Recreational Cannabis in New York: What to Expect
New York is preparing for legalization of recreational cannabis. Some politicians, however, are doubtful that the law can be passed within this year. Governor Andrew Cuomo revealed his plan to legalize and regulate adult-use cannabis. His goal is to include his proposal as part of the $170 million budget for the 2020 fiscal year. The adult-use legislation, called the Cannabis Regulation and Taxation Act (CRTA), establishes the Office of Cannabis Management (OCM), within the Division of Alcoholic Beverage Control, to oversee New York’s adult-use cannabis market, medical marijuana market and hemp cannabis market.
There would be six license categories under CRTA:
Cultivator license
Processor license
Cooperative license
Distributor license
Retail dispensary license
On-site consumption license.
Like New York’s Alcoholic Beverage Control Law, CRTA prohibits vertical integration, banning overlapping ownership interest across multiple license categories. For example, it will be unlawful for cultivator licensees, processor licensees and distributor licensees to have any ownership interest in a retail dispensary license or premises.
However, the proposed legislation gives the OCM’s executive director the authority to grant medical marijuana licensees (Registered Organizations) − which are required to be vertically integrated − the ability to be “licensed to cultivate, process, distribute and sell adult-use cannabis.”
Cultivator licensees, under CRTA, can grow, clone, harvest, dry, cure and trim cannabis, and will be required to sell cannabis to processors only. But cultivators also can apply for one processor and one distributor license.
Processor licensees, on the other hand, will be permitted to extract and infuse cannabis to make cannabis products and package and label those products. Processors must purchase cannabis from cultivators and can sell cannabis to distributors only. Processor licensees can have up to three processor licenses.
Distributor licensees can only distribute and sell cannabis purchased from a processor and sell it to licensed retail dispensaries. It will be unlawful for distributor licensees to have any economic interest in any retail dispensary license.
Adult-use retail dispensary licensees only can sell cannabis directly to consumers. No person may have a financial or controlling interest in more than three retail dispensary licenses. This is in sharp contrast to the Alcoholic Beverage Control law which limits financial or controlling interests in a retail liquor store license to one.
Additionally, dispensaries would not be permitted to sell more than one ounce of cannabis per consumer per day, nor more than five grams of cannabis concentrate per consumer per day. The CRTA creates an affirmative duty for dispensary employees to encourage consumers whom they suspect may be abusing cannabis to seek help.
Finally, the OCM will have the authority to grant on-site consumption licenses to retail dispensaries. On-site consumption licensees cannot sell more than one gram of cannabis to consumers for on-site consumption.
The CRTA would tax cultivators at the rate of $1 per dry weight gram of cannabis flower and $0.25 per dry weight gram of cannabis trim. Wholesalers would be taxed 20 percent of the invoice price to retail dispensaries, plus an additional 2 percent county tax.
Counties can opt out of the legislation and ban the sale of cannabis within their borders.
While clear parallels exist between the proposed adult-use legislation and New York’s Alcoholic Beverage Control Law, CRTA would prohibit integrating alcohol in cannabis products.
Our Cannabis practice will keep informed on the latest updates on the CRTA.