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Wednesday, February 1, 2023

New York Conditional Adult Use Dispensary License

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The creation of a conditional retail dispensary license for adult use in New York made headlines. Although New York plans to issue only 50-100 of this new type of license, the type of license and its basic rules and regulations are very important. why?

First, because the OCM and CCB have issued actual rules and regulations that will apply to a particular type of license. The rules and regulations are comprehensive and provide a clear template for the rules and regulations for other types of licenses included in the MRTA. The release of Conditional Retail Dispensary Rules and Regulations for Adult Use is a clear indication that all other rules and regulations regarding adult use are coming soon.

Second, these Rules and regulations Provide a roadmap for New York’s social justice program, particularly with regard to licensing of retail dispensaries. Many of the rules and regulations follow the Social Justice Fund we recently wrote about, once again highlighting that the CCB and OCM actively coordinate the interaction between different aspects of the adult cannabis use program.

But enough about the big picture. With any rules and regulations, the devil is in the details and there are plenty of details to untangle here.

Who qualifies for a conditional retail dispensary license for adult use?

Eligibility generally falls into two groups: (1) individuals or entities in which ownership consists of at least one individual who has been convicted of or is associated with an individual who has been convicted of a marijuana-related offense prior to the enactment of the MRTA; and (ii) intentionally serving justice nonprofits include individuals and communities with historically high rates of law enforcement activity for marijuana-related crime.

All applicants are required to demonstrate significant presence in New York, either individually or through having a primary corporate location in New York. For entities, the requirement to “be in New York” can be satisfied by a majority ownership interest in the entity held by individuals who are physically present in New York for at least 180 calendar days in the current year or 540 calendar days over the past three years.

For for-profit individuals/entities, there are a few really interesting requirements:

  • The individual involved in justice must demonstrate that residency in New York at the time of the conviction(s) qualifies;
  • An eligible individual must have (for at least two years) at least a 10% ownership interest in a company that has had a net profit for at least two years in which the company has been in business;
  • In order for an entity to qualify, it must own at least 51% of the entity’s ownership, in aggregate, for eligible individuals and/or entities; or Ultimately, 30% of the entity’s ownership must be owned by an eligible individual or entity, if that individual or entity “only holds control of the applicant or licensee”.

For non-profit entities, there are also some interesting requirements:

  • The social enterprise managed by the applicant must have at least two years of positive net assets or profit (based on tax returns);
  • The applicant must demonstrate a history of creating professional opportunities for individuals concerned with justice;
  • The applicant’s board of directors or officers must include individuals involved in justice; And the
  • The applicant must have at least five full-time employees.
How are applicants evaluated for a conditional retail dispensary license for adult use?

The rules and regulations include separate assessment factors (separate from application requirements). Some key evaluation factors:

  • if the eligible person(s) has found himself guilty of a marijuana-related offense;
  • If the eligible person is a resident of New York: for areas with historically high rates of arrest, conviction, or imprisonment for marijuana-related offenses; For historically lower middle income regions; or has been provided by the New York City or State of New York Public Housing;
  • For companies:
    • Number of Employees
    • number of years of business;
    • business profitability;
    • whether the business is engaged in retailing or selling products directly to the end consumer;
    • whether the business has a physical location; or
    • Whether the business has received or resolved state or federal fines, violations, etc.

Overall, it’s pretty clear what CCB and OCM are trying to do: Emphasize licensing New Yorkers who have been involved in justice (from a cannabis perspective) and who have a proven track record of running a successful, compliant business.

What is denied in my application for a conditional retail dispensary license for adult use?

Assuming you meet all of the eligibility criteria, what leads to your application being rejected? There are some specific prohibitions and some more looser ones. the details:

  • inconsistent information in the application;
  • Failure to submit complete applications in a timely manner, including fingerprints;
  • revocation, revocation or suspension of a cannabis license in a state or other jurisdiction;
  • The passage of cannabis is prohibited according to Section 137 of the MRTA (General Prohibitions of the MRTA);
  • Failure to file tax returns in a timely manner or pay taxes; or
  • Causing a violation of Articles 72 or 85 of the MRTA (Adult Dispensary Use Rules).

Reasons for disqualification are “ambiguous”:

  • The applicant has demonstrated prior business practices/arrangements that may not comply with state and local laws relating to the cannabis industry;
  • Creates or reinforces the risk of illicit practices in the cannabis industry (with an emphasis on product inversion or diversion); or
  • Not a good person.
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