On November 21, 2022, the New York State Cannabis Control Board (CCB) approved draft regulations governing the adult-use cannabis program. Although the Office of Cannabis Management (OCM) used a conditional licensing process to begin developing the adult cannabis market in New York, these regulatory projects paved the way for licensing general public, as provided for in the Marijuana Regulation and Taxation Act (MRTA).
Application and license
The proposed regulations set out the permissions, requirements, and prohibitions associated with each type of adult use license, including nursery operations, cultivation, processing, distribution, retail, and microenterprises. On-premises delivery and consumption licenses are also being considered, but will be addressed in future regulations. OCM will accept license applications on an ongoing basis, although OCM reserves the right to limit acceptance of applications. In addition, OCM proposes, when evaluating applications and making the final selection of licensees, that the agency has maximum flexibility to use selection mechanisms, including, but not limited to, scoring, compliance, qualified lotteries and a random selection process or any combination of these methodologies. The licenses will be valid for two years from their issue.
In addition to the application and selection process, the proposed regulations offer a variety of cultivation license opportunities. Consistent with other state adult-use cannabis regulations, the proposed regulations set overall canopy limits and license-specific levels for cultivation based on cultivation methods (outdoor, mixed light, combination of outdoor light and mixed and indoor). Cultivators can cultivate between 5,000 square feet and 100,000 square feet, depending on the level selected. Growers using a combination of outdoor and mixed light can grow, depending on the level selected, anywhere from 5,000 square feet outdoors/2,500 square feet mixed light to 100,000 square feet outdoors/30,000 square feet indoors. mixed light.
The draft regulations also establish a proposed fee structure for each license type. In addition to the $1,000 non-refundable application fee, if the application is approved, licensees are required to pay a fee based on license type to the CMO prior to final issuance of a license. For cultivation and processing licenses, the amount of royalties increases depending on the size of the canopy and the extent of processing. For example, a level 1 outdoor grower can expect to pay $1,000 and $150 per square foot of grow canopy, while a level 5 outdoor grower can expect to pay $40,000 and $440 per square foot of crop canopy greater than 5,000 square feet. The proposed fee for a retail dispensary license is $7,000.
True parties of interest (TPI) and cross-ownership restrictions
In accordance with the MRTA, which establishes a two-tier market structure prohibiting supply-level entities (growers, processors and distributors) from holding interests in licensees participating in the retail space (dispensaries, on-premises consumer sites and delivery services), the draft regulations provide further clarification on the determination of TPI status and whether cross-ownership could be involved in a business relationship or arrangement with a licensee cannabis license. The definition of the TPI is largely in line with the CMO guidelines issued for the conditional program. TPIs include any person who has a financial interest in the applicant or licensee, who has authority or control over the applicant or licensee, or who bears responsibility for the debts of the applicant or licensee. , as well as the spouses of any person considered to be a TPI. The draft regulations also address the concept of passive investing – those TPIs that have a limited ownership interest and do not otherwise have control or influence over the applicant or licensee. However, in line with the horizontally integrated framework mandated by the MRTA, passive investing across the supply and retail levels remains prohibited under the proposed regulation.
Social and economic equity
The proposed settlement identifies criteria for social and economic equity participants – minority-owned business, woman-owned business, distressed farmer, disabled veteran-owned business. All Social and Economic Equity applicants will receive a 50% reduction in their application fee. To maintain their designation, they and all licensees will be subject to ongoing compliance and reporting obligations related to ownership and control.
The settlement also outlines the parameters of a “Community Impact Plan,” which will show how an applicant or licensee will benefit communities and individuals from communities disproportionately affected by the War on Drugs, through opportunities for labor or investments in community resources and education.
The proposed regulations establish clear parameters for the development of municipal laws and largely mirror the rules found in New York’s liquor laws, including prohibitions on the power of local governments to pass laws or regulations. local ordinances or impose specific fees on cannabis licensees. The MRTA and proposed regulations allow localities to impose time, location and manner restrictions on retail dispensaries, but dispensaries cannot limit their operations to less than 70 hours per week. In addition, the proposed regulations also prohibit the issuance of adult on-site retail or consumer sites on the same road or within 500 feet of school grounds or a community facility (e.g., daycare, public park, playground, public swimming pool). swimming pool and library). Similarly, the proposed regulation prohibits a dispensary or consumption site from being located within 200 feet of a place of worship.
Medical Marijuana License Holders
Generally, vertical integration is prohibited for entities licensed under the Adult Cannabis Program, with some exceptions for Registered Organizations (ROs) operating under the Medical Cannabis Program and microenterprises. In accordance with the MRTA, the proposed rule provides that an RO may enter the vertically integrated adult use market with or without a retail license element. Notably, the proposed regulations prohibit an RO seeking retail authorization from applying for adult use retail until cannabis sales have been ongoing in New York for three years. ROs seeking an adult use permit will need to pay additional fees for cultivation, processing, distribution, and distribution – approximately $10 million for the supply-level permit and $20 million for retail authority.
Under New York’s Administrative Procedure Act, draft regulations are subject to a public comment period of at least 60 days upon publication in the National Registry before they can be formally adopted. In addition, at the end of the public comment period, OCM is obligated to evaluate public comments and republish the rule if it makes substantial changes to the substance of the rule.