While many potential New York City cannabis entrepreneurs are waiting for the new regulations on adult use to decide whether to participate in this emerging industry, they should understand that the Marijuana Regulation & Taxation Act (MRTA), enacted March 31, 2021 already the general contours of this upcoming market and how its revenues will be divided among the 11 categories of licensees.

And since the five-member Cannabis Control Board (CCB) has now been appointed, more specifics are expected shortly.

The upcoming Office of Cannabis Management (OCM) regulations follow the release of the MRTA language earlier this year. The MRTA is analogous to and in certain areas more detailed than the regulations for recreational cannabis in other sister states. While residents of other states may complain of “overregulation”, New Yorkers may complain of “overregulation” as the New York cannabis law already addresses big issues (no importing or exporting cannabis and prioritizing state business in the US) in the case of a state Legalization) and small (yes, the law allows customers to use credit cards in retail pharmacies and no, they cannot buy cannabis from a store that sells beer).

Basically, the foundation for the adult cannabis industry has already been laid and the CCB and OCM will largely fill in the details and manage this industry under the existing MRTA law.

MRTA says: Cannabis is too hard alcohol like OCM is to SLA

What we already know under the law is that the OCM will be housed as a separate office within the New York State Liquor Authority (SLA) and SLA employees can be transferred to the OCM to manage the adult cannabis program.

The laws in the Cannabis Act partially mirror New York’s Alcohol Control Act, both of which contain similar general “severability” and restraining orders against prohibited behavior and separate articles based on the nature of the formerly illegal product (medicine, adult) based use and hemp each have their own articles within the Cannabis Act). In addition, the application criteria and documentation requirements are very similar to those requiring licenses and permits for alcohol, wine and beer – with the exception of “social and economic justice” and other additional components for adult cannabis licenses.

In addition, the same physical space restrictions for retail pharmacies and licensees for on-site consumption apply to liquor stores – at least 150 meters from schools and 60 meters from places of worship.

New York’s license branch and components “Social and Economic Equity”

New York’s general cannabis laws reflect the practice in other states that no adult or recreational cannabis may be imported into or exported from the state (Cannabis Law Section 125 (10)) and that workers in the industry they must be at least 18 years old and 21 or older if they have customer contact in retail stores.

On the supply side, however, New York has focused on segmenting the cannabis industry into breeders, nurseries, processors, and distributors (producers), as well as retail pharmacies, delivery companies, and on-site consumption (OSC) stores (retailers). The segmentation of the cannabis market is intended to limit market dominance by each participant, spread business across all license categories, and offer smaller businesses and entrepreneurs (especially women, minorities, farmers in distress, veterans with disabilities, and those with cannabis-related operations) some convictions) to success.

The creation of the “micro-shop” and “cooperative” licenses, which enable greater vertical integration by small companies or a merger of various smaller manufacturers, is also new and independent. This separation of actors within the adult cannabis industry is supported by various laws prohibiting mutual license ownership; For example, Section 80 of the Cannabis Act prohibits manufacturers from having direct or indirect interests in retailers – including prohibiting loans, gifts, or the provision of services to licensees that “can influence” them [retailer] Licensee to purchase the product of such a breeder or processor or distributor. ”In addition, this law prohibits, automatically invalidates, exclusive distribution agreements between manufacturers and retailers, and subjects the licensees concerned to administrative enforcement and penalties.

Focus on the little guys – at least under the law

As the law writes, CCB must review the impact of issued adult licenses (after two years from first retail sale) with “significant market shares” for each license category to determine whether those licensees meet the “objectives of admitting social justice licensees, Fairness for small businesses and farmers in distress, sufficient supply of cannabis and prevention of dominant market participation in the cannabis industry. ”

The articles of association also stipulate that wholesale licensees can change their license to limit their market share; such affected licensees are entitled to a formal hearing to object to changes. (For each licensee, such a review includes violations of New York Labor Law and Labor Peace Agreements.)

Even if the market share of a licensee is reduced, an existing collective agreement cannot be restricted, even if the market is restricted. Most importantly, OCM has the authority to “limit the amount of cannabis that a licensee can grow, process, distribute or sell by canopy, number of plants, square footage or other means”. So any company that wants to dominate the entire market will soon find that OCM has a wide range of wing clipper products. The underlying policy behind the passage of the MRTA is extensive enough to fill an entire treatise on its own, but suffice it to say that politicians fought hard to get legislation to limit dominance and a positive one Establish an action plan to at least 50. % of all licensees are given to women, minorities, distressed farmers, disabled veterans, and people with cannabis prejudice.

Licenses are valid for two years; Fees are unknown and are required by regulation

According to the MRTA, New York expects license and permit fees to “generate sufficient total revenue to at least fully cover the total cost of administering the Office of Cannabis Management, and licenses must be renewed after two years from the date of issue. The fees are essentially based on the amount of administrative resources required to set up and operate OCM, as well as the number of licenses to be applied for. Transfer of ownership of these licenses and special use permits (other than corporate forms) is generally prohibited by law, and the licenses themselves cannot be used as collateral for a loan.

In addition, OCM will scale registration and license fees based on company size and capacity, and fees will be adjusted or waived for social and economic justice applicants. So potential business owners have to think a lot when identifying their “applicant”. (Also note that legal permanent residents (legally non-citizens) can apply for and obtain a cannabis license if they are otherwise eligible, even though they are prohibited from obtaining an SLA license or permit, so that this new industry certainly represents a tremendous opportunity for new Americans.)

New York Cannabis Law § 62 (application information) and 66 (license renewal) describe the application requirements

The MRTA is detailed enough to prescribe nine separate categories of information to be provided under Section 62 of the Cannabis Act, including the requirement, “Racial and Ethnic Diversity,” property information, fingerprints, annual accounts of premises for which the license is being sought, in addition to be provided on “all other information required by law”. In order to ensure that applicants are given a certain leeway when completing applications, the law allows OCM to accept the applicant’s self-disclosure for certain information in accordance with Section 62 (6) (OCM can refer to the information in such an application and in any supplementary declaration and it can be assumed that this information is correct and is binding on registered organizations, licensees or licensed entities as correct. “).

Allegedly based on “applicants for social and economic justice”, the OCM law allows the “submission of intangible information or documents … for any type of license or permit” to be waived. In principle, § 62 is detailed enough that many do not provide for any additional essential regulatory conditions for the application process.

For adult cannabis license renewals, Section 66 contains full details on how it should be done, including the explicit requirement that OCM send a renewal request to licensees at least 90 days before it expires. Requests for renewal require “documentation of the racial, ethnic and gender diversity of the applicant’s employees and owners” prior to approval of the renewal; In addition, licensees can be subject to a “framework agreement on social responsibility” in order to promote racial and gender diversity in the company as a condition for renewal in accordance with Section 66 (2). In addition, in accordance with the renewal procedure set out in Section 66 (6), the application for renewal must contain “evidence of the implementation of your plan for the benefit of communities and people disproportionately affected by the enforcement of cannabis laws”.

While the constitution of the full five-member CCB is certainly a significant milestone in establishing the adult cannabis market in New York, the extensive legal framework in New York Cannabis Act seems to leave the CCB and OCM primarily to fill in the details of the minimum requirements for the operation of each license or permit, the associated fees, and the number of licenses and permits in each geographic area. With much of the industry already defined, segmented and regulated under the MRTA, those thinking of entering this newborn market only need these details to finalize their business decisions but already have the general roadmap like the adult cannabis market will start in New York State in 2022.