July 26, 2022
Cannabis in New York – Newly Adopted Adult-Use Cannabis Retail Dispensary Regulations
To our Clients and Friends:
New York’s Cannabis Control Board (“CCB”) has adopted final regulations for the Conditional Adult-Use Retail Dispensary (CAURD) licenses. The Board also signed off on a mockup of the application, which can be found here. NY Cannabis Mock Retail Application
New York’s first cannabis dispensaries will be reserved for individuals disproportionately impacted by the war on drugs, or as New York defines as “Justice-Involved” individuals. According to public statements by Office of Cannabis Management officials, the state will issue 100-200 of these licenses.
In order to qualify for a CAURD license, applicants must prove they are justice-involved (meaning they or a direct family member were convicted of a marijuana crime before March 31, 2021) and that they have at least two years’ experience owning a profitable business, in addition to other numerous requirements.
An “Eligible Applicant” is an applicant who has:
- a significant presence in New York State, either individually or by having a principal corporate location in the state;
- is incorporated or otherwise organized in the state; or
- a majority of the owners are residents by being physically present in the state no less than 180 calendar days during the current year or 540 calendar days over the course of 3 years.
The individual, or an entity with one or more individuals:
- must be a “Justice-Involved,” meanings individuals who were; or had a parent, legal guardian, child, spouse, or dependent who was; or were a dependent of an individual who was convicted of a marijuana-related offense in New York before March 31, 2021;
- must provide evidence of the primary residence of the Justice-Involved individual at the time of said individual’s arrest or conviction; and
- the Justice-Involved individual holds or held for at least two years at least 10% ownership and control of a business that had net profits for at least 2 years, or a qualifying nonprofit.
If the application is a nonprofit, such nonprofit:
- must be recognized as an entity pursuant to section 501(c)(3) of the Internal Revenue Code;
- serves Justice-Involved individuals and communities with historically high rates of arrest, conviction, incarceration or other indicators of law enforcement activity for marijuana-related offenses; operates and manages a social enterprise that had at least two years of positive net assets or profit;
- has a history of creating vocational opportunity for Justice-Involved individuals;
- has board members or officers who are Justice-Involved; and
- has at least five full-time employees.
Applicant Ownership and Control Restrictions
An applicant that is an entity must be at least 51% owned in the aggregate by one or more Justice Involved individuals; and have at least one Justice Involved who owns at least 30% and exercises sole control of the applicant or licensee.
Applicant eligibility will be evaluated on:
- Whether the applicant qualifies as an Eligible Applicant;
- The primary residence of the Justice-Involved individual at the time of arrest or conviction, and whether that address is:
- Relative to areas with historically high rates of arrest, conviction, or incarceration for marijuana-related offenses, relative to areas with historically low median income, or
- was provided by a public housing authority in New York State or New York City.
If a qualifying business:
- Number of employees
- number of years the business has been in operation
- profitability of the business
- type of business (specifically, whether this business was a retail operation)
- whether the business had a physical location
- whether the business received or resolved any violations, fines or fees assessed against the business by state or federal regulatory authorities.
The Office of Cannabis Management (“OCM”) will create regional “geographic zones” and determine the number of available licenses per zone. For regional geographical zones where there are more applicants than available licenses, OCM may select from Eligible Applicants who indicated a first preference for the given region based on weighted scoring of the evaluation criteria.
The “Conditional Period” is four years from the date the license is granted. The licensee must commence operations no later than 12 months from the date the license is granted, or as otherwise determined by OCM, and must only acquire cannabis products from entities authorized to distribute cannabis products in the State of New York.
For the duration of the conditional period, the licensee must maintain the minimum standards for ownership and control described above.
The licensee “shall enter into and comply with all terms and conditions of any agreement with any fund approved by the [CCB] and made available by [OCM], including, but not limited to, accepting a dispensary location identified by the fund or office, any loan agreement with such fund, any lease or sublease agreement with the State of New York or its agents, or any other such agreements into which the licensee enters.”
CMXLaw is active in the Cannabinoids and Psychotherapeutics industry and works with clients in licensing, regulatory and business investments, partnerships, and startups for entities engaged in, or investing, in this market sector.
For further information or any questions on regulations, please contact Marvin Miller (firstname.lastname@example.org) or Paul Crath (email@example.com), Co-Heads of CMX’s Cannabinoids and Psychotherapeutics Practice Group
Crath Miller & Xistris LLP
Offices: New York
For further information, please contact us at firstname.lastname@example.org.