Lawyer Alerted New York Regulators of Noncompliant Dispensary Location in March 2024

New York’s cannabis industry got sent into another whirlwind on July 28, when regulators informed 152 retail businesses that their dispensary locations were located too close to schools and did not comply with state law.

These businesses range from medical cannabis dispensaries like FLUENT-owned Etain’s Manhattan location that opened in 2020 to Housing Works Cannabis Co.’s Manhattan location on Broadway that was the state’s first adult-use dispensary to open in December 2022. Dozens of others have unknowingly opened in noncompliant locations in 2023, 2024 and 2025.

Under state law, licensed cannabis sites must be at least 500 feet from schools and 200 feet from churches or other houses of worship. However, the New York Office of Cannabis Management (OCM) established guidance in 2022 that state regulators now say was incorrect, impacting 108 already opened storefronts and 44 pending applicants who accomplished one of the most difficult feats in the capital-deprived industry: securing real estate.

Specifically, the OCM erroneously recommended to the state’s Cannabis Control Board (CCB) that dispensary locations were compliant under state law if their entrances were 500 feet from a school building or if they were located on a different road than a school, even if that school was within 500 feet.

“The two entities must be located on the same street for the 500-foot requirement to be applicable,” according to the OCM’s previous guidance.

However, one industry lawyer attempted to point out to OCM officials more than a year ago that their calculation of measuring from a school building/entrance versus a school boundary was improper (more on this below).

Now, OCM officials are saying they borrowed their 2022 guidance on school proximity measurements from municipalities and that it should never have applied to the office’s statewide location assessments. And when a regulation conflicts with a state statute, the statute reigns, according to the OCM.

In issuing a proximity correction on July 28, OCM officials said they will now assess the 500-foot distance from the main entrance of a dispensary location to the nearest property line boundary of a school’s grounds.

“I am keenly aware that this information will have repercussions for you, your business and your community,” OCM Acting Executive Director Felicia A. B. Reid wrote in a letter to the 152 impacted businesses. “You have poured your energy, time, savings, dedication and heart into the promise of New York’s cannabis industry. To give you this news, and for the weight of it, I am incredibly sorry.”

Despite the apology, the 44 pending dispensary applicants impacted by the OCM’s miscue now must find new locations before moving forward in the application process.

Meanwhile, the 108 dispensaries that are already open are now at the mercy of state lawmakers for a legislative fix to address the zoning issue, perhaps by grandfathering their locations in—something the OCM and Gov. Kathy Hochul are pushing for. But nothing’s guaranteed.

“I’d like to do that, yes,” Hochul said of grandfathering in the 108 stores during an interview with NY1’s Spectrum News. “I don’t want them hurt. They’re part of our community already, they’re working hard, they waited a long time for this, and, basically, I don’t want them screwed.”

While the 108 dispensaries technically can’t renew their licenses until a legislative fix arrives, they can submit their renewal application and remain open while the application is under review, as long as they are in good standing with the state. State regulators may prolong their review process until the New York Legislature reconvenes next January.

Hochul said the OCM’s erroneous guidance on school buffer zone measurements was exposed during a recent audit.

Reid, who took over as the OCM’s acting executive director in June 2024, said the OCM’s blunder was uncovered after she directed the office to conduct a thorough review of its practices to ensure compliance with mandates of the Marijuana Regulation and Taxation Act (MRTA), including decision-making protocols incorporated under former OCM Director Chris Alexander.

Alexander resigned in May 2024 after criticism from Hochul, who appointed him to the position in September 2021 but was later unforgiving of the adult-use program’s slow rollout.

No matter who’s at fault for the OCM’s school proximity misguidance, Cannabis Business Times has learned that state regulators could have corrected the issue more than a year ago.

Jeffrey Jensen, a California and New York lawyer who founded the Variscite companies that sued OCM multiple times in the past, alerted OCM officials to the school measurement problem in March 2024. 

In multiple emails to the OCM shared with CBT, Jensen informed the OCM that it had improperly approved a specific dispensary location where “the school grounds take up the entire block” and fall within 500 feet of the dispensary, even though the school’s “primary entrance” was farther than 500 feet and on a different street.

While the OCM responded through its [email protected] domain to let Jensen know that the office staff reviews locations upon license application submissions, Jensen later copied an attorney who was on OCM’s staff at the time but has since left the office.

Jensen’s emails to the OCM cited statutes that he said made the OCM’s method of calculating the distance unlawful. One statute, in particular, that Jensen cited in the March 2024 emails pointed to “school grounds” being a term that’s defined in New York’s education law, meaning “any building, structure [or] surrounding outdoor grounds.”

