Earlier this year, New York joined 18 states, Washington, D.C., and Guam in legalizing recreational cannabis sales through the Marijuana Regulation and Taxation Act. (Source)

On March 31, 2021, Governor Andrew Cuomo signed the Marijuana Regulation and Taxation Act (“MRTA”), legalizing recreational cannabis use in New York state for adults 21 years or older. The move is expected to generate tens of thousands of jobs and hundreds of millions of dollars in revenue for the state. Consumers may purchase and possess up to three ounces of cannabis flower and up to 24 grams of concentrated cannabis, and may securely store up to five pounds of cannabis at their personal residence or grounds.

MRTA tasks The Office of Cannabis Management (“OCM”), governed by a five-person Cannabis Control Board (“CCB”), with implementing regulations for New York’s cannabis industry and overseeing the licensure, cultivation, production, distribution, sale, and taxation of medical, adult-use and cannabinoid hemp. While the OCM is still in the process of promulgating its rules and regulations, what follows is a summary of the rules published to date.

Licensing

The OCM will not accept any licensing applications until the OCM finalizes and publishes its remaining rules and establishes the application process for the various license types that New York will permit. Licensing types will include:

Cultivator license – authorizes licensee to plant, grow, clone, harvest, dry, cure, grade and trim cannabis. Cultivators may only sell cannabis to duly licensed state processors. A cultivator licensee may hold one processor’s license and one distributor’s license solely for the distribution of their own products, and may not hold a retail dispensary or on-site consumption license. While a licensee is limited to only one cultivator license, the CCB may authorize cultivation in more than one location if the licensee meets yet-to-be-established criteria.

Processor license – authorizes licensee to engage in processing activities including, but not limited to, blending, extracting, infusing, packaging, labeling, branding and otherwise making or preparing cannabis products. Processors are not permitted to hold any ownership interest in a retail dispensary license or on-site consumption license. A single processor license may authorize processor activities at multiple locations.

Distributor license – authorizes licensee to acquire, possess, distribute and sell cannabis from a licensed cultivator, processor, registered organizations, cooperative, or microbusiness to retail dispensaries and on-site consumption licensees. Distributors cannot have any ownership interest in a retail dispensary license or an on-site consumption license. Distributors that also hold a cultivation license and processing license are limited to distributing only the products they manufacture.

• authorizes licensees to sell adult-use cannabis to consumers at retail at up to three separate locations. Licensees cannot have any ownership interest in a cultivation, distributor, or processor license, and are limited to no more than three adult-use retail dispensary licenses.
• authorizes licensee to permit recreational cannabis use on the licensed premise. A licensee may hold up to three on-site consumption licenses. Licensees cannot have any ownership interest in a cultivation, distributor, or processor license.
• authorizes licensees to deliver cannabis and cannabis products, independent of another cannabis license, directly to cannabis consumers. Licensees are limited to employing no more than 25 individuals or equivalent thereof in providing full-time paid delivery services to consumers.

Cooperative license – authorizes the acquisition, possession, cultivation, processing, distribution and sale from licensee to licensed distributors, on-site consumption sites, registered organizations, and retail dispensaries. Licensees may not sell directly to cannabis consumers.

Nursery license – authorizes the production, sale and distribution of clones, immature plants, seeds, and other agricultural products used specifically for the planting, propagation, and cultivation of cannabis by licensed adult-use cultivators, cooperatives, microbusinesses, or registered organizations. An adult-use cultivator may hold one nursery license.

Microbusiness license – authorizes the limited cultivation, processing, distribution, delivery, and dispensing of their own adult-use cannabis and products. Licensees may not hold any other cannabis license authorized under MRTA, and may only distribute its own cannabis and cannabis products to dispensaries.

Registered organization – authorizes a registered organization to have the same privileges and conditions as adult-use cultivator, processor, distributor, and retail dispensary licensees. The location of registered organization adult-use retail dispensaries will be limited to three of the organization’s medical dispensaries’ and only authorizes the distribution of the registered organization’s own products. The timing and manner of a registered organization’s participation in the adult-use market will be determined by the CCB. No registered organization can have an interest in or own any other adult-use license type.

As was the case in Colorado, municipalities across New York will be able to decide for themselves whether or not to permit recreational cannabis sales.

Local Opt Out

Municipalities may opt-out of allowing adult-use cannabis retail dispensaries or on-site consumption licenses within their borders by passing a local law by December 31, 2021, nine months after the effective date of the legislation. Municipalities may not ban cannabis possession. Those that choose to opt out of permitting retail marijuana sales or on-site consumption will not receive a portion of the millions in tax revenue generated from legalizing recreational cannabis use. However, a municipality may opt back in at any time.

Home Cultivation

Home cultivation of cannabis plants is not allowed immediately under MRTA. Once the CCB adopts regulations outlining the rules, New Yorkers 21 years of age and older can grow up to six plants in their home for personal use, with a maximum of twelve plants per household. Cannabis plants must be kept in a secure place and not accessible to any person under 21, and it is illegal to make cannabis hash oil or concentrates using substances like butane, propane, or alcohol with homegrown cannabis. The governing regulations for home cultivation must be issued within 18 months after the first adult-use retail sale, which is expected to occur in 2022. Local municipalities may enact and enforce regulations relating to the home cultivation of cannabis.

Commitment to Social Equity

MRTA aims to promote diversity and inclusion in the cannabis industry. Accordingly, the OCM established a goal of awarding 50% of adult-use licenses to social and economic equity applicants, or applicants that were disproportionally impacted by the policies of prohibition. MRTA creates automatic expungement or resentencing for anyone with a previous marijuana conviction that would now be legal and provides essential funding.

In addition to prioritizing social equity, MRTA also aims to promote small business opportunities, avoid market dominance in sectors of the industry, and reflect the demographics of the state of New York. New York will provide loans and grants and establish incubator programs to encourage participation by minority groups, women, struggling farmers, and disabled veterans. Tax revenue from marijuana sales will fund education, job training, drug treatment programs, and other community initiatives.

Protections for the Use of Cannabis and Workplace Safety

The MRTA implements workplace safety protection measures making it unlawful for an employer, to refuse to hire, discharge, or otherwise discriminate against persons who legally use cannabis outside of working hours, off of the employer’s premises, and without the use of the employer’s property. However, employers are not required to commit any act that would cause them to violate federal or state law, or lose federal funding. Employers may also enforce workplace policies that prohibit cannabis use or impairment on the job.

Timeline

New Yorkers can immediately smoke cannabis outside where cigarette smoking is allowed and may possess statutorily permitted amounts of cannabis. MRTA’s tax structure will take effect April 1, 2022, which is the earliest that dispensary and on-site consumption sales of marijuana may begin. However, no sales will commence until the OCM develops rules and regulations for marijuana business licensing and operations.