A group of licensed cannabis dispensaries in New York is suing state regulators over a rule change that threatens to shutter or relocate dozens of businesses.
The lawsuit, filed Aug. 15 in State Supreme Court in Albany, argues that the state’s Office of Cannabis Management (OCM) abruptly reinterpreted a law requiring cannabis shops to be at least 500 feet from schools. Since 2022, regulators measured that distance from one entrance to another. In July 2025, officials said the law should have been measured from a school’s property line, a correction that rendered at least 152 dispensaries noncompliant according to the New York Times and the Associated Press.
Who Is Suing
The twelve petitioners include seven licensed businesses that are open or fully approved (ConBud, The Cannabis Place, Summit Canna, Hush, High Fade, Housing Works Cannabis Co., and Common Courtesy Dispensary) and five provisionally licensed applicants, Rezidue, Elise Pelka, Toastree, Monarch NYC, and Luxe Leaf Boutique. The businesses span Manhattan, Queens, and the Bronx, as reported by Cannabis Business Times.
The Lawsuit’s Arguments
The complaint states that regulators “poured their life savings into launching their businesses” after approvals from the state, only to be told their locations are now in violation. Petitioners say OCM changed its interpretation of the law without a formal rulemaking process, violating the State Administrative Procedure Act. They also argue that the change strips them of due process and equal protection.
“Relying on those approvals, petitioners poured their life savings into launching their businesses,” the complaint says. “They signed leases, completed build-outs, hired employees and opened their doors to the public under the state’s very detailed framework. But now, in a complete about-face, OCM incredulously claims it got the law wrong all along.”
Attorney Jorge Luis Vasquez Jr., who represents the plaintiffs, said the harm goes far beyond money. “This is way more than just financial harm to small businesses,” Vasquez told Gothamist. “This goes beyond money. This is time. This is resources. This is energy. This is building relationships with communities.”
The Stakes
State officials acknowledged the mistake affects 108 licensees and 44 provisional applicants. The OCM has told licensed businesses they can stay open for now, but cannot renew licenses until lawmakers act. Provisional applicants will need to relocate, with access to a $15 million fund that offers up to $250,000 each, according to Gothamist and the AP.
For many dispensary owners, that relief falls far short. The lawsuit cites buildout costs between $500,000 and $1 million per business, plus millions more in operational expenses. Several plaintiffs signed personal guarantees on leases, creating a risk of bankruptcy if they are forced to move, Cannabis Business Times reported.
Equity Concerns
Eleven of the twelve plaintiffs hold conditional adult-use retail dispensary (CAURD) licenses, reserved for justice-involved New Yorkers, and one holds a social and economic equity license. Plaintiffs argue the rule change undermines the state’s promise to prioritize those harmed by prohibition.
“OCM’s reinterpreted rule disproportionately harms these stakeholders and licensees and undermines the very purpose of this law,” the complaint states.
In a joint statement sent to High Times, the coalition Save New York Legal Cannabis for All said that licensed cannabis operators “have worked in good faith, invested their life savings, and followed the rules set forth by the State.” The group, which includes ConBud, The Cannabis Place, Rezidue, Summit Canna, Hush, High Fade, Elise Pelka, Housing Works Cannabis Co., Common Courtesy Dispensary, Toastree, and Monarch NYC, warned that OCM’s announcement threatens the small business owners and equity licensees who form “the backbone of this industry.”
“OCM was supposed to follow a multistep process laid out by law before making such an earth-shattering determination, yet it completely failed to do so,” the statement reads. “Worse, OCM’s proposed ‘solution’ to the damage caused by its carelessness will not actually help us. This so-called solution… still leaves licensees out of compliance, and when a cannabis business is out of compliance, it cannot access banking, real estate, or investment—no matter what the state says.”
The coalition said the lawsuit was filed “to ensure every licensed operator is protected and given a fair path to compliance and success,” and called on lawmakers to adopt a “functional solution that includes all operators, safeguards investments, and fulfills the promise of a truly equitable cannabis program that benefits all New Yorkers.”
State Response
OCM Acting Executive Director Felicia Reid apologized to affected businesses and said legislative intervention is needed to allow them to remain in place, according to the New York Times. Gov. Kathy Hochul called the error “a major screw-up” and promised to work with lawmakers to keep dispensaries open. A spokesperson for Hochul told Gothamist the governor “has been clear that she will work with the Legislature to ensure these hardworking businesses are able to continue to operate without interruption.”
Despite the turmoil, New York’s regulated cannabis market is expected to reach $1 billion in sales this year. But with hundreds of equity-focused businesses now facing relocation or closure, industry leaders warn that the proximity dispute could further destabilize an already rocky rollout.
Photo by Luca Bravo on Unsplash