On July 28, 2025, the OCM referenced this same term and also stated how it’s defined in the state’s education law to justify its corrective action.

In other words, even though there was a leadership transition after the March 2024 email exchanges with Jensen, another 16 months passed before the OCM corrected its misguidance on the school proximity measurement.

Cannabis Business Times reached out to the OCM, asking why it took the office 16 months to rectify the misguidance.

“It did not take OCM 16 months,” OCM Press Secretary Taylor Randi Lee said.  

“The current OCM lead was not aware of the issue until recently,” Lee said. “Regulations that explained how measurements would be taken were published in 2022 and adopted in 2023. It was under these that OCM, under the leadership in place at the time, recommended to the CCB [the] licensure of the first retail stores. Some of these stores opened at locations that violated the law, meaning within 500 feet of the grounds of nearby schools. This is why some of the first opened stores appear on the list of locations facing the school proximity issue. Current OCM leadership, which assumed their roles in June 2024, recently discovered this error and have now moved to bring the agency’s licensing practice in line with the obligations of Cannabis Law.”

Since that March 2024 email chain, the OCM has approved dozens of adult-use dispensary licenses, with at least 47 stores opening in noncompliant locations after Jensen alerted the OCM of his concerns with the office’s proximity measurements. At least 40 of these stores opened after the new leadership took over the reins at the OCM.

“The governor’s office and OCM remain committed to supporting impacted licensees, with the goal of keeping them operating in their current locations through a legislative change,” Lee said. “We look forward to working with the licensees and the Legislature in the coming session.”

On top of buffer zones, dispensary operators generally are tasked with finding locations in commercial or manufacturing zoning. Also, their retail facilities are severely limited by mortgages because federal banks can’t have tenants operating federally illegal businesses, or they risk dealing with money laundering issues under cannabis’s Schedule I control status in the U.S. 

This presents a challenge for cannabis businesses because the vast majority of commercial properties in the U.S. have mortgages, especially when a business has investors who don’t want 100% of their money tied up in a property that prevents them from leveraging other properties or assets.

And specifically burdensome in New York’s cannabis market, Manhattan, Brooklyn and Queens represent some of the most expensive real estate markets in the country, with few options left for dispensaries to relocate nearby.

Particularly, 89 of the 108 impacted dispensaries that opened too close to schools are operating in New York City. Absent a legislative fix, these operators could have to close their doors and move outside the city.

“It’s a nightmare for these people. I don’t think the government has any idea what this does to people,” Jensen said. “The hardest part of this business, I always tell people … comes down to two things: property and money, with a heavy emphasis on property. It is exceptionally hard to find properties.”

Had the OCM heeded Jensen’s warning in March 2024, state officials could have potentially saved at least some of the impacted operators from the uncertainties they now face.

OCM officials announced on July 28 that they’re working with Hochul’s office and the Empire State Development to create a $15 million relief program for the 44 pending applicants impacted by the misguidance, allowing up to $250,000 each in coverage; however, that may not be enough to remedy the damage.

The ripple effect of these businesses having to find new locations disrupts the order of who was placed and when. Some may argue that their backup location is no longer available: In addition to schools and places of worship, licensed dispensaries also have buffer zones between other licensed dispensaries based on municipal populations in New York.

While New York vertically integrated medical cannabis operator Curaleaf was not among the impacted businesses, Chairman and CEO Boris Jordan sounded off on his frustration with the situation.

“The small business owners who have spent the past two years building New York’s adult-use industry into a diverse, thriving market are threatened with millions in damages and potential shutdown,” he wrote on X. “This is a catastrophic failure of governance. We believe the OCM blatantly and knowingly disregarded the MRTA’s proximity provisions, violating both state and federal law on multiple bases. Dispensaries and their owners should not suffer due to the intentional disregard for the law by the OCM and the administration. The state must be held accountable.”

When New York state cannabis regulators deviated from measuring the 500-foot school buffer zone to the nearest school property lines in 2022, and detailed those revised regulations in May 2023, the change was required to be reviewed by Hochul’s administration, The New York Times reported.

Jordan said that instead of New York reaching its market potential, he believes the state’s “reckless” decisions have driven consumers back to the unlicensed market.

The CEO said that his company’s wholesale partners are among those impacted and that Curaleaf plans to fight “this lawlessness.”

“We hear their anger,” he said. “We share it.”