New York's Social Equity (June 23, 2021)

June 23, 2021

Cannabis Social Equity – the New York Approach 

Clients and Friends:

In March of this year, New York was added to the list of states that permit adult-use cannabis for  recreational purposes when Governor Cuomo signed the Marihuana Regulation and Taxation Act (MRTA).

Governor Cuomo and state Senate leaders are currently discussing who should be appointed to head the new Office of Cannabis Management and who should fill out the Cannabis Control Board, the body responsible for setting the regulations for the cannabis industry in New York.

So it will be awhile, probably not until sometime next year, before we will know the exact regulatory requirements to obtain a license to operate a cannabis business in the State of New York.

However, there are some provisions that are worth examining while we wait for the rules and regulations to be finalized.

Since the beginning of the cannabis decriminalization movement, an important aspect has been the requirement that any decriminalization legislation include a social equity component.  Put simply, individuals and areas that were hit hardest during the criminalization of cannabis would be entitled to lower barriers or preferential treatment to obtain a license to operate a cannabis business.

New York, however, is substantially broadening the breath and scope of a traditional approach to a cannabis related social equity program.

The MRTA calls for the appointment of a Chief Equity Officer to operate within the Office of Cannabis Management.  The Chief Equity Officer will be responsible for overseeing all of New York State’s cannabis related social and economic equity initiatives.

The MRTA envisions that the Cannabis Control Board will first ask for public input on the creation and implementation of the social and economic equity plan, and then work with the Chief Equity Officer and the Office of Cannabis Management’s Executive Director, to create and implement a social and economic equity plan to:

• Actively promote applicants from communities disproportionately impacted by cannabis prohibition, and promote racial, ethnic, and gender diversity when issuing licenses for adult- use cannabis related activities, including mentoring potential applicants and prioritizing applications from applicants who are members of communities disproportionately impacted by the enforcement of cannabis prohibition or who qualify as a minority or women-owned business, distressed farmer, or service-disabled veteran; and
• Create an incubator program to encourage social and economic equity applicants to apply for licensure and to provide direct support in the form of counseling services, education, small business coaching, financial planning and compliance assistance.

Unlike other states, New York’s social equity program will reach beyond those who have a cannabis related criminal record to include other traditionally economically disenfranchised groups and also include rural areas in addition to the traditional approach that focuses on urban areas.

Under the MRTA:

• 50% of all adult-use licenses will be awarded to social and economic equity applicants.
• 40% of the tax revenues generated by adult-use sales would be funneled into communities disadvantaged by the war on drugs.
• Social equity licensees would be eligible for financial support (including low or no-interest loans, fee reductions or waivers), and assistance in preparing applications and operating their business.
• Social equity licensees are exempt from the prohibition against vertical integration applicable to non-social equity Microbusinesses license holders.

Social equity licensees, however, would be prohibited from selling or transferring their licenses within the first three years after they are issued.

The social equity aspect of cannabis decriminalization has been a staple of decriminalization laws, but has not to date been generally successful, as qualifying candidates in California and Illinois are all to aware.

New York’s social equity approach is incredibly ambitious, and the Chief Equity Officer and the Office of Cannabis Management have the benefit of examining why social equity programs in other jurisdictions have failed and craft a viable and workable framework.

The one item that of course that is missing from the MRTA is still missing in the New York Cannabis Law is beingable to use banks and credit cards in the operation of a cannabis business. On this front there may be some futuredevelopments in the House and Senate on crafting legislation permitting such access.

For further information or any questions on the Cannabis regulations in New York or California, please contactMarvin Miller (miller@cmxlaw.com), Head of CMX’s Cannabinoids and Psychotherapeutics Practice Group

Crath Miller & Xistris LLP

Offices: New York

Newport Beach

For further information, please contact us at info@cmxlaw.com.

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