The Public Comment Period for New York Conditional Retail Licenses Opened Last Week

On March 30, 2022, the Office of Cannabis Management posted in the New York State Register proposed rules regarding Conditional Adult-Use Retail Dispensary (CAURD) licensing, a subset of retail dispensary licenses for New York’s adult-use cannabis program that allow specially qualified licensees an early opportunity to sell cannabis products in New York State. The license is available only to applicants who can meet certain eligibility criteria, including being “justice involved.” The public comment period for these rules opened last Wednesday, lasts for 60 days, and is available at cannabis.ny.gov. Once adopted, the rules become effective upon publication of a Notice of Adoption in the New York State Register. This blog post analyzes the CAURD rules as they are currently written. These rules are subject to change over the next 60 days based on feedback the Office of Cannabis Management receives on the CAURD.

Refresher on New York’s conditional licensing program

New York identified the most common challenges faced by other state recreational cannabis programs as: 1) access to capital, 2) access to real estate, and 3) timing into the market. The proposed regulations attempt to address each of these barriers by working to license entrepreneurs whose lives have been directly and significantly impacted by the disproportionate enforcement of cannabis prohibition via the War on Drugs, but who also have proven capacity to operate in a dynamic, complex regulatory environment and potentially hyper-competitive market. These individuals are deemed justice involved.

What specifically does it mean to be justice involved?

For individuals, or entities with one or more individuals, this means at least one individual was themselves convicted of a marijuana-related offense in the state prior to March 31, 2021, had a parent, legal guardian, child, spouse, or dependent convicted, or was a dependent of an individual convicted for the same.

Additionally, individuals must provide evidence of their primary residence at the time of their arrest or conviction to determine its proximity to areas with historically high rates of arrest, conviction, or incarceration for marijuana-related offenses, areas with historically low median income, and whether such residence was provided by a public housing authority.

Additionally, individuals must hold or have held, for a minimum of two years, at least 10% ownership interest in, and control of, a qualifying business, meaning the business had net profit for at least two years of operation.

Can nonprofits be justice involved?

Yes. If the applicant is a nonprofit, it must i) have 501(c)(3) status under the Internal Revenue Code; ii) intentionally serve justice involved individuals and communities with historically high rates of arrest, conviction, incarceration, or other indicators of law enforcement activity for marijuana-related offenses; iii) operate and manage a social enterprise that had at least two years of positive net assets or profit as evidenced via tax returns; iv) have a history of creating vocational opportunity for justice involved individuals; v) have justice involved individuals on its board or as officers; and vi) have at least five full time employees.

What are the other application qualifications?

Aside from the residency and justice involved requirements, general license eligibility requirements are as follows:

1. An applicant must demonstrate a significant presence in the state, either individually; by having a principal corporate location, place of incorporation, or being otherwise organized under New York laws; or a majority of ownership of the applicant must be New York residents physically present in the state for at least 180 calendar days during the current year, or 540 days over the course of three years.
2. At least 51% of the applicant entity must be owned by at least one person who meets the individual requirements (residency and justice involved) or an entity that meets the nonprofit requirements (residency and justice involved).
3. At least one qualifying individual, or a qualifying nonprofit, must own at least 30% of the applicant entity, and such individual or entity must have sole control of the applicant or licensee.

Conclusion

If you are a New York resident, you have less than 60 days to participate in the public comment session and make your voice heard on these proposed rules. If you are interested in pursuing a conditional adult-use retail dispensary license, contact our New York attorneys, Perry Salzhauer, Brittany Adikes, and Ramsey Chamie, at Green Light Law Group for expert legal advice. To stay informed on all matters related to cannabis, CBD, hemp, and psilocybin, check out our blog.

You can contact Allison Campbell at info@gl-lg.com or 503-488-5424.