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Implementing an Adult-Use Licensing Lottery: A Big Gamble?

This is a previous edition of our Taproot Cannabis Newsletter, which is delivered to your inbox on a weekly basis. You can sign up here.

As New Yorkers patiently await initial appointments to the state’s Cannabis Control Board (CCB)—the regulatory body charged with overseeing NY’s recreational cannabis program—an item weighing heavily on stakeholders’ minds is the potential structure and process of adult-use licensing. While rumors swirl over how, precisely, the state will implement its legalization law (the “Marijuana Regulation and Taxation Act” or MRTA), a method of license distribution worth examining is that of the lottery system. Proponents of the lottery system argue the method helps to even the playing field and mitigate the number of potential lawsuits from disgruntled or failed applicants. Its opponents, however, indicate that a lottery scheme would imperil the statutorily explicit intentions of the MRTA when it comes to social equity licensing. That is, a lottery necessarily undermines the spirit of a law that purposefully prioritizes certain applicants in the licensing process—including a goal that 50% of licenses be awarded to qualified social equity applicants—thus embedding an intentionally uneven playing field in statute.

The potential for lawsuits should be clear to anyone who witnessed Illinois’ licensing process, which has been chaotic, ineffective, and particularly detrimental to the social equity measures which the state planned to implement per statute. Here, implementation was, of course, marred by lawsuits, including a joint federal lawsuit by a pair of unsuccessful applicants against the Illinois Department of Financial and Professional Regulation which claimed the process was unconstitutional because they were denied the ability to correct errors with their applications.

Realistically, New York cannot avoid lawsuits outright, but it can learn from the experience of other states such as Illinois, Arizona, and others, in making its final decision on whether to use a licensing lottery or not, and how to implement it properly.

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