First part of a series on the New York State Cannabis / Marihuana Regulation & Taxation Act

New York State recently passed long-awaited adult cannabis legislation and took the lead in other major medical-only jurisdictions such as Florida and Pennsylvania. While the bill awaits implementation, now is the time for companies interested in entering the market to prepare for the application process. New businesses are not expected to open for at least a year. However, the regulations are published and the licensing process is initiated much earlier. Over the next few weeks, Fox Rothschild’s National Cannabis Legal Team, led by our New York group, will provide an in-depth look at various aspects of the new law, covering a whole range of topics including social justice, real estate and labor regulations.

Licenses, the defining capital that market participants focus on – from incumbent multi-state operators (MSOs) to emerging single-state operators (SSOs) – are the natural starting point. While New York could have allowed a jack-of-all-trades with the world’s largest cannabis MSOs and global ancillary companies taking full advantage, Albany has taken a different approach. State officials, through the published bill and commentary, have made it clear that the industry’s expansion should be leveraged to address social injustices, benefit small businesses and large industries, and expand New York’s agricultural sector, among other things. While the legislation does not specify how many licenses will be available in each category, it does aim to allow minority and disenfranchised groups such as women-owned businesses, disadvantaged farmers and service-disabled veterans to use at least 50% of the available micro-business, supplies and nursery licenses with the aim of promoting social and economic justice.

The following are key insights into the licensing process and a full list of the categories of licenses that are issued. With so many license types launched at the same time (compared to California’s staggered release of licenses over nearly a decade), it is important for anyone considering an application to understand the various options, processes, and limitations listed below.

The central theses

  • The New York State Cannabis Control Board reviews all applications for the cultivation, processing, distribution, supply or distribution of cannabis.
  • A separate license is required for each facility where it is grown, processed, distributed, or retailed.
  • Applicants must pay a non-refundable application fee (to be determined by the board) based on the type of license applied for.
  • Applicants must pay a biennial license fee based on the amount of cannabis in question as well as other factors the Board deems appropriate.
    • The Board of Directors may waive or reduce fees for social and economic justice applicants.
  • Applicants must disclose:
    • Information about their identity, including racial and ethnic diversity
    • Property and investment information
    • Proof of good moral character (submission of fingerprints)
    • Annual financial statements
  • Licenses are valid for two years and must then be renewed.
  • Licenses are only issued to people over the age of 21.
  • The board of directors determines the total number of licenses issued.
  • The New York legal framework appears to be designed to encourage a wide variety of licenses and licensees along the seed to sale supply chain (compared to Florida’s all-medical system, which legally requires vertical licenses). )
  • Future regulations will include important details necessary to fully understand the opportunity, such as the definition of “indirect” ownership, which is critical to understanding the controls on overlapping license types. Existing regulatory framework conditions in other countries range from “permitted with minimal deviations” to “no direct or indirect economic interest”.
  • Applicants must maintain a labor peace agreement with a bona fide labor organization (a topic we will explore in a future Fox New York Cannabis Alert).
  • Retail Pharmacy Applicants, Registered Adult Cultivators, Processors, Traders, Retail Pharmacies, and On-Site Consumption Applicants Got to Notify the municipality, city or village where the premises are located at least 30 days prior to submitting their application to give the local government an opportunity to provide an opinion for or against being granted such a license.

Types of Licenses

Cultivator license for adults

  • Authorizes the acquisition, possession, distribution, cultivation, and sale of cannabis
  • Includes planting, growing, cloning, harvesting, drying, hardening, sorting and trimming cannabis
  • Can only apply for a processor license
  • Must not also have a retail license or have a direct or indirect interest in a retail pharmacy
  • You may not get a distribution license either

Adult processor license

  • Authorizes the acquisition, possession, processing, and sale of cannabis from the licensed adult cultivator’s premises to properly licensed dealers
  • Processing includes mixing, extracting, infusing, packaging, labeling, marking and otherwise manufacturing or preparing cannabis products
  • Must not also have a retail license or have a direct or indirect interest in a retail pharmacy
  • You may not get a distribution license.

