New York’s much-anticipated adult-use cannabis retail licensing process has recently been stuck in a haze since August 18, 2023, when a New York Supreme Court judge ruled that the state Office of Cannabis Management’s (“OCM”) discretionary licensing procedure violates New York’s Marihuana Regulation and Taxation Act (“MRTA”). As Duane Morris previously reported, the judge’s ruling, resulting in an injunction and stoppage of the OCM’s ability to grant additional license applications, is the latest in a number of delays and legal disputes that has New York’s cannabis authorization program far behind schedule. The case involves a group of military veterans who claim New York’s initial round of issuing conditional licenses only to people with prior marijuana convictions, and not also to a wider group of service-disabled veterans and other social equity applications, violated the MRTA. As a result of the injunction, the OCM has appealed the decision and seeks either a temporary stay of the injunction or an expedited appeals court briefing schedule. Continue reading “New York’s Conditional Recreational Cannabis Licensing Process Goes up in Smoke as State Regulators Ask Court to Stay Injunction Order”
This week, the New York State Cannabis Advisory Board (CAB) and the Cannabis Control Board (CCB) held meetings to discuss the current state of the cannabis industry and proposed regulations and legislation. The CCB is the approval and oversight body of the Office of Cannabis Management and is responsible for approving the regulatory framework for New York’s cannabis industry. This includes licensing cannabis businesses and approving the regulations and rules that will govern the cannabis industry in the state.
Cannabis Advisory Board Meeting
On June 13, 2023, the CAB met at CUNY School of Law in Queens to discuss the revised proposed regulations after receiving 3,500 public comments. These regulations range from focusing on achieving environmental and sustainability targets in the industry to rules for third-party platforms. Current proposals involve allowing the current Registered Organizations (i.e. vertically integrated medical cannabis operators) to co-locate three adult use dispensaries among their eight medical dispensaries. The CCB will vote on the final regulations at its first meeting in September. The CAB and CCB’s hope is to have a live functioning cannabis industry “with all the bells and whistles.”
The Conditional Adult-Use Retail Dispensary (CAURD) License is the first retail dispensary license available to businesses in New York State. These licenses are awarded to justice-involved New Yorkers and their family members. A “justice-involved” individual is someone who has been convicted of certain marijuana-related offenses in New York.
The State hopes to create a foundation to support an equitable industry. The CAB discussed the benefits of being a part of the CAURD Academy, which offers live education, seminars, office-hour meetings, calls with operators from other states, one-on-one mentorship, vendor demos, and access to accountants. Twenty-five licensees have taken part in the Academy thus far.
The CAB also discussed the NY Social & Economic Equity Plan and its recent report analyzing the national landscape of the cannabis market. Between 1980 and 2021, cannabis-related misdemeanor and felony convictions resulted in lost lifetime earnings of approximately $31 billion, and Black and Hispanic people accounted for 83% of those losses.
Acknowledging that it is inherently difficult for small operators to compete against large corporations, regardless of funding, the CAB agreed that New York State must protect its two-tiered market, enforce antitrust laws, protect against predatory practices, and approve regulations that are pro-competition and pro-employee. The CAB noted that cannabis cultivators and farmers want a clear path to licensure, additional Registered Organizations, and a community-driven incubator program.
Cannabis Control Board Meeting
On June 15, 2023, the CCB met in Buffalo to discuss recent Board updates and hear from the public. Chair Tremaine Wright opened the meeting by assuring New York residents that the state is continuing to open more dispensaries, expand access, and further develop New York’s cannabis supply chain.
The CCB approved Resolution No. 2023-23: Consideration of Conditional Adult-Use Retail Dispensaries. This adds 36 CAURD licenses in the Bronx, Brooklyn, Manhattan, Queens, Central NY, Mid-Hudson, and‒for the first time‒the Finger Lakes. Seven dispensaries were approved in the Finger Lakes region. This approval brings the number of CAURD to 251. Wright said these locations will help farmers get more of their product to market.
The Board then presented updates to the market. There are currently 13 open retailers statewide with more than 40 in development. Twenty-one percent of New Yorkers now live in a city with legal cannabis access. Some dispensaries are delivery-only, which is a new form for the state. Consumers are asked to look for a QR code on the window of the dispensary confirming that it is approved by the state. Retail sales are growing; cannabis sales year-to-date are $22.6 million. Some of the dips in sales were attributed to pop-up shops that have transition to brick-and-mortar spaces, which often require a brief shutdown to build out a new space. Product innovations are occurring regularly. Flower sales make up 51% of the revenue, with the rest split between beverages, complex caramels, premium vapes, and more. This widening of product options draws more consumers to the legal market.
The Executive Director reported next that under a newly enacted law, the Office of Cannabis Management (OCM) and the taxing authorities began raids on unlicensed businesses since June 7, 2023. This law allows OCM to take action against businesses selling cannabis without licenses, bolsters OCM authority by conducting regulatory inspections, utilizes court orders to padlock doors if necessary, and allows OCM to seize illicit cannabis.
Each location inspected is issued a notice of violation for selling cannabis without a license. The maximum penalty is $10,000 per day, plus potential additional penalties and consequences if sales continue.
