Mar 31, 2021
New York Legalizes Cannabis for Adult Use, Initiates Implementation of Comprehensive Regulatory System and Expansion of Medical and Hemp Programs
The new law aims to create a more open system that is responsive to the market and includes significant opportunities for small businesses, communities hardest hit by cannabis prohibition
The New York office of Vicente Sederberg LLP, which has been shaping and implementing cannabis laws and regulations for over a decade, will host a free webinar April 7 on the implementation process and new opportunities under the MRTA — *Register Now*
NEW YORK — Gov. Andrew Cuomo signed legislation into law Wednesday legalizing cannabis for adult use and initiating the process of implementing a comprehensive cannabis regulatory system. The bill also expands the existing medical cannabis and hemp programs and aims to repair some of the damage caused by decades of cannabis prohibition.
“New York is poised to establish one of the nation’s largest adult-use markets, which will create a host of new opportunities and foster significant growth in the legal cannabis industry,” said Charles Alovisetti, a partner and chair of the corporate department at national cannabis law firm Vicente Sederberg LLP. “Regulators have been provided with the authority and flexibility needed to keep the system responsive to market forces while also protecting public health and safety. There are still a lot of details that need to be fleshed out during implementation, but the state is extremely well-positioned to become a leader in the emerging global cannabis market.”
Vicente Sederberg’s New York office will hold a free public webinar April 7 at 2 p.m. ET to review details of the new law, how it will be implemented, and opportunities it will create for businesses and individuals. Presenters will include Alovisetti and other local and national firm leaders who have been intimately involved in shaping and implementing cannabis laws and regulations across the country. Register now and find more information at https://event.webinarjam.com/register/52/gmpq8s62.
The Marijuana Regulation and Tax Act (MRTA) takes effect immediately, allowing adults 21 and older to possess up to three ounces of cannabis or 24 grams of concentrate. Once rules for home growing are established, adults will also be able to grow up to six plants (with a maximum of 12 in households with more than one adult), and police will not be allowed to use the odor of cannabis to justify searches. Past convictions for all legalized conduct will be automatically expunged.
The Office of Cannabis Management will be established as an independent agency within the New York State Liquor Authority and overseen by a five-member Cannabis Control Board. The OCM will be responsible for regulating the adult-use cannabis market as well as the existing medical cannabis and hemp programs, both of which will be expanded.
The OCM will issue licenses and create regulations for adult-use retailers, cultivators, processors, distributors, plant nurseries, home delivery services, and on-site consumption. It will also issue licenses for vertically integrated microbusinesses and permits for activities such as packaging, warehousing, and transportation. Local governments will regulate the time, place, and manner in which cannabis licensees operate. Localities that wish to prohibit licensed cannabis businesses must opt out of the system by passing a local law by the end of this year.
Vertical integration is generally prohibited with the exception of microbusinesses and existing medical operators. Retail licensees are prohibited from owning any interest in cultivation, processing or distribution licenses and vice versa.
Retailers can own up to three licenses, each for a specified location, while cultivators and processors are limited to one of each license, which may be used across multiple locations if regulations allow. Existing medical cannabis businesses may be able to convert up to three dispensing locations to dual-use storefronts by paying a one-time fee, which would fund social equity and incubator programs. They may also be allowed four additional facilities, of which the first two must be located in unserved or underserved geographic areas.
The MRTA establishes a goal of issuing 50% of licenses to social equity applicants because mandating it would be unconstitutional. Social equity applicants are defined as minority- or women-owned businesses, disabled veterans, financially distressed farmers, and people from “communities disproportionately impacted by the enforcement of cannabis prohibition.” These applicants will also receive advantages during the licensing process, including reduced fees and priority treatment. The OCM will appoint a chief equity officer to develop a social equity licensing plan that will apply to all licensees, including renewals.
“The system was thoughtfully designed to foster a diverse and inclusive industry that prioritizes equity while also meeting market demand,” said Elliot Choi, who serves as counsel and co-manager of Vicente Sederberg’s New York office. Vicente Sederberg has worked on social equity and small business policy matters and programs around the country. It also provides pro bono and reduced-fee legal assistance to a wide variety of equity and economic empowerment program applicants and participants.
“It is critical that this new adult-use market create ample opportunities and other benefits for underrepresented populations and the communities hardest hit by cannabis prohibition,” Choi said. “Making equity a key goal at the outset should lend to smoother implementation and more rapid returns for those the program aims to benefit.”
Adult-use cannabis will be subject to a 9% state sales tax and a 4% local sales tax, with 75% of the local tax going to the municipality and 25% to the county. A potency-based tax will be levied on distributors, with different rates for cannabis flower, concentrates, and edibles. After regulatory and administrative costs, 40% of cannabis revenue will be directed to community reinvestment grants, 40% to schools, and 20% to substance abuse treatment and prevention, including a cannabis-specific public health campaign and a youth-focused education and prevention campaign.