Under the Marijuana Regulation and Taxation Act (“MRTA”), a new government entity was created to license the cultivation, processing, distribution, sale, and delivery of cannabis in New York State. Each commercial activity involving adult-use cannabis will require a license. Accordingly, because the law generally limits (1) vertical integration and (2) the number and type of licenses that a person may hold, businesses will have to seriously consider which license type best serves their goals, interests, and abilities.
The licensee may cultivate and sell cannabis to a licensed processor. “Cultivation” includes each step of the agricultural process, from planting, growing, and cloning cannabis to harvesting, drying, grading, and trimming it. Cultivator Licensees may also hold one processor license and one distributor license, but only for processing and distributing the licensed cultivator’s own cannabis products. Additional rules or regulations could permit a limited amount of processing without an additional license or could permit a cultivation licensee to operate from more than one location with a single license. Businesses will need to wait for the final regulations to know how the rules will expand, narrow, or explain the limits of the license.
A licensee may buy cannabis from licensed cultivators, process it, and sell cannabis products to licensed distributors. “Processing” includes blending, extracting, infusing, packaging, labeling, and branding cannabis products. Processing essentially involves making or preparing cannabis products. A licensee may also hold one distributor license for distributing its own products but may not hold any other adult-use cannabis licenses. Again, although it is possible that the Cannabis Control Board (“CCB”) will authorize processor licensees to operate from more than one location with a single license, businesses will need to wait for the final regulations to know how the rules will expand, narrow, or explain the limits of this license type.
A licensee may purchase both cannabis and cannabis products from authorized licensees and may sell cannabis and cannabis products to licensed retail dispensaries and on-site consumption sites. Under the MRTA, a distributor licensee may have interests in a cultivator and a processor licensee if their distribution is limited to cannabis cultivated and processed by said licensee.
A licensee may sell and deliver cannabis and cannabis products from a licensed premise. No person can have an interest in more than three retail dispensaries. Anyone who holds a retail dispensary license cannot also hold any other license type issued under the MRTA. Anyone applying for a retail dispensary license must demonstrate ownership or possession of the premises to be licensed within 30 days of final approval of the license. An applicant can make this demonstration through a lease, management agreement, or another agreement, whose term is at least as long as the license period. Dispensaries are prohibited from being located within 500 feet from any school or 200 feet from any house of worship.
A microbusiness licensee may, to a limited degree, engage in cultivation, processing, distribution, delivery, and sale of the microbusiness’ own cannabis and cannabis products. Such licensees cannot hold an interest in any other license; however, they may distribute their own cannabis and cannabis products to licensed retail dispensaries. It is expected that microbusiness licenses will be granted in a manner that promotes social and economic equity applicants.
A delivery licensee may deliver cannabis and cannabis products independent of another adult-use cannabis license. Such a licensee may not have more than 25 individuals providing fulltime paid delivery services per week. A delivery licensee cannot hold an interest in more than one delivery license. It is expected that delivery licenses will be granted in a manner that promotes social equity applicants.
A nursery licensee may produce, distribute, and sell cannabis clones, immature plants, and seeds, as well as agricultural products used to plant, propagate, and cultivate cannabis. A cultivator licensee may also hold one nursery license to sell directly to cultivator, cooperative, and microbusiness licensees. This license is also expected to be granted in a manner that promotes social equity applicants.
An on-site consumption licensee may (1) sell cannabis and cannabis products and (2) allow the consumption (including smoking and vaping) of cannabis and cannabis products, within the licensed premises. Only persons who are at least 21 years old may enter an on-site consumption facility. An on-site consumption licensee may hold an interest in up to three on-site consumption licenses but may not hold an interest in any other license type issued under the MRTA. As with retail dispensary licenses, anyone applying for an on-site consumption license must demonstrate ownership or possession of the premises to be licensed within 30 days of final approval of the license. An applicant can make this demonstration through a lease, management agreement, or another agreement, whose term is at least as long as the license period. On-site consumption licensees are prohibited from being located within 500 feet from any school or 200 feet from any house of worship.
The regulations governing the application process have not yet been adopted, though, because key positions in the Office of Cannabis Management (“OCM”) and the Cannabis Control Board Once (“CCB”) have not been filled. After its members are appointed, the CCB will develop and implement the rules governing the application process. The regulations will address what is required for each license type, and what factors will be considered in evaluating such applications.
At minimum, though, license seekers can expect the application to ask questions regarding an applicant’s: “significant presence” in NYS (e.g., incorporation in NYS, or having a majority of owners as residents of NYS); identity (including racial and ethnic diversity questions for social equity purposes); ownership (including investor and corporate structure information); financial information; moral character (including fingerprinting); and the premises at which the business will operate. In considering license applications, the CCB will consider whether the applicant entered into a labor peace agreement with a labor organization to represent the applicant’s employee and whether the applicant proposes a plan to benefit communities and people disproportionally impacted by enforcement of cannabis laws. The CCB will also consider the number of licenses already issued in a given area in determining whether to grant a license application.
If you have questions about the MRTA, the various license types, how you can comply with it, or what your business or local government can do under the law, contact an experienced attorney for help. The Zoghlin Group offers a range of legal services relevant to the emerging cannabis industry.
The MRTA also requires retail dispensaries to be located in a storefront and to have a principal entrance from street level on a public thoroughfare.
Other license types are also available under the MRTA — such as “Cooperative Licenses” and “Registered Organization Adult-Use Cultivator Processor Distributor Retail Dispensary Licenses” — but will not be covered in this blog post.
To be a social and economic equity applicant, under the MRTA, the applicant must be from either a community disproportionally impacted by enforcement of cannabis prohibition, a minority-owned business, a woman-owned business, a disadvantaged farmer, or a service-disabled veteran. Social and economic equity applicants and licensees will have access to counseling, education, small business coaching, and compliance assistance from the state. This will facilitate the growth and development of adult-use cannabis businesses by qualified social and economic equity applicants. To further promote social and economic equity, the CCB is also authorized to prioritize applicants who have an income lower than eighty percent of the median income in the county where the applicant resides, are member of a “community disproportionately impacted by the enforcement of cannabis prohibition”, or were convicted or are related to someone convicted of cannabis related offenses.
As of the date of this blog post, Cannabis remains illegal under federal law.
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