Proximity Compliance Issues in New York’s Cannabis Market

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New York Dispensaries Being Forced to Relocate

The New York Office of Cannabis Management (OCM) has revised its interpretation of Cannabis Law § 72(6), which has led to significant changes in dispensary compliance. Under the new interpretation, some locations previously deemed compliant are now considered in violation of the law. OCM has acknowledged this error and issued updated proximity guidance.

How Serious is This Issue?

A total of 152 cannabis retail businesses have been identified as affected: 105 licensed dispensaries and 47 pending applicants. In New York City alone, 53 licensed dispensaries fall into this category, although 43 of them have not yet opened. Altogether, 88 licensed dispensaries and 39 pending applications across the five boroughs are now in question. Importantly, 89% of these businesses are participants in Social and Economic Equity (SEE) or Conditional Adult-Use Retail Dispensary (CAURD) programs.

Regulatory Clarification

Cannabis Law § 72(6) prohibits dispensaries from operating:

The law specifies that measurement should be taken in a straight line from the dispensary’s entrance to the nearest property line of the school grounds. OCM, however, had been applying a different method—measuring from the center of a dispensary entrance to the center of a school entrance, and only if both were located on the same street. This approach was inconsistent with the statutory definition of “school grounds,” which includes buildings and surrounding property.

Options for Impacted Operators

Businesses now face three potential paths forward:

Relocation: Pending applicants may be eligible for support through the $15 million Applicant Relief Fund, which provides up to $250,000 per applicant for relocation expenses. However, this program does not apply to licensed dispensaries that are already operating, making relocation particularly challenging in high-cost, dense markets such as New York City.
Legal Action: Several law firms have recommended that businesses perform their own proximity measurements to confirm compliance. Operators may consider litigation, forming coalitions, or lobbying for legislative changes. While legal action could protect certain businesses, it comes with high costs and uncertain outcomes.
Sale of License or Business: For some operators, selling may be the most practical option. Given the demand for retail licenses in New York, selling could allow businesses to recover some of their investment rather than absorbing relocation costs.

Legislative Developments

Senate Bill 8469 has been introduced to allow dispensaries approved prior to July 28, 2025 to remain eligible for renewal regardless of proximity concerns. Governor Kathy Hochul has publicly recognized OCM’s error and has expressed support for finding a legislative solution. However, the legislature will not reconvene until January 2026, which poses a serious challenge for operators with renewals due in the coming months. Some businesses face renewal deadlines within the next 60 days, creating immediate uncertainty.

Early Warnings

Concerns about OCM’s measurement approach were raised more than a year before the correction. In March 2024, attorney Jason Jensen cited statutory definitions of “school grounds” that conflicted with OCM’s method. Despite this, the agency continued applying its earlier interpretation until July 2025.

Current Status and Next Steps

At present, all affected businesses are permitted to continue operations. However, without legislative relief, dispensaries located within prohibited distances will be unable to renew their licenses. License renewal occurs every two years, making it critical for businesses to evaluate their position quickly.

Operators are advised to:

Industry Response and Consulting Support

Stakeholders have noted that OCM’s revised approach conflicts with earlier adjustments intended to account for siting challenges in New York City. Industry consultants are now supporting operators by helping evaluate compliance options, facilitating relocation efforts, assisting with license sales and acquisitions, and advising on advocacy or legal strategies.

Broader Implications

This development underscores the volatility of New York’s cannabis regulatory environment. Retroactive changes in compliance interpretation place significant financial and operational strain on businesses that made decisions based on earlier approvals. The resolution of this issue will set a precedent for how New York manages regulatory errors and whether operators—particularly smaller and equity-focused businesses—can rely on regulatory consistency moving forward.

Frequently Asked Questions

Do I have to close my dispensary immediately?

No. You can continue operating. The issue arises at license renewal, which occurs every two years. If your location is still noncompliant by then and no legislative relief is passed, you will not be able to renew at your current site.

How do I know if I’m affected?

OCM is notifying businesses directly, but you should confirm independently. Under the law, dispensaries cannot be:

Can I get money to help with relocation?

Only pending applicants are eligible. The state’s $15 million Applicant Relief Fund offers up to $250,000 per applicant for relocation expenses, but licensed and operating dispensaries are not included.

What happens if the legislation fails?

If Senate Bill 8469 or another legislative solution does not pass, affected dispensaries will need to relocate before their next license renewal in order to remain licensed.

Should I sell my license?

This depends on your financial and operational situation: