New York Regulators Unanimously Advance Rule To Let People With Marijuana Convictions Open Shop Before Big Businesses Can Enter Market
New York regulators on Thursday advanced a rule to make it so people with prior marijuana convictions, or whose family members have been harmed by criminalization, will get the first round of adult-use marijuana retailer licenses—ahead of existing medical cannabis businesses.
The development is one part of what Gov. Kathy Hochul’s (D) administration is calling the “Seeding Opportunity Initiative,” which she also announced on Thursday.
The New York State Cannabis Control Board (CCB) unanimously voted to formally propose the retail regulations, which will soon be open for public comment. The “Equity Owners Lead Program,” as Hochul describes it, sets the state apart from others that have enacted legalization but faced criticism over a lack of promised results for communities that have been harmed by the drug war.
Today, we continue our work to build a fairer, more equitable New York.
By putting those disproportionately impacted by the enforcement of cannabis prohibition at the forefront of our market, we're creating a national model for the industry. Learn more: https://t.co/7fgnB1Xx1B pic.twitter.com/ikBZrejpwb
— Kathy Hochul (@GovKathyHochul) March 10, 2022
Office of Cannabis Management (OCM) Executive Director Chris Alexander said earlier this week that he expects upwards of 200 “justice involved” applicants to receive the priority licenses under the proposal, with retailers potentially coming online by the year’s end.
During a virtual press briefing after the board’s meeting on Thursday, Alexander responded to a question from Marijuana Moment about potential criticism from existing medical marijuana businesses that have been operating in the state about being put second in line to receive adult-use licenses.
“Existing medical operators will absolutely be able to participate—but they knew and they supported the cannabis law” enacted last year, he said. “And the language included in the law that guides our actions today was that individuals who’ve been most impacted will be given priority as we build this adult-use market.”
“I think there’s definitely an avenue and a pathway forward for those existing operators—those folks who have been supplying the patients of the state of New York for some years and they will be able to participate,” Alexander said. “But equity will lead, and those who’ve been most impacted will go first.”
To qualify for the conditional license, an applicant would need to have been convicted of a cannabis-related offense prior to March 31, 2021, when the state’s adult-use legalization law was enacted. Those who have a “parent, legal guardian, child, spouse, or dependent” who faced such convictions would also be eligible, as would those who were themselves dependent on someone with a conviction.
“New York State is making history, launching a first-of-its-kind approach to the cannabis industry that takes a major step forward in righting the wrongs of the past,” Hochul said in a press release. “The regulations advanced by the Cannabis Control Board today will prioritize local farmers and entrepreneurs, creating jobs and opportunity for communities that have been left out and left behind. I’m proud New York will be a national model for the safe, equitable and inclusive industry we are now building.”
There are some business-related requirements in order for eligible applicants. For example, the measure states that they must “hold or have held, for a minimum of two years, at least ten percent ownership interest in, and control of, a qualifying business, which means a business that had net profit for at least two of the years the business was in operation.”
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Non-profit organizations could also be eligible to hold the licenses if they “intentionally serve justice involved individuals and communities with historically high rates of arrest, conviction, incarceration or other indicators of law enforcement activity for marihuana-related offenses.”
Existing medical marijuana operators, called “registered organizations” under the state’s cannabis code, would generally not be able to obtain the proposed conditional licenses. This seems to be part of the state’s overall goal of ensuring that the industry that emerges is equitable and not dominated by monied multi-state operators.
Applications for the conditional retail licenses under the Equity Owners Lead Program will open this summer, the governor’s press release says, and the “first licenses are expected to be distributed by late summer or early fall 2022.”
To further ensure that those most impacted by criminalization are able to compete as the market opens and matures, the conditional licenses would need to be reserved to applicants with at least 51 percent ownership by justice involved people as outlined in the measure.
Next, the proposed regulations will be published in the State Register and will undergo a 60-day public comment period.
Conditional adult-use retail licenses would be valid for four years. Licensees would need to notify regulators of their intent to continue participating in the recreational market within 120 calendar days of the expiration of the conditional license. Regulators would conduct a review before approving them for the standard adult-use retailer licenses that will eventually be made more widely available to any interest parties.