Finally, during the closing comments, board member Reuben McDaniel resigned, presumably as a result of the perceived conflict of interest of his being both a CCB board member and also as the president of DASNY.
Two pieces of legislation were recently introduced in the New York City Council aimed at controlling the unlicensed cannabis market in New York City.
The first bill bill would prohibit knowingly leasing commercial premises to a tenant who uses the premises for distribution or sale of cannabis or cannabis products without a license. The first time that an unlicensed cannabis seller is found to be operating in leased commercial premises, the Sheriff, Police Department, or any other relevant agency would issue a warning to the owner of the premises. If an unlicensed cannabis seller is later found to be operating in the same commercial premises, the owner would be liable for civil penalties. https://legistar.council.nyc.gov/LegislationDetail.aspx?From=Alert&ID=6165428&GUID=33A0F77B-950A-4A9E-8033-F0316A346404&Options=ID%7CText%7C&Search=cannabis
The second bill would require the Department of Health and Mental Hygiene to collaborate with the Department of Consumer and Worker Protection and any other relevant agency to create and implement a public awareness campaign on the dangers of purchasing cannabis or cannabis products from unlicensed cannabis retailers. The campaign would target minors and young adults and focus on the risks of consuming cannabis products adulterated with synthetic cannabinoids and other harmful substances and the risk of purchasing such products from unlicensed cannabis retailers .https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=6165413&GUID=59A6FC8D-E54A-43D2-B621-906AA1B706A2&Options=&Search=
On November 21, 2022, the New York State Cannabis Control Board (the “Board”) approved draft regulations under the Marihuana Regulation and Taxation Act (“MRTA”) that address, among other subjects, the scope of “municipal rulemaking,” or the authority retained by cities, counties, towns, and villages to enact “time, place, and manner” restrictions on the operation of adult-use retail dispensaries and on-site consumption sites within their jurisdiction.
Short of opting out from the marijuana retail market altogether, the MRTA permits municipalities to exercise control over the market by passing “local laws and regulations governing the time, place and manner of the operation of licensed adult-use cannabis retail dispensaries and/or on-site consumption site,” so long as the law does not make the operation of such facilities “unreasonably impracticable” as determined by the Board. But while “time, place, and manner” restrictions have a long history in First Amendment jurisprudence, see City of Renton v. Playtime Theatres, 475 U.S. 41, 46 (1986), what do they mean in the context of regulating the marijuana retail market? Continue reading “New York Approves Draft Rules regarding Local Time, Place, and Manner Restrictions”
On October 28, 2022, the New York Office of Cannabis Management (OCM) released forward-looking guidance for those seeking to operate within the state’s recreational cannabis market.
In January, Gov. Kathy Hochul published an extensive State of the State book, laying out New York’s plan for 2022, including $200 million loan fund in support of social equity applicants within the state’s nascent marijuana market.
The state government set a goal of opening dispensaries by the end of the year that will allow New Yorkers to legally purchase cannabis. Hochul told the editorial board of Advance Media, owner of the Syracuse Post-Standard, that the state would open 20 dispensaries by the end of the year, with another 20 opening each month thereafter.
On October 17, Hochul told reporters that New York is “on track” to open some cannabis dispensaries within months.
Under Hochul’s plan, it is up to the state to select and lease locations for the dispensaries, including 70 in New York City. While the state’s OCM has not yet announced any locations for dispensaries anywhere in the state, it recently issued guidance in clear anticipation of this plan unfolding in the near future.
The New York OCM’s “Guidance for Adult-Use Dispensaries” is a series of prospective regulations for Conditional Adult-Use Retail Dispensary (CAURD) licensees and applications and are immediately effective.
The 27-page document includes requirements and operational rules addressing everything from operations and compliance measures to marketing, sales and distribution parameters, while providing insight into the OCM’s plans for issuing licenses when the time comes. This includes topics of record-keeping requirements, required training for staffers, and inventory and tracking requirements, among others.
While these guidelines are not yet formally adopted and enacted as rules, they at least offer both CAURD licensees and regulators a “working” preview of the New York Cannabis Control Board’s (CCB) expectations for the forthcoming dispensaries.
Indeed, the document states that it “serves to provide the framework that will assist CAURD licensees plan for how to operate their dispensary before regulations are formally adopted. . . and provides clarity on what the Office’s expectations are in relation to those regulations and laws currently in place and the regulations that will be promulgated in the future.”
What Does This Mean for CAURD Licensees?
The state and regulators are gearing up for the opening and development of these dispensaries, possibly within the next few weeks, and throughout the next 15 months. CAURD licensees in New York should adhere to OCM’s newest guidance, in addition to existing Cannabis Law and Title 9 of the New York Codes, Rules and Regulations, until a copy of the final regulations is made available on the OCM’s website.
On November 3, a Business of Cannabis: New York panel discussion ensued, where much of the conversations centered on the importance of providing equal opportunities to small business and justice-involved entrepreneurs to participate in the industry. Panel participants included Tremaine Wright, Chair of the CCB, Crystal Peoples, New York State Assembly Majority Leader, and Jeremy Berke, Reporter for Business Insider.
