New York Supreme Court Overturns Cannabis Marketing Restrictions

LOS ANGELES- In a significant legal development for New York’s cannabis industry, the Supreme Court in Albany County invalidated several marketing restrictions on Monday, marking a pivotal moment for licensed cannabis businesses in the state. The challenged regulations had imposed stringent limits on the ability of cannabis retailers to advertise and promote their products, significantly hindering their marketing efforts.

The litigation was initiated by Leafly Holdings Inc. (Nasdaq: LFLY), alongside other petitioners, against the New York State Office of Cannabis Management and the New York State Cannabis Control Board. The plaintiffs contended that the regulations not only restricted their freedom of speech as guaranteed under the New York State Constitution but also rendered the legal cannabis market less competitive against unlicensed entities by restricting their ability to engage in paid marketing and share accurate pricing information through third-party platforms.

Justice Kevin R. Bryant, in his judgment, criticized the development and approval process of these regulations, labeling the conclusions as “arbitrary and capricious” and lacking a “sound and substantial basis.” Moreover, Bryant’s ruling highlighted other provisions within the cannabis regulations as unlawful, addressing the broader implications of these rules on the industry.

The court specifically identified the regulations’ failure to present a reasoned basis for their implementation, instead relying on conclusory assertions without solid evidence. As a result, the court deemed the contested regulations invalid, highlighting their arbitrary nature and the unconstitutional vagueness and restrictions they placed on free speech.

While the petitioners succeeded in having the contentious rules annulled, their request for legal costs coverage was denied. This decision is anticipated to have wide-reaching effects on New York’s emerging adult-use cannabis market, necessitating a reassessment of advertising and promotional guidelines by state regulators.

The ruling arrives amid heightened scrutiny on unlicensed cannabis operations, with Gov. Kathy Hochul recently criticizing tech companies for facilitating these entities. The response from the New York State Office of Cannabis Management and the New York State Cannabis Control Board to the court’s decision remains pending.

This judicial outcome underscores the evolving legal and regulatory landscape for the cannabis industry in New York, reflecting the ongoing challenges and debates surrounding the integration of cannabis businesses into the state’s regulatory framework.