The cannabis industry finally harpooned its white (or maybe green) whale when Governor Cuomo signed The Marijuana Regulation and Taxation Act (or "MRTA") into law on March 31 - legalizing adult-use cannabis throughout New York. For anyone keeping tabs on the Empire State's state of cannabis - long viewed by many as one of the most exciting and potentially lucrative adult-use markets out there - you know it's been a long, hard and winding road. But hey, if adult use can make it here, it can make it . . .
And while it's still early days for the adult-use market in
New York – regulators have yet to be appointed, rules have
yet to be written – there's still a lot to learn from the
text of MRTA itself. Here are five things you should
know about the MRTA.
The Cannabis Control Board
The newly created Cannabis Control Board ("CCB") will be
the epicenter of adult-use regulatory authority in New
York. Among its many powers and responsibilities, the
CCB will: (1) have the power to issue licenses; (2) have the
discretion to limit the number of licenses issued in order to
prioritize social equity applicants, encourage small business
opportunities and to prevent the New York market from being
controlled by a small group of large MSOs; and (3) promulgate the
rules that will govern everything from licensing applications to
the operation of New York's cannabis cultivators, distributors
and retailers. The CCB will consist of five members,
with the Chairperson and two other members being appointed by the
Governor (with advice and consent of the State Senate), and the
other two members appointed by the legislature – one by the
Senate President, and one by the Speaker for the State
Assembly.
Adult Use Licensing Criteria
While the CCB will have a lot to say about the form, content and
evaluation of applications for the different category of licenses,
the MRTA does include certain "selection criteria" meant
to guide the CCB's rule-making process. In addition
to prioritizing social and economic equity applicants (see more on
that below), the CCB will seek to determine an applicant's
ability to (1) comply with existing state laws and regulations, and
the ability to guard against the illegal distribution of cannabis,
(2) effectively use the license (does the applicant have the
necessary land, equipment and experience to carry out the
activities contemplated by the license), (3) "mitigate adverse
environmental impacts", including carbon emissions, and (4)
"contribute to communities and people disproportionally harmed
by enforcement of cannabis laws."
This list is by no means exhaustive, and the CCB's regulations
will put more meat on these bones, but the MRTA's criteria
provides an important starting point for evaluating what kinds of
applicants will have the best chances of procuring the license of
their dreams.
#SocialEquityGoals
One of the MRTA's core, overarching legislative purposes is to
promote social and economic equity by providing certain groups with
a leg-up in what is certain to be a highly competitive licensing
application process. To that end, the MRTA directs the
CCB to "promote diversity in commerce, ownership, and
employment, and opportunities for social and economic inequality in
the adult-use cannabis industry." In fact, the MRTA
provides the CCB with a specific social equity goal –
"to award fifty percent of adult-use cannabis licenses to
social and economic equity applicants." These
include minority and women-owned businesses, distressed farmers (as
defined in the law), and service-disabled veterans. The
law also sets forth the requirements to qualify as one of these
social and economic equity applicants. For example, in
order to qualify as a women-owned business, women must own at least
51 percent of the company and exercise control over the day-to-day
operations of the business.
No "Vertical" Licenses
While some states award "vertical" licenses –
allowing a single company to cultivate, process, distribute and
sell medical or adult-use cannabis – New York is forcing
operators to pick a lane. The MRTA makes it unlawful for
any person authorized to cultivate, process or distribute cannabis
from having any direct or indirect interest in an entity licensed
to operate a cannabis retail, delivery or on-site consumption
business. In other words, it's one or the
other.
Existing Registered Medical Organizations
Don't Automatically Qualify For Adult-Use
License
Licensed participants in New York's pre-existing medical
cannabis program (referred to as Registered
Organizations) may qualify for a
license to also participate in the adult-use program but won't
do so automatically. Instead, a Registered
Organization's ability to obtain adult-use licenses is subject
to the discretion of the CCB, and RO's looking to make the leap
will have to meet certain requirements, and will be subject to all
fees, rules and conditions imposed by the board.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
