New York’s Adult-Use Cannabis Law: Multifaceted Licensing With A Purpose

New York state recently passed long-awaited adult-use cannabis legislation, taking the lead on other key jurisdictions with medical use-only systems, such as Florida and Pennsylvania. While the bill awaits implementation, now is the time for entities interested in entering the market to gear up for the application process. While new businesses aren’t expected to open for at least a year, the regulations will be published and license process initiated much sooner. Over the next few weeks, Fox Rothschild’s national Cannabis Law team, led by our New York group, will provide in-depth insight into various aspects of the new law, covering a full range of issues, including social equity, real estate and labor provisions.

Licenses, the defining asset on which market entrants – from established Multi-State Operators (MSOs) to yet-to-be-formed Single State Operators (SSOs) – are focused, are the natural starting point. While New York could have allowed a free-for-all in which the world’s largest cannabis MSOs and ancillary global businesses absorbed all of the opportunity, Albany has taken a different approach. State officials have clearly indicated, through the published bill and related commentary, a multifaceted intent to leverage the industry expansion to remediate social injustices, benefit small businesses along with major industry and grow New York’s agriculture sector, among other objectives. While the legislation does not specify how many licenses will be available in each category, it aims to grant at least 50% of available microbusiness, delivery and nursery licenses to minorities and disenfranchised groups such as women-owned businesses, disadvantaged farmers and service-disabled veterans with the goal of promoting social and economic equity.

Outlined below are key takeaways regarding the licensing process, as well as a full listing of categories of licenses being issued. With so many license types launching at the same time (compared, for example, to California’s staggered release of licenses over nearly a decade), it’s critical for anyone considering an application to understand the various opportunities, processes and limitations noted below.

Key Takeaways

• The New York State Cannabis Control Board will review all applications to cultivate, process, distribute, deliver or dispense cannabis.
• A separate license is required for each facility where cultivation, processing, distribution or retail dispensing occurs.
• Applicants will have to pay a non-refundable application fee (to be determined by the Board) based on the type of license sought.
• Applicants will have to pay a biennial license fee based on the amount of cannabis at issue as well as other factors deemed appropriate by the Board.
  • The Board may waive or reduce fees for social and economic equity applicants.
• Applicants will be required to disclose:
  • Information about their identity, including racial and ethnic diversity
  • Ownership and investment information
  • Evidence of good moral character (fingerprint submission)
  • Financial statements
• Licenses are valid for two years and then must be renewed.
• Licenses will only be issued to those over 21 years of age.
• The Board will determine the total number of licenses issued.
• New York’s legal framework appears designed to encourage a diverse and numerous set of licenses and license holders along the “seed to sale” supply chain (compared, for example, to Florida’s medical-only system, which requires vertical licenses as a matter of law.)
• Future regulations will provide key details required to fully understand the opportunity, such as the definition of “indirect” ownership, which is key to understanding the controls around overlapping license types. Existing regulatory environments in other states run the gamut from “permitted with minimal variation” to “no direct or indirect economic interest whatsoever.”
• Applicants must maintain a labor peace agreement with a bona fide labor organization (a subject we will explore in a future Fox New York Cannabis Alert).
• Retail dispensary applicants, registered organization adult-use cultivator, processor, distributor, retail dispensary and on-site consumption applicants must notify the municipality, city, town or village where the premises will be located at least 30 days prior to filing their application in order to afford the local government an opportunity to express an opinion for or against granting such a license.

Types of Licenses

Adult-Use Cultivator License

• Authorizes the acquisition, possession, distribution, cultivation and sale of cannabis
• Includes the planting, growing, cloning, harvesting, drying, curing, grading and trimming of cannabis
• May apply for only one processor license
• May not also hold a retail dispensary license or have a direct or indirect interest in a retail dispensary
• May not also obtain a license to distribute

Adult-Use Processor License

• Authorizes the acquisition, possession, processing and sale of cannabis from the licensed premises of the adult-use cultivator to duly licensed distributors
• Processing includes blending, extracting, infusing, packaging, labeling, branding and otherwise making or preparing cannabis products
• May not also hold a retail dispensary license or have a direct or indirect interest in a retail dispensary
• May not obtain a license to distribute.

