New York’s adult use cannabis market is poised to become one of the biggest and most influential in the world, once it gets going. Its ripple effects will likely extend from financial to cultural realms.
This year, regulators have been crafting the rules. For the adult use market, licenses are to be issued in two major phases: an interim phase that gives a head start to small farmers as well as “justice involved” individuals, and the subsequent phase that allows just about anyone to apply for a business license.
This initial phase will offer only conditional licenses: only existing hemp farmers are eligible for conditional licenses to grow cannabis and to process it into products, like vape oils, and harvest season is underway. Meanwhile, the Office of Cannabis Management (OCM) is reviewing the more than 900 retail applications that came in from “justice-involved” individuals — people with a cannabis arrest (or a family member with one) — seeking the conditional retail licenses for which only they are eligible. Cannabis regulators and Governor Kathy Hochul continue to say that cannabis sales — under this initial phase — will begin by the end of 2022. And a lot has happened this year toward meeting that goal.
But there’s still much left to do in the remaining two months of 2022 in order for New York to ring in the New Year with legal adult use sales. Timing is important, too, because there are farmers and processors who are growing increasingly anxious to know whether their product will have a home on shelves this year – or if delays may bring unexpected costs.
Cannabis Wire has compiled a checklist of the tasks completed, and those still outstanding.
Here’s what’s completed:
• In January, Governor Hochul announced a $200 million public-private fund to “promote equity and economic justice in New York’s cannabis industry.” More details on how the fund would operate came by May.
• In February, New York lawmakers passed a bill, which Hochul signed immediately, to give hemp farmers a head start in growing the state’s first legal adult use cannabis crop. They would be given conditional licenses to grow cannabis and to turn it into products. “Our existing hemp growers, who have been some of the hardest hit by market fluctuations, already have the knowledge base to meet this need,” the bill’s sponsor, Senator Michelle Hinchey, said at the time.
• In March, cannabis regulators approved a plan to allow people who have some business experience and a record of a cannabis conviction, or have a parent or guardian with one, to apply for adult use retail licenses — as with the hemp farmers, these are conditional — before other entities are allowed to do so. (Hochul announced that this proposal, plus the announcements in January and February, would be called the “Seeding Opportunity Initiative.”)
• In April, conditional cultivation licenses started getting awarded and hit nearly 150 by May.
• In May, the Dormitory Authority of the State of New York (DASNY) opened two cannabis-related Requests for Proposals (RFPs). One sought a manager for the $200 million fund that Hochul announced in January, now known as the “New York Social Equity Cannabis Investment Fund,” which would provide 150 turnkey shops for the retail licensees under the “Seeding Opportunity Initiative,” and the other sought “design-build services” for those shops.
• In June, the Dormitory Authority announced that it had selected Social Equity Impact Ventures, LLC to run its $200 million equity fund. And regulators began to accept applications from hemp farmers who want a conditional license to process cannabis and turn it into products like oils.
• In July, regulators announced the application window for the Conditional Adult-Use Retail Dispensary licenses, under the Seeding Opportunity Initiative, would open in August.
• In August, the Dormitory Authority put out an RFP looking for point-of-sale software for cannabis retail shops.
• In September, the authority put out an RFP looking for a bank to work with the equity fund.
• As of the end of October, regulators have licensed more than 200 of these conditional cultivators and processors, and regulators celebrated harvest season in three “Croptober” stops at farms, from Long Island to Columbia County upstate.
• Late in the day on October 28, regulators released guidance for the state’s forthcoming adult use cannabis conditional retail license holders as an interim framework until rules are finalized.
Of course, lots of other cannabis-related moves happened along the way — such as regulators approving rules for medical cannabis patients to grow at home and the formation and first meeting of the Cannabis Advisory Board — but they weren’t directly related to getting adult use sales off the ground by the end of 2022.
Here’s what still needs to be done:
• Who will run the first adult use shops? The Office of Cannabis Management still needs to review the more than 900 applications that have come in, and make their selections for the 175 slots (150 for the “justice-involved” applicants, and 25 for non-profits).
• Where will these first shops be located? The Dormitory Authority still needs to announce the specific locations of these shops, as its equity fund is in charge of providing the conditional licensees with turnkey storefronts.
So far, New Yorkers only have a rough idea of the concentrations of shops within regions, as Cannabis Wire reported. Under the conditional license phase, there will be seven shops in the Capital Region, for example, and 10 in the Bronx.
• Who will design these turnkey shops? The Dormitory Authority’s window for its Request for Proposals for the entities that will provide the design-build services for conditional retail licensees’ shops, like architectural and construction work, closed in June. The announcement about successful applicants is long overdue (Cannabis Wire was told back in July that the announcement was expected within the week).
• Who will bank the Fund? The Dormitory Authority still needs to select a bank to provide services for the New York Social Equity Cannabis Investment Fund. That RFP closed Oct. 7.
“The goal of the State,” the RFP notes, “is to provide social equity and restorative justice for the benefit of communities and persons that have been disproportionately impacted by the enforcement of past laws punishing the use of cannabis. This goal is advanced through the provision of financing and other related services to Social Equity Licensees that will enable them to establish their Dispensaries.”
• Which company will manage the point of sale software?
The Dormitory Authority’s RFP closes on November 4. It calls for “Point-of-Sale Providers capable of providing a complete point of sale system, including software as a service, associated hardware and required implementation services for adult-use cannabis retail dispensary facilities (“RCDs”) for operation by Social Equity Licensees.”
Looking to the future, what needs to be done after sales start, to ensure the legal industry thrives?
• When will the full package of adult use regulations be completed?
All of the rules that regulators have drafted to-date apply only to the conditional licensees for this first phase of sales, with the exception of rules released in June for packaging, advertising, and testing. A package of rules must be finalized before the post-conditional phase of licensing can begin.
• Who will rein in unlicensed cannabis sales?
So far, regulators have sent just over 50 cease and desist letters to unlicensed cannabis sellers. Beyond that? Crickets. There are rising calls from lawmakers for increased enforcement against these operators, though, as Cannabis Wire reported.
Senator Liz Krueger, who was one of two architects of the Marihuana Regulation & Taxation Act, told Cannabis Wire that she plans to reintroduce a bill to rein in the rampant unlicensed cannabis sales.
“I absolutely am going to continue down that path in January. But again, I will, as is my philosophy, do this in conjunction with” the Office of Cannabis Management, Krueger told Cannabis Wire. “Frankly, the messaging we’ve really been trying to get across to anybody and everybody who thinks they’re going to jump ahead of the law,” Krueger said, is, “‘Guess what? You’re not getting a license to do this legally.’”
• Which jurisdictions are allowing sales?
Some local governments have opted out. Here’s a list of opt-out submissions that OCM has received. (If California is any lesson, jurisdictions that ban sales create spaces where unlicensed activity thrives.)
What about potential curveballs?
It is rare to see an adult use market get off the ground without some sort of tumult, and the most common cause is lawsuits that challenge the licensing process.
Connecticut, to use a current and local example, is in the process of awarding its first cannabis licenses, with the goal of starting sales by the end of the year, and multiple lawsuits are underway.
Illinois set out to make its industry a “gold standard” on equity, only to see the issuance of equity licenses held up for more than a year because of lawsuits.
So far, New York’s Office of Cannabis Management has so far seen only one legal challenge against its licensing approach, but it’s highly unlikely to be the last.
