New York allowed pot shops to open too close to schools. Now they might have to move

Key Points

• New York officials have admitted to incorrectly measuring the distance between cannabis shops and schools, affecting around 100 dispensaries that may now face relocation.
• Regulators revealed the error involved measuring from the entrance of schools instead of from their property lines, which contravenes the 500-feet distancing rule.
• Businesses have been granted temporary allowances to operate despite expired licenses, but they are concerned about banking, insurance, and future stability due to pending legislative solutions.
• Governor Kathy Hochul has termed the situation a “major screw up” and is advocating for a legislative remedy to assist affected shop owners.

Since New York began licensing recreational marijuana stores about three years ago, the state has been using a simple tactic to ensure pot shops are kept a legally-mandated distance from local schools: Measure from the door of the dispensary to the door of the school.

But officials recently made a startling admission: They’d misread the law and had been measuring incorrectly the whole time. Now, about 100 cannabis shops are in limbo, crossing their fingers for a legislative fix while wondering whether they’ll have to relocate.

The news was like dropping “a grenade in the laps” of business owners, said Osbert Orduña, who owns a New York City dispensary called The Cannabis Place that is now deemed to be too close to a nearby preschool.

“The way that they executed this was a complete and utter failure in leadership,” he said.

The admission is just the latest bungle from New York’s beleaguered legal marijuana program, which has been hamstrung by legal challenges, a slow rollout and gaps in the law that allowed an illicit market to flourish.

Business owners found out about the issue from the Office of Cannabis Management last month, which admitted it should have been measuring from the edge of a school’s property line, rather than its entrance, to ensure weed stores were kept at least 500 feet (152 meters) away.

“To give you this news, and for the weight of it, I am incredibly sorry,” said Felicia A.B. Reid, acting executive director of the cannabis agency, said in notices to the businesses.

The error impacts a sizable share of the state’s roughly 450 cannabis dispensaries.

About 60 of those were licensed using the erroneous measurement system, mostly in New York City, plus around another 40 that have licenses but are yet to open their doors.

On top of that, there are almost 50 other businesses that have applied for licenses under the incorrect measurement system and are awaiting final approval from the agency. The state has set aside a pot of money where applicants can get up to $250,000 to help relocate.

The existing shops have been told they can remain open for now, and even continue to operate with their expired licenses as long as the businesses file an application for a renewal.

Regulators say they are urging state lawmakers to create a permanent fix that will allow the shops to stay put. But they have also noted that is not guaranteed. The state Legislature isn’t scheduled to sit again until January.

Meanwhile, business owners say they're being forced to operate in a gray area.

Jillian Dragutsky, who opened a dispensary called Yerba Buena in Brooklyn a few months ago, worries the issue still jeopardizes a dispensary’s ability to bank, get insurance and purchase inventory since they are supposed to have valid licenses in place.

“How do you grow your business not knowing where you’re going to be a few months from now?” Dragutsky said.

In a statement, the cannabis office said businesses can obtain “proof of a valid license or a letter of good standing to operate” by contacting the agency.

An internal review of the cannabis office released last year detailed numerous problems at the agency, including inexperienced management and shifting licensure rules, while state leaders promised an administrative overhaul.

Gov. Kathy Hochul, who has previously said the program has been a “disaster,” called the school proximity problem “a major screw up” and vowed to find a legislative fix.

“These people have worked hard. They’ve waited a long time. They put their life savings into something that they thought was going to help them support their families,” she said. “So what I’m been doing is first of all reassuring them that you’re going to be OK. Secondly, we need to get the law changed to have a fix.”