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On March 30, 2021, the New York State Assembly and State Senate approved the Marijuana Regulation and Taxation Act (MRTA) legalizing, taxing, and regulating recreational marijuana in New York State. The following day, the Governor signed MRTA into law, marking the end of the battle between lawmakers over recreational cannabis in New York, and setting the stage for the emergence of a multi-billion dollar industry. MRTA reforms New York’s criminal laws pertaining to cannabis and directs the reinvestment of substantial portions of tax revenues[1] to communities disproportionally affected by previous drug laws, and also sets forth specific procedures and regulations concerning the impending licensure of persons and organizations to cultivate, process, distribute, and sell cannabis for recreational use by persons aged twenty-one (21) and older.
The Office of Cannabis Management (OCM) & Cannabis Control Board:
MRTA establishes the Office of Cannabis Management, an independent entity within the Division of Alcoholic Beverage Control, comprised and governed by a five-member Cannabis Control Board. The Cannabis Control Board shall have the authority to prescribe forms of applications, licenses and permits, as well as the discretion to make the preliminary determinations on the issuance of more than ten (10) different types of cannabis licenses.
Recreational Cannabis Market Structure & Types of Licenses:
MRTA establishes a tiered market structure for recreational cannabis, modeled after the state’s alcohol industry. License categories for adult-use include cultivation, processing, distribution, retail dispensaries, registered organizations certified for medical use, consumption sites, and delivery. There will also be a Cooperative License category that will authorize groups of individuals to cultivate and process cannabis products; a Nursery License to allow for immature plants to be grown and sold to other licensees; and a Microbusiness License to allow the holder to cultivate, produce, and retail their own cannabis products in limited size quantities.
See the below chart[2] highlighting certain features of each category of adult-use recreational licenses classified by MRTA.
| ADULT-USE LICENSE TYPE: |
AUTHORIZES: |
FEATURES/RESTRICTIONS: |
| Cultivator License |
Acquisition, possession, distribution, cultivation, and sale of cannabis to licensed processors |
May apply for and obtain ONE processor’s license and ONE distributor’s license solely for the distribution of their own Products.
Cannot hold a retail dispensary license. |
| Registered Organization Adult-Use Cultivator Processor Distributor Retail Dispensary License |
Certified for medical use and includes the same authorizations and conditions as adult-use cultivator, adult-use processor, adult-use distributor and adult-use retail dispensary licenses |
Location of dispensaries shall be limited to only three of the organizations medical dispensaries’ premises and facilities.
May only distribute its own products
May not also hold another retail dispensary license. |
| Registered Organization Adult-Use Cultivator, Processor and
Distributor License |
Certified for medical use and includes the same authorizations and conditions as an adult-use cultivator, processor, and distributor licenses. |
Does not qualify such organization for any other adult-use license and may only authorize the distribution of the licensee’s own products. |
| Processor License |
Acquisition, possession, processing and sale from cultivators to processors or distributors |
License may authorize processing activities at multiple locations if authorized by Board. |
| Cooperative License |
Acquisition, possession, cultivation, processing, distribution, and sale to distributors, on-site consumption sites, registered organization and/or retail dispensaries, but NOT directly to consumers. |
Must be comprised of residents of state of New York as LLC of LLP. LLC and LLP must adhere to various other organizational structure requirements. |
| Distributor License |
Acquisition, possession, distribution and sale from cultivator, processor, cooperative, microbusiness, or registered organizations to retail dispensaries and onsite consumption sites |
Cannot have direct or indirect economic interest in microbusiness, retail dispensary, on-site consumption, or registered organization. In the event of direct or indirect interest in cultivator or processor licensee, can only distribute products cultivated or processed by such licensee. |
| Retail Dispensary License |
Acquisition, possession, sale and delivery license shall authorize the acquisition, possession, sale, and delivery from licensed premises to cannabis consumers. |
No person can have a direct or indirect interest in more than three retail dispensary licenses, and cannot hold a cultivation, processor, microbusiness, cooperative, or distributor license, or be registered as a registered organization. Must be owner of premises in which retail license is applied for or demonstrate possession of premises within thirty days of final approval through lease, management agreement, or other agreement for duration of license period. |
| Microbusiness License |
Limited cultivation, processing, distribution, delivery, and dispensing of their own cannabis and cannabis products |
May not hold a direct or indirect interest in any other license. Size scope, and eligibility criteria shall be determined in regulation by the board. |
| Delivery License |
Delivery of cannabis and cannabis products independent of another cannabis license |
Limited to no more than 25 individuals or equivalent thereof in providing full-time paid delivery services to consumers. |
| Nursery license |
Production, sale, and distribution of clones, immature plants, seeds, and other agricultural products used specifically for the planting, propagation, and cultivation of cannabis. |
May apply for one nursery license to sell directly to other cultivators, cooperatives, microbusinesses, or registered organizations. |
| On-Site Consumption License |
Areas licensed solely for the purpose of recreational cannabis use. |
Cannot hold interest in more than three on-site consumption licenses. Must be owner of premises in which retail license is applied for or demonstrate possession of premises through lease for duration of license period unless leased from gov’t agency. Cannot hold any other cannabis licenses. |
Application Process:
The Cannabis Control Board is granted the discretion to prescribe the form of applications, licenses, and fees. It may also limit the number of registrations, licenses and permits of each class to be issued within the state or any political subdivision thereof, in a manner that prioritizes social and economic equity applicants with the goal of awarding fifty percent to such applicants. It also aims to consider small business opportunities and concerns, avoid market dominance in sectors of the industry, and reflect the demographics of the state. At this time, the form of the application and associated fees for licensing have not yet been promulgated, but we expect the application decision-making criteria to include a wide range factors unique to each class of license.
If you have any questions about MRTA and navigating this emerging landscape of recreational cannabis in New York, please do not hesitate to contact Marc J. Ross, Esq. at 212-398-5541, mross@srf.law, or Michael Cuttitta, Esq. at 212-981-6770, mcuttitta@srf.law.[3]
[1] MRTA imposes a 9% state tax and 4% local tax for retail sales of cannabis. MRTA imposes an additional requirement that adult-use distributors remit taxes based on the per milligram amount of THC (0.5 cents for cannabis flower, 0.8 cents for cannabis concentrate, 3.0 cents for edibles).
[2] This chart is intended to highlight the main features of each category of license; it is not, nor is it intended to be, all-inclusive of every regulation and authorization pertaining to each category of license.
[3] This MRTA Alert is for general information purposes and is not intended to advertise our services, solicit clients or represent our legal advice.
