Proponents of legalized marijuana say it will be a boon for government tax revenue and jobs. But in New York, pot farmers are alleging that the state’s regulatory board overseeing the establishment of a legal cannabis market, the Office of Cannabis Management, is threatening to crush the industry with its “disastrous” rollout. 

In a lawsuit filed in the Onondaga County Supreme Court, the Cannabis Farmers Alliance alleged that the OCM and the Cannabis Control Board have done a “disastrous” job of issuing licenses for farmers and opening new retail locations for growers to sell their products. 

New York legalized recreational marijuana in 2021. In the three years since, 156 stores have been opened across the state, far fewer than were expected. By contrast, Michigan, with a population half the size of New York’s, has more than 800 dispensaries. 

Pot growers who received licenses began their growing operations with the expectation of having many more locations to sell their crops to. However, as a result of the sluggish pace of store openings, the lawsuit says farmers are facing “severe financial distress.”

The CFA says 97 percent of small cannabis farms are “operating at a loss, nearly two-thirds under 1 percent profit margin, and over 90 percent in need of operating funds to maintain solvency.”

“Without relief, the industry is at risk of collapse,” the complaint warns. 

The CFA also alleges that the state has failed to meet its goal of providing half of its licenses to “social and economic equity” applicants. Applicants that would fall under that category include “women, people of color, service-disabled veterans, distressed farmers, and residents of those overpoliced communities.”

However, the cannabis farmers’ lawsuit says the OCM has “allowed other entities and groups of licensees free rein at dominating the market, in clear violation of the Cannabis Laws.” The group also takes issue with the state’s decision to keep issuing new licenses for growers even as existing farmers are struggling financially. 

The OCM declined to comment on the lawsuit.

A lawyer for the CFA, Dean DiPalato, told CBS 6 at Albany, “Now that they are giving out licenses, they’re giving it out willy-nilly. They’re not paying attention to the little guy.”

“The farms aren’t going to survive. The health impacts on these people have been horrendous, beyond anxiety and depression,” he added.

He accused the state of letting growers acquire different types of licenses so they can acquire a “larger piece of the farming market to the detriment of these small farmers, and OCM knows it’s happening and [has] done nothing about it.”

The CFA lawsuit also says the state did not comply with the requirement for the “implementation of a functioning and affordable Seed to-sale tracking system, market monitoring and stabilization, and a regulatory framework designed to protect licensed operators from unfair competition and market dysfunction.”

The growers are seeking a declaratory judgment against the OCM and an injunction that would require it to follow the obligations they say it is failing to comply with.

Growers and other cannabis organizations have had longstanding issues with the OCM. In September, the head chief equity officer of the agency, Damian Fagon, resigned after an inspector general investigation concluded a probe into whether he targeted licensees who criticized the agency, even though the probe did not find evidence to prove he violated OCM’s policy.

In May, the executive director of the OCM, Chris Alexander, announced his resignation amid tension with Governor Hochul, who said the agency’s rollout of legalized marijuana had been a “disaster.” Ms. Hochul’s office released a scathing report criticizing the agency’s leadership and inefficient approval process for licenses. 

Besides leadership turmoil, the OCM has faced a barrage of litigation over its social equity goal for licenses and allegations it was engaged in “illegal or unconstitutional disbursements of state funds.”

While small pot farmers are struggling to make ends meet by complying with state regulations, there are still likely thousands of illegal sellers in the state. The New York State Illegal Cannabis Enforcement Task Force has shut down around 1,000 illegal sellers this year. However, officials estimated there were 4,000 unlicensed sellers at New York City alone before the task force ramped up its enforcement, and they believe there are still thousands in operation.