As state marijuana markets continue to develop and mature, the role of the judiciary has become increasingly central to implementation. With legal challenges brought regarding regulations, licensing, and social equity eligibility, the marijuana industry continues to evolve in response to decisions and precedents set. Up to this point in time, because marijuana is illegal at the federal level, these disputes have been worked out in various state courts, but they could eventually make their way to the federal judiciary. The first piece in this series primarily focused on legal challenges to various state residency requirements, this piece focuses on court cases in just two states related to adult-use marijuana. The first relates to getting an adult-use marijuana initiative on the ballot in Florida, and the second pertains to the separation of powers argument that has once again put the nascent New York adult-use marijuana market on hold. While these cases are more state-specific than the cases discussed in the first installment, the potential size of the adult-use markets in these respective states makes them worthy of exploration.

Initiative Process—Florida

While a growing number of states have legalized adult-use marijuana through the legislative process, the majority of states have done so via the ballot initiative process, which allows the question of state legalization to be put directly in front of voters on election day. If enough voters approve, the initiative passes and becomes law. Not all states have laws that allow the initiative process and those that do may have slightly different regulations, but generally a certain number of certified signatures are required, and the language of the initiative must be approved before it appears on the ballot. In Florida, where initiatives are allowed, a legal challenge will determine if an adult-use marijuana measure will make the ballot in 2024. The legal question hinges on whether the language of the ballot summary that voters will read on election day is deemed to be unclear or misleading.

The group Smart and Safe Florida is spearheading the attempt to get an initiative in front of Florida voters to approve the legalization of adult-use marijuana in the state by adding an amendment to the state constitution. Florida legalized medical marijuana in 2016 through the initiative process, with Florida voters overwhelmingly supporting the measure, Amendment 2, 71.3 percent to 28.7 percent (an enacted 2006 initiative raised the threshold for the approval of constitutional amendments to 60 percent).

Smart and Safe Florida collected approximately a million signatures in support of an adult-use marijuana initiative, more than statutorily required, which were then certified by the Florida Department of State. However, while the signature requirement for getting on the ballot was met, State Attorney General Ashley Moody filed a petition with the Florida Supreme Court, asking that the court review if the proposed amendment “complies with the single-subject requirement of Article XI, section 3, Florida Constitution, and whether the ballot title and summary of the amendment complies with the substantive and technical requirements in section 101.161(1), Florida Statutes.” Two adult-use marijuana amendments were proposed for the 2022 election but did not make the ballot as a result of similar challenges.

In subsequent court filings, Moody laid out her opposition to the wording of the ballot summary, arguing that it is misleading and should therefore invalidate the initiative and prohibit it from appearing on the November 2024 ballot. The first concern is that the ballot summary does not make clear that marijuana remains federally illegal and that any marijuana use in the state would be a violation of federal law, subject to federal penalties. Moody asserts that the initiative is misleading in stating in the ballot summary that the initiative would “allow adults 21 years or older to possess, purchase, or use marijuana products and marijuana accessories for non-medical personal consumption by smoking, ingestion, or otherwise,” as the state cannot allow anything that is federally illegal; it can instead only eliminate state penalties for adult-use marijuana. Additionally, Moody states that the inclusion of the language “applies to Florida law; does not change, or immunize violations of, federal law” in the ballot summary is insufficient, as it fails to clearly warn voters that possession or consumption in the state would inherently be a violation of federal law. Therefore, Moody concludes that “an initiative that ‘will not deliver to the voters of Florida what [the summary] says it will’ is invalid.”