Meanwhile, the state has also taken separate steps to get the industry in a position to have products available by creating provisional marijuana cultivator and processor licenses for existing hemp businesses that take certain steps to promote equity in the emerging industry. Hochul signed that legislation late last month. This “Farmers First Program” is another one of the three branches of the administration’s Seeding Opportunity Initiative.
Regulators on Thursday also approved the form for conditional cultivator applications under that law and said they will be open from March 15 June 30.
“Our state’s Cannabis Law sets a high goal for creating an equitable industry that puts New Yorkers first,” CCB Chair Tremaine Wright said. “The Seeding Opportunity Initiative puts us on a path for achieving that goal and hopefully models a way forward for reaching those goals while building a stable market.”
“I am thankful for the support of Governor Hochul and the Legislature, which made it possible for us to get this initiative off the ground quickly, establish a supply chain from our farmers to equity, retailers, and generate the resources to help revitalize communities that were harmed by the disproportionate enforcement of cannabis prohibition,” she added.
Assembly Majority Leader Crystal Peoples-Stokes (D), who sponsored the legislation that created the legalization law and recently launched an equity-focused political action committee that will place a strong focus on electing candidates that support marijuana reform, said that “we are doing what no other state has done by focusing on the people most criminalized by cannabis prohibition, and promoting New York farmers.”
“The cannabis industry is going to grow our economy and create new wealth, and it is imperative that we make sure that opportunities begin with the most deserving New Yorkers,” she said.
As it stands, adults 21 and older can possess and publicly consume cannabis, as well as gift marijuana to other adults as long as they aren’t being compensated. But regulators are still finalizing licensing rules, and there are currently no retailers that are authorized to sell cannabis for adult use in the state.
Hochul has repeatedly emphasized her interest in efficiently implementing the legalization law.
The governor released a State of the State book in January that called for the creation of a $200 million public-private fund to specifically help promote social equity in the state’s burgeoning marijuana market. That funding, called the “New York Social Equity Cannabis Investment Program,” is the last component of the Seeding Opportunity Initiative.
Hochul said that while cannabis business licenses have yet to be approved since legalization was signed into law last year, the market stands to generate billions of dollars, and it’s important to “create opportunities for all New Yorkers, particularly those from historically marginalized communities.”
That proposal was also cited in the governor’s executive budget, which was released in January. The budget also estimated that New York stands to generate more than $1.25 billion in marijuana tax revenue over the next six years.
Enacting legislation that expedites licensing could help the state reduce the number of businesses that are effectively using the legal “gifting” provision of the state’s marijuana law to give away cannabis for “free” if a non-marijuana-related purchase is made.
New York regulators recently issued warnings to more than two dozen businesses that they allege are either illegally selling marijuana without a license or exploiting the “gifting” component.
Here are some other ways that New York lawmakers and regulators are working to build upon the legalization law as the state prepares to implement retail sales:
Last month, for example, a state senator filed a bill that would promote recycling in the marijuana industry once retail sales officially launch.
Sen. Michelle Hinchey (D) is also sponsoring that legislation, which would require cannabis shops to apply a $1 deposit for any marijuana products sold in single-use plastic containers and also reimburse consumers for that fee if they return the container.
The senator is also behind a separate bill filed last year that would prioritize hemp-based packaging over synthetic plastics for marijuana products.
The recycling bill is identical to an Assembly version filed by Assemblywoman Patricia Fahy (D) last year.
Sen. Jeremey Cooney (D) is sponsoring a recently introduced bill to allow licensed cannabis companies to deduct certain business expenses on their state tax returns. He’s also behind the aforementioned measures to expand the marijuana law’s equity definition and provide provisional licenses to get the market ready.
The state Department of Labor separately announced in recent guidance that New York employers are no longer allowed to drug test most workers for marijuana.
Meanwhile, a New York lawmaker introduced a bill in June that would require the state to establish an institute to research the therapeutic potential of psychedelics.
Another state legislator filed legislation in December to legalize psilocybin mushrooms for medical purposes and establish facilities where the psychedelic could be grown and administered to patients.
Meanwhile, as New York prepares the launch of its adult-use marijuana market, OCM announced this month a significant expansion of the existing medical cannabis program.
Now doctors will be able to issue medical marijuana recommendations to people for any condition that they feel could be treated by cannabis, rather than rely on a list of specific eligible maladies.
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Photo courtesy of Max Pixel.