Key Takeways:

  • If you haven't already registered, please join our webinar - New York: Where Are We Now - on Thursday, May 18, where our team will provide an in-depth overview of what is to come in New York.
  • Timeframe: New York regulators are on track to open up general cannabis licensing following Labor Day.
  • Competitive Applications: The Revised Regulations have changed the application process from one that was "continuous and rolling" to set application windows for limited licenses based on regions.
  • Corporate Considerations: Priority status remains highly relevant – as do the complicating and highly fact-specific true party of interest restrictions and prohibitions.
  • Registered Organizations: While these rules have certainly improved the pathway for licensure for medical operators, significant issues still remain.

New York's Office of Cannabis Management ("OCM") has posted, and the Cannabis Control Board (the "CCB" or "Board") voted to approve the filing of, certain revised adult-use regulations (the "Revised Regulations"). While these Revised Regulations merely contain amendments to the robust first set of proposed rules ("Prior Draft"), they are important given both the timing for general adult-use licensing it lays out, as well as the roadmap for what the application process and adult-use marketplace will look like in the weeks, months, and years to come.

Overview

Timeline

As it relates to timing, the million dollar question for prospective cannabis businesses in New York has been when will general licensing commence. Most are familiar that the only licenses issued in New York, to date, have been conditional licenses with extremely limiting conditions (hemp program licensure, qualifying businesses, qualifying convictions), meaning, license opportunities have not been available to any old businesses and/or individuals that wished to apply. However, the posting of the Revised Regulations today aligns with statements made by Senior Level OCM officials regarding the anticipated roll-out towards regular licensing. For instance, Axel Bernabe, Chief of Staff and Senior Policy Director of OCM, previously gave the anticipated timeline as follows:

The regulations that we filed for public comment, we're really trying to get them done by our May 11 board meeting. If we get it done by then, we should be able to file final regs by the end of August. Then we can start opening the general application period within a couple months of that. These are all tentative dates, but in the fall, after Labor Day, that's when we can start to award more dispensaries.

(Emphasis added.)

In short, several months after this comment was made, OCM's predication on the time-frame for the Revised Regulations have hit the mark, with the hope that the remainder of the timeline noted above also holds true.

From here, we wait for the formal publication of the Revised Regulations in the New York Register, and another forty-five (45) day comment period. After the publication of the Prior Draft, an initial sixty (60) day comment period commenced. Following the close of that comment period, the Board could have adopted, revised, or withdrawn the rule proposal. Given that they have revised the regulations, the Board was required to submit a Notice of Revised Rule Making, which triggered the immediate forty-five (45) day review period.

Roadmap

Rolling Licenses Have Evolved to Application Periods

One of the biggest changes to the application process is that whereas the Prior Draft noted that applications would be solicited and accepted "on a continuous rolling basis," the Revised Regulations have changed this to distinct application periods. For example, the Revised Regulations identify that "[l]icensing applications shall be accepted during specific license type application periods, which shall be announced no less than thirty (30) days before the application period opens for that specific license type, as established by the Board." Meaning, this will not be an open and rolling application period, like we've seen in other recent adult-use states such as New Jersey, and instead, more akin to what we've seen during the Adult-Use Conditional Cultivator, Adult-Use Conditional Processor, and Conditional Adult-Use Retail Dispensary ("CAURD") rounds. The Revised Regulations have maintained the language identifying potential caps, wherein it identifies that "[l]imitations may be imposed on the acceptance of licensing applications, including, but not limited to, the total number of licenses; locations or authorized regions of operations; size of operation or output; limitations associated with true party of interest; eligibility criteria; and operating conditions, such as sustainability, public health and safety, and social and economic equity factors."

In short, we're likely to see, like we did with the CAURD licensing round, an opening of applications subject to specific criteria and that limits the total number of opportunities by region. For instance, when the CAURD round was initially announced, OCM solicited only one hundred fifty (150) total CAURD licenses, and broke that down by different regions of the state. Though OCM subsequently doubled that to three hundred (300), this example is certainly in stark contrast with an open application round that accepts application on a seemingly continuous and rolling basis.

We note that this again holds true to public comments made by senior-level OCM staff, who had anticipated:

. . . a phased rollout to a certain extent, so we don't have a thousand people all looking for dispensaries at the same time. We have like, 100, and then another 100, and then a couple months later, another 100. Then you don't have 500 people descending on a county and all scrambling and fighting for space and bidding up the price.

How Will These Applications Be Processed?

While priority was certainly important under the Prior Draft, it has become especially important in light of the defined application periods noted above. The regulations identify that applicants will be reviewed based on priority, including based on "provisional, social and economic equity status, or any additional criteria to be set by the Board." Social and economic equity applicants include those entities who are owned and solely controlled by: (a) an individual from a community disproportionately impacted ("CDI") by the enforcement of cannabis prohibition; (b) minority owned businesses; (c) woman-owned businesses; (d) distressed farmers; (e) and service-disabled veteran owned businesses. Moreover, the rules give OCM the ability to provide extra priority to those businesses owned by those from a CDI and who have income lower than 80% of the median income in the county in which the applicant resides plus convicted of a cannabis related offense.

How Will Applications Be Evaluated?

Largely the same as under the Prior Draft, including by reference to: (a) community impact plan; (b) operational and regulatory compliance plans, highlighting technologies, techniques, and strategies to protect the surrounding environment, limit carbon footprint, and leverage sustainable energy sources; (c) completion of workforce or training programs offered by OCM; (d) applicant's history in creating or maintaining an equitable workplace environment through the review of previous business and management practices; (e) history in creating or delivering culturally and linguistically competent services to diverse and underserved populations; (f) service in community leadership roles; (g) relative performance of applicants based on such criteria; (h) applicant's qualification for provisional licensing status; and (h) consideration to whether applicants have entered into an agreement with a statewide or local bona-fide building and construction trades organization for construction work on its licensed facilities.

Importantly, the request for operational plans should not be overlooked, as they constitute the regulatory meat of the submissions associated with the application. Operational plans will include reference to: (a) energy and environmental standards; (b) site, operating, and environmental plans; (c) security and storage of cannabis; (d) employee requirements and obligations; (e) responsible workforce training; (f) worker health and safety standards; (g) sanitary facility, equipment, and handling standards; (h) inventory and tracking; (i) quarantine and recalls; (j) transport of cannabis and cannabis products; (k) management of cannabis and other waste; (l) inspections and audits; (m) general recordkeeping; and (n) processing samples for internal quality control. In short, the preceding is akin to the types of application sections and materials that we see in most other competitive marketplaces. Moreover, when one of the criteria to be assessed by OCM in connection with license issuance is the "relative performance of applicants based on such criteria," the message is that the narrative responses must not only meet the relevant regulatory criteria, but exceed it by reference to best practices that differentiate one applicant's protocols from another.

To view the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.