From Green light to Red Tape
OCM’s Audit Triggers Licensing Crisis
The Office of Cannabis Management has done it again, rolling out a policy change that threatens to derail the very entrepreneurs the state says it wants to support. This time, it’s a “proximity correction” that could cost over 150 dispensaries and applicants their future, hitting New York City hardest.
On July 28, the OCM informed license holders and applicants that a key rule (how to measure the legally required 500 feet between a cannabis dispensary and a school) had been applied incorrectly for more than a year. The change replaces the agency’s 2022 “entrance-to-entrance” method with a stricter “main entrance to the property line” rule, using a straight-line measurement.
The fallout? 105 licensed dispensaries and 47 pending applicants—88 and 39 of them in NYC, respectively—are now flagged as non-compliant.
How We Got Here
This controversy stems from an internal audit launched under interim OCM Director Felicia Reid. The review revealed that over 150 adult use retail dispensary licenses had been approved under the agency’s earlier “entrance-to-entrance” interpretation of the law but would now fail under the current reading of Cannabis Law § 72(6).
Under the earlier interpretation, OCM measured the distance from a dispensary entrance to a school entrance, a method spelled out in its 2022 guidance. The audit found that this method didn’t match the law, which requires measuring from the dispensary’s main entrance to the nearest property line of a school’s grounds, using a straight-line calculation.
Chris Alexander, the OCM’s former executive director says this was a deliberate decision, signed off on by the Governor’s office and other agencies.
“This wasn’t an oversight; it wasn’t a mistake—it was a choice,” Alexander said, explaining that the entrance-to-entrance rule was developed to make space for dispensaries in densely packed areas like NYC. He also pointed out that the regulation went through an 18-month review, public comment period, and state-level approval process.
What This Means for Equity
The MRTA was sold as a pathway to economic opportunity for communities historically harmed by prohibition. But repeated policy shifts, from licensing freezes to legal challenges and now this proximity correction, have created instability that threatens to push smaller, equity focused operators out before they’ve had a fair shot. Yet now:
47 pending applicants will have to find new locations.
105 licensed dispensaries are now considered non-compliant, 60 of which are already open.
Even more alarming: the overwhelming majority of the businesses impacted are social equity.
Pending Applicants must find new, compliant locations before moving forward. Affected applicants can apply for help through a $15 million relief fund, with up to $250,000 in support available per business.
Licensed Dispensaries are allowed to stay open, for now. Their licenses cannot be renewed unless a legislative fix is passed. The OCM and Governor Hochul’s office say they are "aggressively pursuing" legislation to grandfather in these businesses, but there are no guarantees.
In other words, businesses that followed the rules may still be shut down through no fault of their own.
What's Next for These Businesses?
Bronx State Sen. Luis Sepúlveda has introduced Bill S8469, which would “grandfather in” any adult use dispensary license approved before July 28, 2025, regardless of proximity to a school property line, so long as it met the rules in place at the time. The measure aims to protect over 100 busineseses from being punished for following OCM’s original guidance.
While the bill is pending, the state maintains there is “no need” for a special legislative session, impacted dispensaries will be allowed to continue operating if they file “timely and sufficient” renewals, which the state will just keep it pending until a resolution is reached......next year. But business owners say that isn’t enough as banks, insurers, landlords, and even workers’ comp carriers often require a valid license in hand.
This was the driving message at Friday’s rally on the steps of City Hall, where a coalition of impacted businesses gathered to demand immediate action. The group includes roughly a third of the 152 impacted businesses statewide, from Bliss + Lex in Manhattan to The People’s Joint in Schenectady. Speakers called on Governor Hochul to convene a special session this fall to pass Sepúlveda’s bill, rather than waiting until January.
For the hundreds of entrepreneurs caught in the crossfire, the message from Friday’s rally was clear: waiting until January is not an option.
The promise of equity in New York’s cannabis market means little without accountability and consistency. Entrepreneurs deserve more than apologies and press releases—they deserve a system that works as hard for them as they do for their communities.
