New York’s beleaguered cannabis market on Tuesday was grappling with the sudden collapse of a court case that had signaled an effort by state regulators to step up enforcement in the sector.
On Monday, regulators in the state’s Office of Cannabis Management, without much explanation, abruptly withdrew charges in the case, a major corruption investigation that had been months in the making. The move was followed by the removal of the head of the agency and the firing of the official in charge of the investigation.
However, on Tuesday, the administrative law judge handling the matter held off on dismissing it, saying she needed to decide whether the state should have the option to revisit the matter down the road.
The confusion swirling around the case, against the Long-Island based company Omnium Health, was the latest setback for New York’s cannabis sector, which has endured officials’ broken promises, competition from a robust illicit market and uncertainty around regulations.
Now, as the charges against Omnium hang in limbo, one of the state’s most ambitious efforts to crack down on bad business practices in the cannabis sector appears to be backfiring and to have become another source of embarrassment.
During a virtual hearing on Tuesday, Laurie Cartwright, the judge hearing the Omnium case, did not take issue with the withdrawal of the charges. But Judge Cartwright, who works in the Office of Cannabis Management, held off on dismissing the matter, she said, because she was skeptical of the agency’s regulators’ assertion that they could refile the charges at a later date.
The agency had accused Omnium of orchestrating an illegal scheme to allow some of the biggest cannabis brands from around the country to secretly use its licenses as a back door into New York’s regulated market.
In building the case over several months earlier this year, state investigators said they had gathered secret manufacturing contracts, cannabis that could not be traced back to licensed growers and sworn testimony from a company executive and former workers describing the illegal arrangement.
So it was a dramatic reversal when state officials dropped the charges, citing the need to review unspecified new information. At the same time, the governor’s office dismissed the agency’s top official and the lawyer in charge of the investigation.
Michael Waller, a lawyer representing the agency, did not explain when Judge Cartwright asked him why the agency believed it should be able to revisit the charges. She said she believed the decision should be up to her.
She ordered the agency to provide a written justification for the option to refile the charges by Friday, with responses from Omnium and other companies involved due by Dec. 19. She also agreed to lift the order requiring Omnium to recall roughly $30 million worth of joints, vapes and edibles that has been locked away at licensed dispensaries and company warehouses.
Patrick Hines, a lawyer representing Omnium, said the company welcomed the agency’s decision to drop the charges, but he asked the judge to bar officials from refiling them later. He said the allegations had been hanging over Omnium for eight months and had cost the company tens of millions of dollars of revenue.
“They just continue to kick the can down the road. And eventually, they’ve got to put up or shut up,” Mr. Hines said.
The hearing took place as the industry was reeling from the shake-up at the agency, which is undergoing its second change in leadership in less than two years. Gov. Kathy Hochul cited the handling of the Omnium case in a statement acknowledging that she had asked for the resignation of Felicia A. B. Reid, whom she had appointed to lead the Office of Cannabis Management in June 2024. James Rogers, who led the anti-corruption unit handling the case, was fired.
Damien Cornwell, who owns a licensed dispensary upstate and is the president of the Cannabis Association of New York, an industry trade group, noted that Ms. Reid’s departure came at a critical time for licensed suppliers. He said the businesses are scrambling to meet the state’s Dec. 17 deadline to implement a tracking system to prevent the flow of cannabis from unauthorized growers by monitoring it as it moves from growers to consumers.
“Ultimately, this kind of turbulence hurts operators, undermines investor confidence and confuses consumers,” he said. “It reinforces the perception that New York is the punching bag of the legal cannabis world at a moment when we need to be demonstrating consistency and competence.”
Though New York’s cannabis market is on track to make $1.7 billion in sales this year, the rollout has been turbulent. Efforts by state officials to provide early recipients of dispensary licenses with turnkey retail locations and an investment fund were badly managed. And more recently in August, the future of some 150 dispensaries was thrown into question when regulators suddenly shifted a policy dictating how the 500-foot required distance between a cannabis dispensary and a school should be measured.
Ashley Southall writes about cannabis legalization in New York.
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