One of the more unique wrinkles in New York’s Marijuana Regulation and Tax Act (MRTA) is the creation of cannabis consumption clubs. I recently wrote about how these clubs will make New York a destination for cannabis tourism. But what will it take to operate a cannabis club in New York? To start, you will need an Adult-Use On-Site Consumption License (consumption license) from the New York Cannabis Control Board (Board).
Over the next eighteen months, the Board will issue regulations, establish a license application process, evaluate and accept applications, and then finally issue consumption licenses. This post focuses on what a consumption license entails under the MRTA, what the MRTA requires from consumption license applicants, and how the MRTA instructs the Board to evaluate consumption license applications.
Consumption licenses are covered in detail in Article 4, Section 77 of MRTA. One key provision in Section 77, is that cannabis smoking and vaping restrictions in Public Health Law, Article 13-E, do not apply consumption licenses. Article 13-E is part of New York's Clean Air Act. The Clean Air Act generally prohibits smoking indoors. Although smoking is prohibited in most businesses, including bars and restaurants, those prohibitions will not apply to cannabis smoke at a consumption licensee's premises.
Consumption licensees cannot allow any person under the age of 21 on their premises. Licensees must not have any "opening or means of entrance or passageway for persons or things between the licensed premises and any other room or place in the building [. . .] or into any adjoining or abutting premises," unless that opening or entrance is restricted to employees or is otherwise approved by the Board. This was likely included in MRTA to ensure that consumption licensees will be able to monitor every point of access and verify that no one under the age of 21 enters the club.
Only cannabis purchased from a licensed entity is allowed onsite and only in containers that are approved by the Board, labeled per the Board's regulations, and containing a quantity or number of servings that do not exceed limits set by the Board. Consumption licensees cannot reuse, refill, or otherwise tamper with contents of a cannabis container.
The MRTA prohibits consumption licensees from allowing "gambling, exposing or simulating, contests or fireworks" on the premises. This means that a consumption license cannot double as a casino, strip club, or fight club and cannot host the neighborhood fireworks show on the Fourth of July.
Because consumption licensees will be able to sell cannabis, the MRTA requires that consumption licensees must keep records of all transactions including the following:
- The amount of cannabis purchased by the licensee, in applicable metric measurement;
- The name, license number, address, and amounts of cannabis purchased from each of its cannabis suppliers; and
- The sales of cannabis products made by the licensee
The MRTA authorizes the Board to promulgate rules and regulations for consumption licensees operating two or more consumption licenses that may allow for "centralized accounting, bookkeeping, control records, reporting, billing, invoicing or payment respecting purchases, sales or deliveries of cannabis, or methods and practices of centralized receipt or storage of cannabis products within this state without segregation or earmarking for any such separately licensed premises[.]" This could allow a consumption licensee with multiple locations to handle all bookkeeping and record keeping at one location. In addition, consumption licensees with multiple locations could use one location for storage and then distribute cannabis to its other locations.
APPLICATION REQUIREMENTS UNDER MRTA
The MRTA contains the following conditions for applicants seeking an Adult-Use On-Site Consumption Licenses:
- Applicants must Have a Right to Real Estate. Consumption licensee applicants must have a right to the premises where cannabis consumption will take place. That means a consumption licensee must own the premises or have a lease, in writing, for a term that is at least as long as the initial term of the license. Evidence of that lease will not be required for a license renewal, so the requirement to provide the lease appears to be an issue mainly for initial applicants. There is an exception for premises that are leased from government agencies. An applicant leasing or occupying a premise from a government agency is not required to provide evidence of a lease if the agency provides written documentation regarding the terms of occupancy.
- Applicants can Control No More than Three Consumption Licenses. No person can hold a direct or indirect financial or controlling interest in more than three consumption licenses. The MRTA does not define “direct or indirect financial or controlling interest.” The Board will likely need to define this term in regulations before issuing any licenses.
- Applicants Cannot be Vertically Integrated. No person holding a consumption license may also hold an adult-use retail dispensary, cultivation, processor, microbusiness, cooperative or distributor license or be registered as a medical cannabis operator under Article 3 of MRTA.
- Applicants Cannot Operate in Sensitive Areas. The consumption licensee’s premises must be at least five hundred feet away from school grounds and at least two hundred feet away from a house of worship.
CRITERIA FOR EVALUATING APPLICATIONS
Now that we have gone over the rules for consumption licenses and the conditions for licensure under MRTA, let’s turn to the criteria upon which the Board will score applicants. Overall, the Board's goal in evaluating applicants is to determine "whether public convenience and advantage and the public interest will be promoted by" granting a consumption license in a particular location. The MRTA states that the Board may consider the following in granting licenses in a way that promotes the public interest:
- That a cannabis license is a privilege and not a right;
- The number, classes, and character of licenses in proximity to the proposed location and in the particular municipality or subdivision;
- Whether the applicant has obtained all necessary licenses and permits from the state and other governing bodies;
- Whether there is a demonstrated need for a space to consume cannabis;
- The impact on pedestrian and vehicular traffic;
- The impact on noise levels; and
- Any other factors specified by law or regulation, relevant to determining the interest on public convenience, advantage, and interest.
The Board is a creature of statute. It was created by the MRTA and is required to abide by the MRTA's terms. As of this writing, the Board members have not yet even been selected, meaning that we are still a way out from draft regulations and policies from the Board. While the MRTA grants the Board with the power to regulate and issue consumption licenses, it must do so within the confines of Article 4, Section 77 and the MRTA generally. Green Light Law Group will continue to write about the MRTA as we wait for updates from the Board, so that when the Board does begin issuing regulations our readers will be informed on what the underlying law says and whether the Board’s regulations and policies are consistent with the law.
This news article is intended for educational purposes only and is not intended to give legal advice. If you are seeking legal advice on the subject please consult one of our New York licensed attorneys: Perry Salzhauer, Ramsey Chamie, or Brittany Adikes.