market – again.
A new lawsuit from a now-notorious marijuana business operator who has filed multiple lawsuits over various social equity programs across the country – and who was responsible for several months’ worth of delays in New York licensing already – has filed a new lawsuit asking a federal judge to block New York regulators from awarding further cannabis licenses.
Variscite Four LLC and Variscite Five LLC filed suit in U.S. District Court in the Northern District of New York on Dec. 18, the same day the most recent licensing window closed. The suit claims that state residency restrictions are unconstitutional and that the two applications filed by the plaintiffs during the recent window should have received “extra priority,” a term given to retail applicants with locations already locked down, so those applications could be fast-tracked.
The suit is requesting a new injunction to prohibit the state Office of Cannabis Management and the Cannabis Control Board from awarding new cannabis business licenses until Variscite is included in the favored “extra priority” pool.
“Because Plaintiffs satisfy every requirement for the ‘extra priority’ pool except the unconstitutional New York residency preferences, Defendants should process Plaintiffs’ applications in the extra priority pool,” the suit argues. “Because Plaintiffs should have received ‘extra priority’ over all other applicant classes – whether general adult use, priority adult use, or CAURD – the court should enjoin Defendants from issuing any licenses.”
A similarly named company, Variscite One, sued last year over the conditional adult use retail dispensary (CAURD) program, which attempted to award the first retail licenses to “justice-involved” entrepreneurs, New York residents with nonviolent cannabis criminal records. That resulted in an injunction and months of delays in several specific state regions, before the action was settled out of court.
Variscite One is owned by Kenneth Gay, who has also filed multiple lawsuits over social equity programs and criteria in California and Washington state. All three Variscite entities are represented by the same registered agent in their lawsuits, according to the New York Department of State.
In August, the New York cannabis retail rollout was halted again when several service-disabled veterans with no connection to Gay or Variscite filed their own lawsuit, which resulted in another injunction that lasted until late November.
The settlement which resolved that legal action was also mentioned in the new suit, with Variscites Four and Five alleging that the New York OCM agreed to “not process any further CAURD applications until April 2024.”
“However, defendants did not agree to not proceed with the already-processed CAURD applications and issue licenses thereunder even before April 2024,” the suit notes. “Defendants must not consider any category of adult use application program or CAURD application program applications before considering the social and economic equity ‘extra priority’ pool.”
Gay was not identified by name in the latest lawsuit, and it’s yet not clear who the owners of Variscite Four and Variscite Five are. The owner of the companies is identified only as a resident of Los Angeles County, and the suit stipulates that the owner has a cannabis criminal conviction there which qualifies him for social equity status, and that the owner retains a 51% stake in each company.
Regardless, the new lawsuit has the potential to upend the New York rollout once more, given that none of the prior lawsuits were ever ruled on by the courts, leaving the underlying legal questions unresolved.
On Wednesday morning, a previously scheduled Cannabis Control Board meeting was suddenly postponed, with the agency citing “scheduling conflicts.”
Of the 463 CAURD shops that have been awarded licenses, only 37 have thus far managed to open for business.
A case management conference in the new lawsuit is scheduled for March 11, according to court records.
A spokesperson for the OCM declined to comment on active litigation.