Court ruling paves way for third-party cannabis companies to compete in NY

Just as sites like DoorDash and Seamless have taken over food delivery in New York, third-party cannabis companies could soon become the go-to source for legal weed purchases.

An Albany judge has ruled in favor of one such site, Leafly, in a lawsuit filed last year. The company challenged state rules banning dispensaries from advertising or fulfilling orders on third-party sites that list cannabis products for sale. Leafly said in its complaint that the rules made it impossible for it to operate in New York.

Supreme Court Justice Kevin Bryant ruled this week that the marketing regulations, which were developed by the state’s Cannabis Control Board, had no rational basis and were unconstitutionally vague.

“We hope this decision ultimately leads to a healthy, stable adult-use market in the state,” Leafly said in a statement celebrating the win. “It’s impossible to overstate the importance of providing consumers with choices, and educational information when making purchasing decisions.”

New Yorkers can already order legal cannabis products online and have them delivered by individual licensed vendors.

Osbert Orduña, co-owner of The Cannabis Place, a licensed dispensary in Queens, said he thinks the introduction of third-party vendors is bad for the burgeoning industry. Orduña said he doesn’t want it to become the norm for local cannabis businesses to pay a third party to market and deliver their products.

“They’re worried about making money. They don't care about us,” Orduña said of companies like Leafly. Other competitors include Weedmaps and Doobie.

Orduña added that the marketing regulations that were struck down helped to level the playing field among legal cannabis vendors.

“With these regulations being lifted, the person with the deepest pockets can do the most advertising,” Orduña said.

But Orduña is also among the legal dispensary owners who have complained that some of the state’s regulations make it too difficult to compete with unlicensed shops. He said, for instance, that the state should ease its restrictions around signage outside of stores.

Wei Hu is a cannabis lawyer and co-owner of Lenox Hill Cannabis Co., a legal dispensary on the Upper East Side. He said he didn’t think Friday’s ruling would “make that much of a material difference in the market.”

However, he noted, a previous version of the ruling briefly threw the legal cannabis industry into chaos. In that version, handed down Wednesday and amended Friday, the judge broadly declared all regulations governing the adult-use cannabis market “unlawful and void.”

Hu said he recognized immediately that the original ruling was likely a mistake, but said, “I had a lot of clients calling me, like, ‘Yo, is the industry done?’”

Bryant, the judge in this case, previously derailed New York’s legal industry for months, when he blocked the state from opening any new dispensaries under its social equity licensing program.

Asked for comment following the initial ruling this week, the state Office of Cannabis Management said, “We are reviewing the decision and exploring all possible legal options.”

The agency did not respond to a request for comment on the updated ruling.