New York cannabis regulators have approved a resolution allowing certain medical marijuana businesses, known as registered organizations, to enter the adult-use cannabis market. This decision follows a legal settlement between regulators and a coalition of New York medical cannabis companies challenging the state’s licensure system. The settlement required regulators to schedule a meeting for the Cannabis Control Board to consider the transition of medical licenses to adult-use licenses for the plaintiff companies.
The registered organizations, which are vertically integrated, had to submit plans prioritizing existing medical patients, outlining community impact, and ensuring environmental sustainability to qualify for expansion into recreational marijuana. They can begin wholesale distribution immediately and retail sales later this month, with a requirement to allocate half of their shelf space to products other than their own. The transition to adult-use sales at one location is permitted in December, with authorization for additional storefronts by the end of June 2024.
The ZaZa Report
A federal magistrate in NY is recommending that the case continue that was brought by the conglomerate operating the post-bankruptcy Toys R Us brand to use the powers of federal trademark law against a pair of unlicensed Brooklyn cannabis bodegas operating under the name “Zaza R Us.”
The article discusses the challenges faced by cannabis companies in the United States when seeking bankruptcy protection due to federal illegality. Despite the growth of the cannabis industry, federal law prohibits cannabis, making bankruptcy protection difficult for such businesses. The U.S. Department of Justice (DOJ) has a policy of nonprosecution for state-regulated cannabis enterprises, but bankruptcy protection remains largely unavailable to them.
While federal courts historically followed a strict non-tolerance policy, recent cases indicate a potential shift in judicial attitudes. The U.S. Court of Appeals for the Ninth Circuit, in the Garvin v. Cook Investments NW case, affirmed the confirmation of a Chapter 11 bankruptcy plan for real estate holding companies connected to a Washington State cannabis business. Another case, Hacienda Company LLC, saw a bankruptcy court allowing a debtor with past cannabis operations to file for bankruptcy and liquidate assets.
These cases suggest a more holistic approach to cannabis-related bankruptcies, considering factors such as the timing of cannabis-related conduct and the debtor’s connection to the industry. However, the article notes that it remains to be seen how widely this approach will be adopted and whether it will extend to overt cannabis companies.
To learn more about how cannabis companies are adapting in the shifting bankruptcy arena, click here.