The Attorney General also argues that there is a disconnect between the ballot summary’s assertion that the amendment “allows Medical Marijuana Treatment Centers, and other state-licensed entities, to acquire, cultivate, process, manufacture, sell, and distribute such products and accessories” and what the text of the amendment actually does. The legislature already has the power to grant licenses to Medical Marijuana Treatment Centers and other entities; the amendment would grant no new powers, but rather according to Moody “decline(s) to disturb the Legislature’s preexisting authority to license such entities.” This is misleading, according to Moody, because it tricks voters into thinking that the amendment would open the marijuana market up to include those beyond the currently established Medical Marijuana Treatment Centers that already provide medical marijuana. And while the power to license new entities remains the same, the power of the Florida Department of Health to regulate adult-use marijuana is not established by the proposed amendment. Per Moody, “Though the proposed amendment would expand Article X, Section 29 to cover recreational uses of marijuana, it would not extend the Department’s regulatory authority over that use.” If the Department of Health desires to regulate adult-use marijuana differently than the existing medical marijuana program, those regulations will have to be created.

Finally, the Attorney General finds the text in the ballot summary indicating that the proposed amendment “establishes possession limits for personal use” is unclear and misleading as it doesn’t clarify that the amendment text creates a possession cap of 3 ounces. Moody argues that not only would this effectively eliminate all home cultivation by individuals, but that because this is an amendment to the constitution, the legislature would be unable to increase the possession amount in the future without again amending the constitution. As voters only see the text of the ballot summary on the ballot and do not see the full text of the amendment, they may be unaware of what the possession limit established would be or that the opportunity for home grow would be diminished—two factors that may impact their decision of how to vote.

In their brief, Smart and Safe Florida argues that the Attorney General is asking the Florida Supreme Court to abandon the precedents for ballot access that it established in its rulings regarding the two medical marijuana initiatives (rejected by voters in 2014 and approved by voters in 2016) and its rejection of two adult-use marijuana initiatives in 2021. According to Smart and Safe Florida, the court would have to disregard its own rulings—some as recently as two years ago—and move the goalposts for ballot access to comply with the Attorney General’s requests. The ballot summary, they assert, is clear as to the primary purpose of the amendment—“allowing adults 21 years or older to possess, purchase, and use marijuana.” They argue that while the summary of the ballot measure may be ambiguous on some of the other issues raised by the Attorney General—such as the personal possession limit and the Department of Health’s authority—they are not the primary purpose of the amendment and they are not misleading. The distinction, according to them, is important: “ambiguity in a proposed amendment itself is not a ground for invalidating an initiative” under Florida law.

[If the] ballot measure is deemed unclear… it could also change the playing field for the initiative process in the state if the court sets a new standard for qualifying for the ballot moving forward.

As of this writing, a ruling has not been made by the Florida Supreme Court and the fate of the ballot measure is still undecided. If the Attorney General is victorious and the ballot measure is deemed unclear, that would not only be a setback for adult-use legalization efforts in Florida, but it could also change the playing field for the initiative process in the state if the court sets a new standard for qualifying for the ballot moving forward.

Separation of Powers—New York

A new legal challenge in New York over the issuance of Conditional Adult-Use Retail Dispensary (CAURD) licenses has resulted in an injunction. That injunction has frozen the ability of the Office of Cannabis Management (OCM) to grant new retail licenses and for some current license holders to open dispensaries. Fiore, Norgard, Mejia, Spaccio vs. New York State Cannabis Control Board et al. was brought by a group of veterans with service-related disabilities who want to apply for adult-use retail cannabis licenses in the state but have been unable to do so as they do not meet the current criteria for a CAURD license (which only includes justice-involved individuals and their immediate families that had a cannabis-related offense in the state). They allege that the CAURD licenses are unconstitutional as OCM and the Cannabis Control Board (CCB), which oversees OCM, engaged in legislative policymaking. The plaintiffs argue that OCM and CCB’s actions violated the separation of powers doctrine of the state constitution by creating a type of license that was not explicitly included in the Marihuana Regulation and Taxation Act (MRTA), which established the adult-use marijuana program in the state. The arguments in this case are very similar to those presented in another case, Coalition for Access to Regulated & Safe Cannabis v New York State Cannabis Control Board et al., which is still pending. A third case challenging an aspect of the CAURD licensing, Variscite NY One, Inc. v. State of New York et al., was settled (both these cases are discussed in the previous blog on marijuana and the courts).

