New York Creates Conditional Retail Dispensary Licenses

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On March 10, 2022, the New York State Cannabis Control Board released proposed regulations for conditional adult-use retail dispensaries. 

This follows the announcement on February 22, 2022 that New York would grant conditional cultivation and processing licenses to certain qualified individuals within New York’s industrial hemp industry.  After long delays in releasing cannabis regulations, New York appears poised to accept applications for conditional adult-use retail dispensary applications as early as this summer.

What is a conditional license?

New York’s conditional adult-use dispensary licenses are temporary licenses only available for “justice involved” applicants. This includes those who have had a cannabis-related offense or have an immediate family member with a cannabis related offense, who have experience owning and operating a business. This is different from New Jersey’s conditional licenses, which are meant to allow people to obtain adult-use cannabis licenses without large amounts of capital pre-application.

Why are conditional adult-use retail dispensary licenses being awarded to “justice involved” entrepreneurs?
When New York passed the Marihuana Regulation and Taxation Act (“MRTA”), they created a new benchmark for social equity cannabis programs.  New York set goals of awarding 50% of all cannabis licenses to equity candidates in order to allow the communities most harmed by the war on drugs to benefit from the new cannabis laws.  In granting “justice involved” candidates licenses first, New York is further demonstrating a commitment to equity applicants by offering an edge and allowing these candidates to establish their businesses before multi-state operators (“MSOs”) can enter the state.

How will “justice involved” applicants set-up their retail dispensaries?
Gov. Hochul has proposed a $200 million Social Equity Cannabis Investment Fund. Those awarded conditional adult-use retail dispensary licenses would be able to utilize the fund to help with securing and renovating property for their dispensaries.

What does this mean for cannabis in New York?

The creation of these conditional licenses should greatly accelerate the formation of New York’s legal cannabis market.  The Cannabis Control Board indicated that they expect to accept retail applications as early as summer 2022 and to award licenses in late summer or early fall 2022, allowing retail stores to open before the end of 2022.

Am I eligible for a conditional adult-use retail dispensary license?

To be eligible for a conditional adult-use retail dispensary license, applicants must:

  • Be majority-owned by “justice involved” individuals;
  • Said individuals must have had at least a 10% ownership stake for at least two years in a business that had a net profit for at least two years;
  • And be New York residents if applying as an individual, or have a principal corporate location within New York or be organized under the laws of New York if applying as an entity.

Alternatively, applicants can be:

  • Non-profits that serve “justice involved” individuals and communities that managed a social enterprise with at least two years of positive net assets;
  • Have a history of creating opportunities for “justice involved” individuals;
  • Have “justice involved” individuals on its board or as officers;
  • And have at least five full-time employees.

Conditional licenses are valid for four years from the date on which a license is granted, and license holders can apply to convert to a standard retail dispensary license prior to expiration.  License holders would be required to enter a labor peace agreement with a bona-fide labor organization.

In conclusion

New York’s recent steps regarding conditional cannabis licenses should help the state catch up with neighbors New Jersey and Connecticut and allow adult-use cannabis to be sold in 2022.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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