New York City’s cannabis retailers are facing a new regulatory challenge that blends zoning complexity with legal compliance. A recent correction by the Office of Cannabis Management (OCM) has redefined how dispensaries must measure their distance from schools under Cannabis Law § 72(6), placing dozens of city businesses at risk of noncompliance.
OCM’s updated guidance clarifies that dispensaries must be located at least 500 feet from the property line of school grounds, not from the school’s entrance as previously interpreted. This change aligns with Education Law § 409(2), which defines school grounds to include the full legal boundary of the property. The measurement must be a straight line from the dispensary’s entrance to the nearest point on the school’s property line. According to OCM’s published notice, this correction affects 152 businesses statewide, including 89 licensed dispensaries and 38 applicants in New York City.
In New York City, where due to urban density schools and storefronts often share blocks, the revised interpretation dramatically narrows the pool of compliant retail locations. Many dispensaries had obtained approvals and licenses, secured leases and invested in buildouts based on the original guidance. Now, those same locations may fall within the newly defined buffer zone. Relocating a cannabis business in NYC may not be an option for retailers, as it means navigating high rents, limited inventory, and zoning restrictions, all while maintaining community ties and operational momentum.
To help businesses assess their proximity risk, OCM has published an interactive map, available at local.cannabis.ny.gov. While not definitive, the map offers a useful visual reference for dispensaries evaluating their compliance status.
While acknowledging the significance of the updated guidance, OCM has stated that it is not directing existing licensees to close, relocate, or cease operations. Licensees may continue operating while the agency and Governor Hochul pursue a potential legislative fix that could allow affected businesses to remain at their current locations. However, passage of such legislation is not guaranteed and depends on action by the New York State Legislature.
For applicants who have not yet received a final license, the state has launched a $15 million Applicant Relief Program to help cover costs (up to $250,000 per applicant) associated with relocation or capital improvements. Existing licensees are not eligible for this program.
OCM has also reassured licensees with upcoming renewals that they may continue operating under the State Administrative Procedure Act (SAPA) § 401(2), provided they submit timely and sufficient renewal applications. Still, without legislative action, renewal at a noncompliant location remains uncertain.
Adding to the urgency of the situation, a group of New York City cannabis retailers recently filed a lawsuit challenging the state’s revised interpretation of the school proximity rule. The complaint, filed in New York State Supreme Court, argues that the sudden change in how distance is measured has jeopardized previously approved and licensed businesses that relied on the original guidance. The legal action underscores the high stakes for dispensaries operating in dense urban areas and may influence how regulators and lawmakers respond in the coming months.
Ultimately, the impact of OCM’s proximity correction will be primarily felt in New York City’s cannabis community. As the Governor and New York’s legislature work toward a legislative solution, OCM must consider not just statutory compliance but the practical realities of operating a cannabis business in one of the most complex urban environments in the country.
