All the elements of the state of New York’s costly, drawn-out and mismanaged rollout of legal sales of marijuana are playing out in three locations around the Gazebo in downtown Peekskill.

A half a block up North Division Street, one applicant for a retail license has filed a lawsuit against the state and a competitor.

Another half block down Central Avenue, the applicant named in the lawsuit has the required state license and now seeks approval from Peekskill to open before other competitors.

And another half block along Park Street, state agents seized illegal marijuana being sold from a smoke shop and tagged the building for the illegal sales.

The legal battles here in Peekskill began last Thursday, March 28, when enforcement agents from the state’s Office of Cannabis Management (OCM) posted notices on several different locations in Peekskill that illicit cannabis had been seized from the stores.

“… this location must immediately cease the sale of unapproved and unauthorized cannabis products” the notices from the state say. “The unlicensed sale of cannabis and cannabis products is strictly prohibited.” A second violation comes with a fine of up to $20,000.

The Herald verified two locations with seizure notices: the smoke shop at 1014 Park St. and the Highland Gourmet Deli at 501 Highland Ave. The notices claim authorities witnessed the sale of illegal products in the stores.

Requests for comment placed with the state OCM and the Taxation and Finance Department were not returned.

Race to open in Peekskill dragged into court

The next day, on March 29, attorneys for the applicants of Gracious Greens, a proposed retail shop at 32 N. Division St., filed a lawsuit in state Supreme Court seeking to overturn a state law that prevents two marijuana stores from opening within one thousand feet from each other.

In court papers, attorneys for Gracious Greens claim the state law is illegal because it removes the right of local governments to determine rules about where shops can be located. The papers also allege that it is impossible to know where other applicants could be opening their shops that are pending state approval.

“This harm is proximately and causally related to Gracious Greens’ inability to comply with a regulation that it could not have complied with because it was never given notice that its locations were going to be disallowed based on proximity to planned dispensaries that do not physically exist yet and therefore could not be physically observed such that Gracious Greens would know to stay away,” the court papers state.

A quick ruling by a state court overturning the state law would allow both shops to open if Peekskill said okay, but the matter could be in the courts for months.

New York’s original legal marijuana plan was delayed for over a year from the November 2022 start while courts put the program on hold until ruling that beginning in October 2023 more groups had to be allowed to apply for licenses, undermining preferences given to minorities and those with criminal marijuana convictions.

The state continues to approve new licenses on an irregular time frame. In late March, 43 new retail dispensary licenses were issued but only one was in Westchester. There are approximately 2,200 applicants currently waiting for approval.

Challenging location rule, cracking down on illegal sales

Operators need two approvals to open a retail marijuana store in New York state – local approval and a state license.

Two competitors have won approval from Peekskill but so far don’t have the necessary state license. One of them, Cloud 914, is anticipating state approval in the coming weeks after getting permission from Peekskill last month to open their store at the current Nardone Brothers Furniture location on Washington Street.

Another Peekskill candidate, Valley Greens, has a conditional state license that will expedite final approval and plans to seek a permit from the Peekskill Planning Commission at its May meeting. They intend to run their store at 939 Central Ave.

Gracious Greens, the company suing the state and Valley Greens, also has a Peekskill permit but isn’t yet state licensed. If Valley Greens opens on Central Avenue, Gracious Greens contends in the lawsuit they will be stopped from ever opening at their North Division Street location because of the 1,000 feet state law.

“This constitutes irreparable harm given that these commercial real properties and locations are unique and irreplaceable, and their disqualification by the OCM not only presents a violation of Gracious Greens’ constitutional rights, but it also deprives Gracious Greens of its opportunity and the concomitant goodwill of being a first entrant to a brand new market, all of which constitutes irreparable harm as a matter of law,” the court papers state. Gracious Greens is also seeking to open a second store in New Paltz.

The crackdown by state officials on illegal sales is required if the legal operators are going to thrive. Critics of the rollout of the legalized marijuana marketplace and those now operating licensed shops are depending on state authorities to rein in illegal sales, where customers don’t pay the taxes that add to the cost of the legal product.

The raid on the several Peekskill locations on March 28 is the first sign here that the state is serious about trying to limit that illegal market. Local police have enormous challenges trying to make arrests because the law requires that they test the seized product to determine the THC content level. There have been no arrests by Peekskill police for marijuana sales in the past two years.

In Yorktown recently, police received a tip that a newly opened convenience and tobacco shop was selling marijuana illegally. After an investigation, the police seized the illegal product but couldn’t shut down the store.  When the Office of Cannabis Management didn’t come to Yorktown (they have 14 inspectors for the entire state), Yorktown’s building department revoked the store’s certificate of occupancy.

Local candidates for shops face off

The lawsuit filed by Gracious Greens pits two out-of-area businessmen against the three young entrepreneurs of Valley Greens.

The principals of Gracious Greens, Michael Ruttenber and Stephen Van Ostrand, both U.S. Marine Corps veterans, won a state license in Massachusetts to operate a marijuana store there but then divested that project before trying to open stores in New Paltz and Peekskill.

They won approval from Peekskill’s Planning Commission to operate at the 32 N. Division St. building.

The three partners at rival Valley Greens had hoped originally to open their store at 638 Central Ave., the former Zeph’s restaurant, a building which Louis Lanza owned at the time. Lanza subsequently decided not to lease them that space last year. An undisclosed buyer reportedly signed a contract to purchase that building earlier this year. Lanza did not return a call requesting comment.

The proposed location on Washington Street for Cloud 914, headed by partners Kyle Knapp, his wife Kim and Chris Calabrese, has its city permit. A fourth contender, owner Eric Sanchez of Papi’s Secret Stash smoke shop on Main Street, has not applied to the Peekskill Planning Commission.