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New York Legislature Approves Conditional Cannabis Licenses to Begin Cultivation and Processing of Adult Use Cannabis

NY CONDITIONAL LICENSES BEGIN wide

On February 16, the New York Assembly passed legislation that would allow New York hemp growers and processors to begin cultivating and processing adult use cannabis . Recently, we wrote about the New York Senate’s version of the same bill. Now that both the Senate and Assembly have passed this conditional licensing bill, it will only take a signature from Governor Hochul to jump start New York’s cannabis market. These licenses will only be available for those holding or applying for hemp licenses prior to 2022, although qualifying hemp licensees will be allowed to bring in outside investors as long as the qualifying hemp licensee retains majority equity ownership. Those who receive licenses will grow and process the first legal, adult use cannabis in New York. If you are interested in obtaining a conditional cannabis license, this blog post is a good starting point.

Conditional Cultivator License

Qualifications

In order to be eligible, a conditional cultivator applicant must:

  1. have held a valid hemp grower authorization as of December 31, 2021, which allowed for the growing of cannabinoid hemp, and be in good standing with the NYDA;
  2. have grown and harvested hemp for at least two of the past four years and be able to prove the amount of hemp planted
  3. as an individual applicant have an ownership interest of fifty-one percent or more, or as any other applicant have an ownership interest of fifty-one percent or more of the entity applying for the license.

License Privileges

A conditional cultivator licensee would be permitted to cultivate up to 43,560 square feet outdoors and 25,000 square feet in greenhouses. A cultivator may cultivate both outdoors and, in a greenhouse, so long the flowering canopy in a greenhouse is less than 20,000 square feet and the total flowering canopy is equal to or less than 30,000 square feet.

In addition, a cultivator licensee would have the temporary authority to minimally process and distribute cannabis products so long as the final product would be in the form of cannabis flower. It appears that the distribution of cannabis would require retail stores to be operational because cultivator licensees are not given authority to sell directly to the public.

The conditional cultivation license would not allow processing cannabis into oils, wax, edibles, or anything else that departs from smokable cannabis flower. The ability to minimally process and distribute cannabis would expire on June 1, 2023. After that date, in order to manufacture and distribute cannabis, the licensee would need a processor and distributor license.

Limitations

A conditional cultivator licensee could only grow cannabis outdoors or in a greenhouse with no more than twenty artificial lights. A conditional cultivator license may only operate in the same or adjacent county in which the applicant had previously been authorized to grow hemp.

During the conditional period, conditional cultivator licensee could not make any ownership or organizational structure changes to the licensed entity, except as provided in subsections 2, 3, and 4 of Section 67 of the MRTA.2

The Board will have to develop regulations governing ownership and organizational changes. Once those are in place, a conditional cultivation licensee will need to follow the Board’s direction in order to make any changes.

The conditional cultivator license must be issued before December 31, 2022 and will only remain valid until June 30, 2024. No later than 90 days before the expiration of the conditional cultivation license, the Office of Cannabis Management (Office) must determine whether the licensee is in good standing. If they are in good standing, they could be issued a regular cultivator license. A conditional licensee cannot apply for a regular cultivation license while holding the conditional license thereby creating a separate track for converting a conditional license to a regular license.

Conditional Processor License

Qualifications

In order to be eligible, a conditional cultivator applicant must:

  1. have applied for a cannabinoid hemp processor license before January 1, 2022;
  2. hold an active cannabinoid hemp processor license issued by the Office; and
  3. as an individual applicant have an ownership interest of fifty-one percent or more, or as any other applicant have an ownership interest of fifty-one percent or more of the entity applying for the license.

A conditional adult-use processor license allows the processing and manufacturing of cannabis products provided the licensee complies with all requirements for the processing and manufacture of cannabis products as set out by the Board, once the Board establishes regulations governing cannabis processing. A conditional processor license can distribute cannabis products until June 1, 2023. After that date a conditional processor licensee could only distribute cannabis with a distributor license.

Limitations

Processing of cannabis is only allowed where the conditional processor license applicant processed hemp. A conditional processor could only perform extraction activities if authorized under its hemp processor license and all extraction methods are subject to OCM approval. The OCM will need to establish procedures for approving extraction methods if the Governor signs the conditional license bill into law.

A processor licensee could not make any changes to its ownership or organizational structure during the conditional period, except in compliance with Section 67, quoted above.

Like the conditional cultivator license timeframe, a conditional processor license must be issued before December 31, 2022 and will only be valid through June 30, 2024. A conditional processor license must be in good standing at the end of the two-year license window to obtain a regular processor license, once the conditional period ends. A conditional processor could only process cannabis at the same location where the licensee is authorized to process hemp, unless expressly authorized otherwise.

Bottom Line

The Office of Cannabis Management will promulgate regulations setting out additional requirements, such as the requirement that a conditional licensee participates in an environmental sustainability program, maintain a social equity mentorship program to train individuals interested in becoming cultivators, and enter into a labor peace agreement.

If this conditional license bill becomes law, it will be time for eligible applicants to start preparing in earnest for applications. That will require drafting governing documents, vetting compliant locations, raising investment, developing processes and procedures as well as business plans. In addition, it seems likely that regulations surrounding applications will soon be public, which will require analysis in order to prepare for the application window. If you need further assistance in obtaining a conditional cannabis license and/or determining whether you are eligible to obtain one, or if you need assistance with intaking investment into (or investing in) a business that will apply for a conditional license, feel free to reach out to our regulatory Green Light Law Group attorneys.

For more New York coverage, check out some of other New York blog posts:


Daniel Bottom Block

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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.