Leafly wins cannabis advertising case as New York court strikes down pot-marketing ban

By Steve Gelsi

Judge Kevin Bryant says rule violated free speech but his decision may be appealed.

A New York state judge handed a legal victory to cannabis-information provider Leafly Inc. this week by striking down a marketing ban for cannabis companies in the Marijuana Regulation and Taxation Act that regulates the state's pot industry.

New York Supreme Court Judge Kevin Bryant issued an amended decision late Thursday that sided with a case brought by Leafly (LFLY) after it was prevented from including an ad for a Buffalo-based cannabis dispensary on its website.

Leafly's stock fell 2% after rising earlier in the day.

Bryant's initial decision on Wednesday nullified the bulk of the state's act, but then he narrowed the move to focus on its marketing ban.

"This court is...constrained to find that the regulations are an unconstitutional violation of petitioner's free speech rights as set forth in the New York state constitution," Bryant said in his initial decision.

Leafly filed the legal action to open up access to its website, which helps consumers shop for and compare cannabis products and find dispensaries.

The Office of Cannabis Management is reviewing the decision and exploring all possible legal options, the OCM said in a statement.

A Leafly spokesperson said the company is "pleased to hear that the court agreed with our claims and we couldn't be more excited to support consumers and licensed retailers."

The company said it's "critically important" that licensed retailers get equal access to advertising and marketing tools to compete in the New York market, which currently has thousands of unlicensed pot sellers.

Robert DiPisa, chair of the cannabis law group at Cole Schotz, said it's likely that dispensaries in New York will take a "wait and see" approach before they start advertising.

It will likely take months for the Office of Cannabis Management to issue new rules around advertising and more lawsuits over aspects of the state's cannabis regulations may follow, he said.

"Overall it's a very good thing for the New York marketplace," DiPisa said about the court ruling. "The listings will direct more consumers to licensed stores."

Damien Cornwell, board president of the Cannabis Association of New York, said the Office of Cannabis Management may appeal Bryant's decision or possibly submit "substantially similar" regulations.

"I have full confidence that this too shall pass and that the court will reach a decision in the best interest of all parties," Cornwell said.

The Leafly case marks the latest legal battle over New York state's 2021 cannabis law.

Among them, a lawsuit last year delayed the rollout of state cannabis licenses for several months until it was settled in November.

Gov. Kathy Hochul recently ordered an overhaul of the Office of Cannabis Management.

Dispensary owners have complained that the advertising ban and other regulations have made it more difficult to compete with illicit cannabis stores.

Also read: Cannabis venture-capital firm Poseidon makes first investment in New York market

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-05-24 1426ET

Copyright (c) 2024 Dow Jones & Company, Inc.