CAURD & the Variscite Litigation

Last verified: April 2026

The CAURD Program

In March 2022, Governor Hochul announced the Seeding Opportunity Initiative. The Conditional Adult-Use Retail Dispensary (CAURD) license, launched in August 2022, reserved the first round of retail licenses for “justice-involved” New Yorkers — defined as a person convicted of a New York cannabis offense before March 31, 2021, or whose parent, legal guardian, child, spouse, or dependent had such a conviction — plus qualifying nonprofits.

The state envisioned 150–200 first-round CAURD licensees. By February 2026, the CCB reported 324 active CAURD licensees statewide.

Variscite NY One v. New York

Variscite NY One v. New York (N.D.N.Y., Case No. 1:22-cv-01013, Judge Gary L. Sharpe). Less than a month after the CAURD application window closed, Variscite NY One, a Michigan-based entity owned 51% by Kenneth Gay (a Michigan resident with a Michigan cannabis conviction), sued in the Northern District of New York alleging that the program’s “significant presence in New York” requirement violated the U.S. Constitution’s Dormant Commerce Clause.

On November 10, 2022, Judge Sharpe granted a preliminary injunction freezing CAURD licensing in five regions including Brooklyn — a ruling that single-handedly delayed the entire rollout into 2023. The injunction was based on Sharpe’s finding that the in-state requirement likely violated the Dormant Commerce Clause by discriminating against non-NY residents in interstate commerce.

The Legal Theory — Dormant Commerce Clause

The Dormant Commerce Clause is the inverse of the federal Commerce Clause: just as Congress has authority to regulate interstate commerce, so the states are restricted from discriminating against interstate commerce. State residency requirements that favor in-state actors over out-of-state actors face strict-scrutiny review.

Cannabis presents a unique constitutional puzzle: federal law (Controlled Substances Act) makes cannabis Schedule I, meaning there is no federally-lawful interstate commerce in cannabis. The Dormant Commerce Clause typically protects interstate commerce, so the question becomes whether the doctrine reaches commerce that federal law itself prohibits. The First Circuit (2022, in NPG v. Maine) and the Second Circuit (2025, in Variscite NY Four) held that the Dormant Commerce Clause does apply — striking down state cannabis residency requirements. The Ninth Circuit (January 2026, in Peridot Tree WA, Inc. v. Washington State Liquor & Cannabis Control Board) went the other way, creating a circuit split.

The 2023 Resolution & Follow-On Litigation

After Second Circuit modifications in March 2023 and a settlement in May 2023, CAURD licensing resumed. But follow-on cases kept litigation pressure constant:

• Variscite NY Four — decided by the Second Circuit in 2025, the case extended Sharpe’s reasoning. Judge Dennis Jacobs, writing for the majority: “The dormant commerce clause prohibits state protectionism unless Congress clearly authorizes specific protectionist laws.”
• Carmine Fiore v. NYS Cannabis Control Bd. (August 2023) — further procedural challenges to CAURD eligibility

By March 2026, more than 50 lawsuits had been filed against OCM.

The Brooklyn Catch-Up

The injunction’s practical impact on Brooklyn was severe. Brooklyn was one of the five regions frozen by the Variscite preliminary injunction. The freeze meant that during the critical first months of legal sales (December 2022 through May 2023), Brooklyn essentially had no operational CAURD pipeline. Brooklyn’s 2024–2025 explosive growth was the catch-up; the borough now hosts the largest year-over-year licensed-dispensary growth in the city.

The Federal Circuit Split

As of April 2026:

• First Circuit (NPG v. Maine, 2022) — state cannabis residency requirements violate the DCC
• Second Circuit (Variscite NY Four, 2025) — same conclusion; Judge Jacobs’s opinion explicitly applies DCC analysis to cannabis residency rules
• Ninth Circuit (Peridot Tree WA, January 2026, 3-0) — opposite conclusion; federal illegality means the Constitution does not protect interstate commerce in marijuana. Appellants had until March 17, 2026 to seek en banc review or Supreme Court certiorari.

The split sets up a likely Supreme Court resolution within the next 18-24 months — a resolution that will determine whether NY’s CAURD-style equity programs are durable, and whether other states can tighten the residency screws back up.

Implications for NYC CAURD Operators

The CAURD program survived the Variscite litigation in modified form. The 324 active CAURD licensees statewide as of February 2026 represent the original equity-first vision largely intact, though the licensing process has been substantially restructured to comply with Sharpe’s reasoning. NYC CAURD licensees — who form the largest sub-population of the active 324 — continue to operate under the program as currently structured.

The Broader Equity Question

The Variscite litigation raised a question that NY cannabis policy is still working through: how do you design a constitutionally durable equity program that meaningfully prioritizes communities harmed by prohibition? The Dormant Commerce Clause restriction means residency-based prioritization faces challenge. State-defined social-equity criteria tied to past arrest, income, and disproportionately impacted geographic areas (the framework Detroit pivoted to after its own 2021 federal ruling) may be the more durable model. NY is still iterating.