ALBANY, N.Y. (NEWS10) — A New York federal judge has sided with a Michigan company that claims New York State’s process of issuing retail marijuana licenses is discriminatory against applicants who live out of the state. The ruling comes as state regulators are preparing to approve the first batch of licenses for dispensaries to start operating.

The New York State Office of Cannabis Management (OCM) established the Conditional Adult-Use Retail Dispensary (CAURD) license. The program is designed to award the first group of licenses for retail dispensaries to New Yorkers — or their relatives — with past marijuana convictions. Convictions must have occurred before March 31, 2021 when the state’s legalization bill was signed by former governor Andrew Cuomo.

An LLC from Michigan named Variscite NY One Inc. filed a lawsuit that claimed the application process for a CAURD license is in breach of an old commerce clause that blocks states from discriminating against out-of-state residents. Variscite NY One Inc. is majority-owned by a Michigan man named Kenneth Gay.

According to the ruling, Variscite applied for a CAURD license, but because it “is [fifty-one percent] owned by an individual who has a cannabis conviction under Michigan law” and “has no significant connection to New York,” it was ineligible to be selected. U.S. Judge Gary Sharpe sided with the plaintiff and granted a motion for a preliminary injunction.

The ruling prevents OCM from issuing CAURD licenses in the Finger Lakes, Central New York, Western New York, mid-Hudson, and Brooklyn. Licensing is still allowed in eight other regions.

NEWS10 reached out to the Office of Cannabis Management and received the following statement:

“We don’t comment on pending litigation. The Office of Cannabis Management is committed to the Marijuana Regulation and Taxation Act’s goals of including those impacted by the state’s enforcement of cannabis prohibition in the market that we are building and we are additionally committed to getting New York’s cannabis supply chain fully operational. The Cannabis Control Board will soon have before it applications for the Conditional Adult Use Retail Dispensary license which will start closing that supply chain.”

The judge’s ruling can be read in-full below:

Hundreds have applied for a CAURD license, but approximately only 150 will be issued. OCM has its next meeting scheduled for Nov. 21.

New York was hoping to begin retail sales by the end of 2022, but an exact date had not been set, yet.