Adult-Use Distributor License

• Authorizes the acquisition, possession, distribution and sale of cannabis from the licensed premises of a licensed adult-use cultivator, processor, small business adult-use cooperative or microbusiness authorized to sell adult-use cannabis to duly licensed retail dispensaries
• May not also hold a retail dispensary license or have a direct or indirect interest in a retail dispensary

Adult-Use Retail Dispensary License

• Authorizes the acquisition, possession, sale and delivery of cannabis to adult consumers
• May not have a direct or indirect financial or controlling interest in more than three adult-use retail dispensary licenses (compare, for example, to the 10 adult-use dispensary limit in Illinois)
• May not also hold an adult-use cultivation, processor, microbusiness, cooperative or distributor license or be a registered organization, as detailed below
• Retail licenses will not be granted unless the applicant can demonstrate possession and complete control of the premises for at least a two-year term (i.e. the term of the license)
• Retail store cannot be located within 500 feet of a school grounds or 200 feet of a house of worship (zoning and land use issues will be explored in detail in a future Fox New York Cannabis Alert)
  • Note: The definition of “school” is broad and includes public, charter and non-public schools in addition to board of cooperative educational services, special act school districts, approved preschool special education programs and approved private residential or non-residential schools for disabled students.

Microbusiness License

• Authorizes the limited cultivation, processing, distribution and dispensing of business’s own adult-use cannabis
• May not hold an interest in any other license
• May only distribute its own cannabis to dispensaries
• This type of license shall promote social and economic equity applicants (a goal of 50%)

Delivery License

• Authorizes the delivery of cannabis and cannabis products
• May employ no more than 25 individuals for full-time paid delivery services
• May not also have a direct or indirect financial or controlling interest in more than one delivery license
• This type of license shall promote social and economic equity applicants (a goal of 50%)

Nursery License

• Authorizes the production, sale and distribution of clones, immature plants, seeds and other products used specifically for cultivating cannabis
• A person or entity holding a cultivators license may obtain one nursery license to sell directly to other cultivators, cooperatives or microbusinesses
• This type of license shall promote social and economic equity applications (a goal of 50%)

Small Business Adult-Use Cooperative License

• Authorizes the acquisition, possession, cultivation, processing and sale to duly licensed distributors, on-site consumption sites and/or retail dispensaries
• Must be comprised of New York residents as a LLC or LLP or in some other business structure approved by the Board
• May not also hold a retail dispensary license or have a direct or indirect interest in a retail dispensary

Registered Organization Licenses

Registered Organization Adult-Use Cultivator, Processor, Distributor, Retail Dispensary License

• Same authorization and conditions as adult-use cultivator, adult-use processor, adult-use distributor and adult-use retail dispensary licenses but adult-use cannabis sales and cannabis products cultivated, processed or distributed by such organizations are limited to the organization’s adult-use retail dispensaries
• The location of such adult-use dispensaries shall be limited to the organization's medical dispensaries’ premises and facilities
• Registered organization MUST maintain its medical cannabis license and continue offering medical cannabis.

Registered Organization Adult-Use Cultivator License

• Same authorization and conditions as adult-use cultivator license but sales of adult-use cannabis and cannabis products by such organizations are limited to licensed adult-use processors
• This type of license does not qualify the organization for any other adult-use license

Adult-Use On-Site Consumption License

• Applicant must demonstrate possession and complete control of the premises for at least a two-year term (i.e. the term of the license)
• May only have a direct or indirect financial or controlling interest in three adult-use on-site consumption licenses
• May not also hold an adult-use retail dispensary, cultivation, processor, microbusiness, cooperative or distributor license or be a registered organization
• Premises cannot be located within 500 feet of a school grounds or within 200 feet of a house of worship,
• Detailed record keeping and tracking of all transactions for a period of five years.

Keep an eye out for future installments in our series — In the Weeds: NY's Marijuana Market — on New York state’s adult-use cannabis law.