A spokesperson for the department tells The Philadelphia Inquirer they issued the ban last week because the Pennsylvania Cannabis Festival in Scranton is not a "medically focused event."
Festival organizer Jeff Zick said he stands to lose tens of thousands of dollars after dispensaries paid more than $8,000 each to set up booths at the festival.
About 10,000 people are expected to attend the fifth annual free event held April 20.
Dispensary owner Chris Visco said he believes there is a perception that "a bunch of stoners" were heading to Scranton, which is not the festival's intention.
Chris Goldstein, a spokesperson for the National Association for the Reform of Marijuana Laws, said the dispensary ban goes against the state's own interests.
"Part of the goal of the medical program has always been to get underground cannabis consumers into the dispensaries," he said.