NY Regulators Delay Hearing in Bid for Settlement with Cannabis Dispensary Owners

NEW YORK – New York state Cannabis regulators have postponed a key hearing on a disputed proximity rule, aiming to negotiate a resolution with affected dispensary operators. The move comes after a lawsuit from business owners who argue that a recent policy shift threatens their investments and operations.

The controversy stems from a July correction by the Office of Cannabis Management (OCM), which oversees the state’s recreational Cannabis program. Initially, regulators measured the required 500-foot buffer between dispensaries and schools from entrance to entrance. But the agency later determined the law mandates measurement from the dispensary’s entrance to the school’s property line, rendering more than 15 licensed locations non-compliant. This adjustment disrupted plans for dozens of entrepreneurs, including some with shops already open or on the verge of launching.

A coalition of about a dozen dispensary license holders filed suit in mid-August in Albany’s State Supreme Court, seeking to halt the rule change and secure compliance status under the prior interpretation. The plaintiffs contend the reversal undermines millions in sunk costs, from leases to build-outs, and jeopardizes the program’s equity goals.

The hearing, originally slated for late August, was pushed back as OCM engages in talks with the owners’ representatives. Details of a potential agreement remain under wraps, but sources suggest it could involve grandfathering existing approvals or targeted exemptions to avoid widespread relocations. Without a deal, the case could drag on, adding to the legal costs for all sides and further slowing the rollout of New York’s adult-use market, which has already faced delays from litigation and enforcement challenges.

State officials have not commented publicly on the negotiations, but the postponement signals a willingness to compromise rather than litigate. The OCM’s error has drawn criticism from lawmakers and industry advocates, who point to it as another stumble in a program meant to prioritize social equity applicants harmed by past drug policies.

As of early September, no settlement has been announced, leaving operators uncertain about the next steps. For New York’s Cannabis sector, this case highlights the risks of regulatory unpredictability in a fledgling industry. A swift resolution could stabilize growth and investor confidence. However, prolonged disputes might deter future entrants and strengthen the illicit market that legal dispensaries aim to supplant.