The same day, Wright tweeted, “[New York] is on target to open stores by the end of the year.” Axel Bernabe, Chief of Staff & Senior Policy Director for OCM, who delivered the keynote more specifically assured, “In 15 months, we’ll have a fully established supply chain built on social equity. That supply chain will form the backbone of what we’re going to build on in the future.”
Qualifying New York small business owners and entrepreneurs should keep a close pulse on this evolving regulatory landscape over the coming weeks and months to ensure they remain in legal compliance and best positioned to take full advantage of this next phase of the state’s cannabis initiative.
A Maine law requiring all owners of medical marijuana businesses to be residents of the state was recently struck down by the US Court of Appeals for the First Circuit, which ruled that the statute is a violation of the “Dormant Commerce Clause” of the United States Constitution, which prohibits states from passing legislation that restricts interstate trade. In its opinion (Northeast Patients Group et al. v. United Cannabis Patients and Caregivers of Maine, the Appellate Court upheld a lower court ruling that the residency requirement is an unconstitutional restriction on interstate trade.
Under the Maine’s medical marijuana program, all directors or officers of a licensed medical cannabis dispensary are required to be residents of the state. Interestingly, Maine had already dropped its residency requirement for its adult-use market following an earlier legal challenge that was also based on the Dormant Commerce Clause but it sought to keep it in place for its medical cannabis program.
This could be a problem for NY’s new adult use cannabis program, as of the requirements is that the potential licensees must have been arrested (or are related to someone who was arrested) for a marijuana related crime in New York and must also have been a New York resident at the time of the arrest. This could like be deemed a residency requirement and thus lead to challenges not only to any individual licenses grants but the entire CAURD program.
Equally or possibly even more problematic is the fact that this ruling could also open the door to legal challenges to a variety of other State laws banning the exporting or importing of cannabis from other states, as the same rationale invalidating the residency requirements could come, as disallowing cannabis exports and imports between states could be construed as similarly placing unreasonable restrictions on interstate commerce.
By C. Neil Gray
On August 15, 2022, the New York Cannabis Control Board (the Board) held a public meeting via real-time stream to consider a number of agenda items. Among the most notable of the topics taken up was the approval of conditional adult use cultivator licenses and conditional adult use processor licenses.
Chair Tremaine Wright opened the meeting by providing an update on the Seeding Opportunity Initiative (SOI) that was launched in Spring 2022. Through the SOI, the Board has granted 223 adult use conditional cultivator licenses, resulting in the first farms cultivating regulated adult use cannabis in New York State. Chair Wright also noted that the Board visited three of these farms in July and were encouraged by the progress and creativity demonstrated in such a short window of time. After some additional opening remarks, the Board moved on to “further steps to advance the Seeding Opportunity Initiative” to “continue to build out New York’s Adult Use Cannabis supply chain.” Continue reading “New York Cannabis Control Board Approves 19 Adult Use Conditional Cultivator and 15 Adult Use Conditional Processor Licenses; Retail Dispensary License Applications Open August 25”
On July 14, 2022 the New York Cannabis Control Board (the “Board”) met to consider a variety of topics. Most importantly, the Board approved the Conditional Adult-Use Retail Dispensary Regulations and the online application for a retail dispensary license.
The initial focus of the meeting was on the approval of proposed Conditional Adult-Use Retail Dispensary Regulations. (Generally referred to in the meeting as the “CAURD Regulations”.) The Senior Policy Director of the New York Office of Cannabis Management noted that the CAURD Regulations were designed to provide retail dispensary licenses to applicants who met two eligibility requirements. First, the applicant (or family member) must have had a cannabis related legal offense that occurred prior to the passage of the Marihuana Regulation and Taxation Act on March 31, 2021. Second, the applicant must have experience owning and operating a qualifying business. The Board unanimously approved the CAURD Regulations. The Senior Policy Director also provided a form of online application for a retail dispensary license. This sample form fleshes out the CAURD Regulations. The Board unanimously approved the sample form of application. The Board also ordered that a new application period for adult-use retail dispensaries licenses open and close on dates established by the Office of Cannabis Management. The Board did not indicate when the actual application would be made available for filing but notice of the application window must be posted on the Office of Cannabis Management’s website no less than 14 days before the application window opens and the application window must last at least 30 days. Continue reading “New York Cannabis Control Board Meeting, July 14, 2022”
New York State’s Office of Cannabis Management (“OCM”) held a board meeting on May 19, 2020. As always, the meeting was available for observation by the public through online streaming. Continue reading “New York’s Office of Cannabis Management Grants Cultivation Licenses and Encourages Enthusiasm for Dispensary Licenses”
New York State Department of Taxation and Finance has created a new webpage with information on the Adult-use cannabis products excise tax.
This cannabis excise tax will apply to both:
- Distributors of adult-use cannabis products on sales of retailers, and
- Adult-use retailers on sales to retail customers.
If you plan to sell adult use cannabis you must register with the Department of Taxation (which is in the process of developing an online registration process and other guidance. More information is available on the NYS Department of Taxation website (https://www.tax.ny.gov/bus/auc/)