Distribution license for adults

  • Authorizes the acquisition, possession, distribution and sale of cannabis on the licensed premises of a licensed cultivator, processor, co-operative for adult use in small businesses, or a micro-business authorized to sell adult cannabis to properly licensed retail pharmacies
  • Must not also have a retail license or have a direct or indirect interest in a retail pharmacy

Adult retail license

  • Authorizes the acquisition, possession, sale, and supply of cannabis to adult consumers
  • May not have direct or indirect financial or controlling interest in more than three adult retail licenses (compare, for example, the limit of 10 adult pharmacies in Illinois).
  • Must not be licensed to grow, process, microbusiness, cooperate, or distribute for adults or be a registered organization as described below
  • Retail licenses are only issued if the applicant can demonstrate ownership and full control of the premises for at least two years (i.e. the term of the license).
  • The retail store cannot be within 500 feet of a school campus or 200 feet of a place of worship (zoning and land use issues will be fully covered in a future Fox New York Cannabis Alert).
    • Note: The definition of “school” is broad and includes, in addition to cooperative educational services, public, charter and non-public schools, special school districts, approved pre-school special education programs, and approved private residential or non-residential schools for disabled students.

Microbusiness license

  • Authorizes the limited cultivation, processing, distribution, and supply of adult cannabis
  • Must not be interested in another license
  • Only allowed to distribute his own cannabis to pharmacies
  • This type of license is designed to promote social and economic justice applicants (a 50% target).

Delivery license

  • Approves the supply of cannabis and cannabis products
  • Cannot employ more than 25 people for full-time paid delivery services
  • Also may not have a direct or indirect financial or controlling interest in more than one supply license
  • This type of license is designed to promote social and economic justice applicants (a 50% target).

Kindergarten license

  • Authorizes the manufacture, sale, and distribution of clones, immature plants, seeds, and other products specifically used for growing cannabis
  • A person or organization that has a cultivator license can obtain a tree nursery license to sell directly to other cultivators, cooperatives, or micro-businesses
  • This type of license is designed to promote social and economic justice claims (a 50% target).

Adult Small Business Cooperative License

  • Authorizes the acquisition, possession, cultivation, processing and sale to properly licensed dealers, on-site consumption points and / or retail outlets
  • Must be comprised of New York residents as an LLC or LLP, or in any other business structure approved by the Board of Directors
  • Must not also have a retail license or have a direct or indirect interest in a retail pharmacy

Registered organization licenses

Registered Organization Adult Cultivator, Processor, Distributor, Retail License

  • Same permit and terms as adult cultivator, adult processor, adult trader, and adult retail license but Adult cannabis sales and cannabis products grown, processed or distributed by such organizations are restricted to adult retail pharmacies
  • The location of such adult pharmacies is limited to the premises and facilities of the organization’s medical pharmacies
  • The registered organization MUST keep its medical cannabis license and continue to sell medical cannabis.

Registered organization cultivator license for adults

  • Same permit and conditions as the adult cultivation license but The sale of adult cannabis and cannabis products by such organizations is limited to licensed adult processors
  • This type of license does not qualify the organization for other adult use licenses

Adult on-site consumption license

  • The applicant must demonstrate ownership and full control of the premises for at least two years (i.e. the duration of the license).
  • May only have a direct or indirect financial or controlling stake in three on-site adult consumption licenses
  • Also cannot own a retail pharmacy, cultivation, processing, micro-business, cooperative, or adult distribution license, or be a registered organization
  • The premises must not be within 500 feet of a school campus or within 200 feet of a place of worship.
  • Detailed recording and tracking of all transactions over a five-year period.

Keep an eye out for future installments on our series – In the Weed: NY’s Marijuana Market – New York State’s Adult Cannabis Act.

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