Many people ask how to start a cannabis business in New York State, now that recreational marijuana (“cannabis”) is legal under the Cannabis Regulation and Taxation Act (“the Act”). 

The Act was recently passed in New York State on March 31, 2021, under bill S854A (nysenate.gov) and legalized recreational marijuana. 

I previously discussed how this new legislation would impact employers and employees in the workplace.  That article can be found here: https://lawyerandcounselor.com/new-york-state-legalizes-recreational-use-of-Cannabis-which-will-likely-impact-the-workplace/.

Below are some key points laid out in the Act that address how to start a cannabis business in New York.

The Preferred Applicant for a Cannabis Business License

Applicants are generally defined as having a significant presence in New York State,

  • either individually; or
  • by having a principal corporate location in New York State; or
  • by being incorporated or organized in New York State; or
  • a majority of the ownership are residents of this state.

The cannabis control board (this has not been formed yet) has “sole discretion to limit, or not to limit, the number of registrations, licenses and permits of each class to be issued within the state.”

Who Has Preferential Treatment

Extra priority will be given to:

  • a member of a community disproportionately impacted by the enforcement of cannabis prohibition,
  • an applicant with an income lower than eighty percent (80%) of the median income of the county where the applicant resides, or
  • someone convicted of a cannabis-related offense, who had a family member or was a dependent of an individual convicted of a cannabis-related offense prior to the effective date of the Act.

At least 50% of the licenses are expected to support social and economic equity, to ensure inclusion of minority and women-owned businesses, distressed farmers, service-disabled veterans, and individuals from a community disproportionately impacted by cannabis prohibition.

Application Information

Application information may include the applicant’s identity, racial and ethnic diversity, ownership structure, evidence of good moral character, fingerprints, premises to be licensed, or financial statements.

Recreational Cannabis Licenses (Article 4 of the Act)

  1. Cannabis Production: Cultivation of cannabis. Creates categories of production (indoor, outdoor, or mixed light). Limited to 1 license.
  2. Cannabis Processor: Purchasing, processing, and packaging of cannabis. Limited to 3 licenses.
  3. Cannabis Delivery: May transport cannabis from a retail store directly to a customer.
  4. Cannabis Onsite Consumption: May sell cannabis products directly to individuals and those individuals may consume those products at the retail location.  License holders may NOT also sell alcohol. Limited to 3 licenses.
  5. Cannabis Microbusiness: Smallest-scale activity. Permits small business license holders to vertically integrate their business (production, processing, and sale at very small levels). This is not allowed under permits for large businesses. Limited to 1 license.
  6. Cannabis Retailer: May sell cannabis products directly to individuals and those individuals may consume those products at the retail location. License holders may NOT also sell alcohol. Limited to 3 licenses.
  7. Cannabis Distributor: Transportation of cannabis products between licensed cannabis entities.
  8. Cannabis Testing: Testing cannabis products for potency and quality. Limited to 1 license.
  9. Cannabis Nursery: Producing, storing, maintaining, and selling seeds of cannabis plants to producers and to customers interested in participating in home grow. Limited to 1 license.
  10. Cannabis Co-op: Acquisition, possession, cultivation, processing, distribution, and sale from the licensed premises.

Municipal Opt-out

Municipalities cannot opt-out of adult-use legalization.

However, the Act allows cities, towns, and villages to opt-out of allowing adult-use retail dispensaries or on-site consumption licensing by passing a local law by December 31, 2021 or nine (9) months after the effective date of the Act.

Otherwise, the municipality may not opt-out at a future date but may opt back-in at any time.

Many individuals and businesses are eager to get the ball rolling on starting a cannabis business, but it is likely going to take New York State at least another 18 months to implement the necessary processes and procedures based on this complicated new legislation.

I will keep you all apprised as further developments unravel.

This article is intended for general information and educational purposes only and should not be considered legal advice or counsel. The substance of this article is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2021 Regina Sarkis, Esq.