According to the plaintiffs, Article 4 of the MRTA indicates that the goal of CCB and OCM is to issue “fifty percent of adult-use cannabis licenses to social and economic equity applicants and to prioritize the consideration of applicants who (i) qualify as minority-owned businesses, women-owned businesses, distressed farmers, and service-disabled veterans, or (ii) are from communities disproportionally impacted by cannabis prohibition.” They also highlight that the MRTA states “that the initial adult-use cannabis retail dispensary license application period shall be opened for all applicants at the same time.” Instead, the plaintiffs state that CCB and OCM “created” and exclusively issued CAURD licenses, which are not mentioned in the MRTA, thereby giving those license holders the first opportunity in the newly developing legal adult-use marijuana market in the state. The plaintiffs further argue that the MRTA does not grant the power to CCB and OCM to create new categories of licenses, and as an administrative agency, they do not have the power to “policies” as that duty lies solely with the legislature. They also assert that OCM and CCB violated the MRTA a second time by failing to open up licensing to applicants at the same time. These violations allegedly created irreparable harm to the plaintiffs and they sought an immediate injunction to new CAURD licenses being issued by OCM or the granting of operational approval to current CAURD license holders, preventing them from opening dispensaries.

After issuing a temporary injunction on August 7 before hearing oral arguments, New York Supreme Court Justice Kevin Bryant granted a limited injunction on August 18, 2023. Justice Bryant was not persuaded by the arguments made by CCB that “the Board has some general authority under Article 2 of the MRTA to establish new classes of licenses as such authority would render meaningless the relevant language in Article 4 outlining specific classes of license and the requirements that applications be open to all applicants at the same time.” Until further order of the court, OCM and CCB were prohibited or “enjoined from further processing, approving or investigating pending applications for CAURD licenses” but “this injunction does not apply to any licensees who, prior to August 7, 2023, met all requirements for licensing, including but not limited to site plan approval from the CCB and, where applicable, from local municipalities.” Further exemptions, according to the court order, would be granted on a case-by-case basis. The Cannabis Control Board was also instructed to convene “forthwith to begin finalizing applicable regulations for Adult Use Cannabis Licenses as set forth in Article 4 or the MRTA.” A subsequent hearing on August 25, 2023, resulted in the approval of 23 current CAURD licensees to be exempted from the injunction, allowing them to proceed with opening. CCB is expected to start the process of approving regulations for general licenses to be issued in October 2023.

Given the overall delays with most CAURD licensees opening their retail dispensaries, the opening of the market to all licenses in October will greatly diminish their first-mover advantage.

This has been the latest setback for the growth of the marijuana industry in New York; the previous injunction granted in Variscite NY One, Inc. v. State of New York et al prohibited retail licenses from being granted in five regions of the state (Central New York, Brooklyn, Finger Lakes, Western New York, and Mid-Hudson), slowing the initial rollout. While that injunction was eventually lifted for four of the regions, the Finger Lakes only had their injunction removed in June 2023 with the settlement of the case leaving that region at a disadvantage for getting dispensaries operational. Given the overall delays with most CAURD licensees opening their retail dispensaries, the opening of the market to all licenses in October will greatly diminish their first-mover advantage. How this impacts the social equity of the New York market overall will be worth watching.

Conclusions

Legal challenges will continue to shape the marijuana industry nationwide, and while judicial rulings to date have been limited to individual states, they also provide a roadmap of potential hurdles that states early in the legalization process may need to address for a smoother launch of their respective marijuana markets. Issues of access and fairness will continue to be an area of contention in the marijuana market, given the financial stakes potentially involved in the sector, which will increase reliance on the judiciary to settle such disputes. With the potential of the federal government rescheduling marijuana to a Schedule III drug on the horizon, the judiciary may be called in to adjudicate the changing marijuana industry landscape.

ABOUT THE AUTHOR

Heather Trela is director of operations and fellow at the Rockefeller Institute of Government