Third Party Advertising Gets the Green Light in NY’s Adult-Use Market

On April 4, 2024, New York Supreme Court Justice Kevin Bryant struck down the state’s ban on third-party cannabis marketing. This amended decision comes on the tails of an original holding by the court that invalidated all eight sections of New York’s cannabis regulations. While in effect, the marketing ban prevented cannabis retailers from advertising their merchandise on “third-party platforms,” which are digital sites that list and provide information on retailers’ products. Dispensaries enter into contractual relationships with these platforms to promote their businesses. Without the ability to advertise on such platforms, this ban would have prevented operators’ from reaching new customers through third-party advertising and impeded e-commerce platforms (such as Leafly Holdings, Inc.) from entering the New York market and directing consumers to licensed operators instead of illicit shops — something desperately needed within the New York market.

In September 2023, Leafly Holdings, Inc. (“Leafly”), a third-party platform, and Stage One Cannabis, LLC, an adult-use retailer, sued the New York State Office of Cannabis Management (“OCM”) and the Office of the New York State Attorney General, arguing that the ban unconstitutionally restricted their right to free speech. Justice Bryant agreed, finding that the OCM failed to establish a factual basis for adopting the marketing ban.

What does this mean for New York cannabis operators? While it’s difficult to say exactly how the market will respond overtime, this decision will inevitably allow more third-party e-commerce companies to expand into the New York market. Another effect of this decision is that consumers will now have more access to information about legal dispensaries which will allow them to make informed purchasing decisions.

While the OCM stated that it is reviewing the decision and exploring its legal options, Leafly has stated that it is optimistic that the decision will allow legal operators to establish a healthy and stabilized adult-use market.