An Update on New York’s Conditional Adult-Use Licensing Process

New York State legalized adult-use cannabis in March 2021 through passage of the Marihuana Regulation and Taxation Act (the “Act”), and the state is currently processing its first applications for retail dispensaries. The Act established the New York Office of Cannabis Management (the “OCM”), which is responsible for promulgating regulations under the Act as well as issuing licenses to participants in both adult-use and medical cannabis markets. Through the OCM, New York began issuing licenses for cannabis cultivation in April, and for processing – converting plants grown in the state to usable products such as edibles and vape oils – in August. Approximately 240 conditional cultivation licenses have been granted, and 15 conditional processor licenses.

New York’s legalization scheme includes a focus on social equity, whereby it is currently accepting applications only for “conditional” licenses, available primarily to businesses and nonprofits owned by or serving individuals affected by marijuana convictions. The state is currently reviewing applications for Conditional Adult-Use Retail Dispensary (“CAURD”) licenses – the application period was open from August 25 to September 25, and the state received approximately 900 applications, for 175 available licenses.
The state has two categories for CAURD licenses, which both have slightly different criteria. Up to 150 of these licenses will be issued to qualifying businesses, and 25 to nonprofits. To be eligible for a CAURD license, an applicant must be a business with at least 30% ownership interest held by a person who:

• First, is “justice-involved” – was either convicted of a marijuana-related offense in New York State before March 31, 2021, or who has a family member with such a conviction;
• Second, has owned at least 10% of a business which earned a net profit for at least two years; and
• Third, has a significant presence in New York – either lives in, or owns land or property in, the state.

Any type of business organization may apply for a CAURD license. Licensees may operate one retail dispensary, and are eligible to receive loans from the New York Social Equity Cannabis Investment Fund to pay for construction, renovations, and equipment associated with the dispensary location.

The second category of CAURD licenses is available to qualifying nonprofits, which must have a history of serving or employing currently or formerly incarcerated individuals, at least one justice-involved member, officer, or advising committee member, and a history of at least two years of net profits. One key distinction between the two types of licenses is that nonprofits are not eligible for financial support from the Fund, and must provide their own retail storefront, over which the OCM has approval authority.

While the OCM is currently reviewing applications and granting conditional licenses for cultivation, processing, and retail sales, it has not yet promulgated regulations governing general adult-use licenses – available to applicants not eligible for conditional licenses – but has stated it will do so in the coming weeks and months.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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