New York Cannabis Licensing: MRTA Adult Use License Types

In this article:

Types of licenses authorized by the MRTA and restrictions governing each type of license

The MRTA authorizes several different license types, each of which allow licensees to provide a defined list of services. The initial licenses will expire 2 years after issuance. There are express restrictions on having multiple licenses, which has the general effect of prohibiting vertically integrated cannabis businesses. The license types:

Cultivator Licenses

What activities are authorized? In short, growing and selling cannabis to any processor licensed by the CCB. “Cultivation” includes every part of the agricultural process, including planting, growing, cloning, harvesting, drying, grading, and trimming cannabis.  

What are the licensing limitations? Licensees are also allowed one processor license and one distributor license, but only for processing and distributing the licensed cultivator’s own products.

What else do I need know?

  • The CCB may create rules that permit a limited amount of processing without a processor’s license.
  • The CCB may authorize cultivator licensees to operate in more than one location (but not to have more than one license).

Registered Organization Adult-Use Cultivator Processor Distributor Retail Dispensary License

What activities are authorized? Basically, the same activities as vertically integrated Registered Organizations, but with adult-use retail sales only allowed at 3 of the Registered Organization’s medical dispensaries and limited to the Registered Organization’s own products.

What are the licensing limitations? Licensees cannot hold any other adult-use licenses.

What else do I need to know?

  • The Registered Organization must maintain its medical cannabis license and continue offering medical cannabis (the degree of the continued medical cannabis sales will be determined by the CCB).

Registered Organization Adult-Use Cultivator Processor Distributor License

What activities are authorized? The same activities as adult-use cultivator, processor, and distributor licensees.

What are the licensing limitations? Licensees cannot hold any other adult-use licenses.

What else do I need to know?

  • A Registered Organization licensed as an adult-use cultivator, processor, and distributor can only distribute its own products.

Processor License

What activities are authorized? Buying cannabis from licensed cultivators, processing the cannabis (blending, extracting, infusing, packaging, labeling, branding and otherwise making or preparing cannabis products), and selling cannabis products to licensed distributors.

What are the licensing limitations? Licensees are allowed one distributor license for distributing their own products, but no other licenses.

What else do I need to know?

  • A processor cannot engage in any other activities at the licensed location.
  • The CCB may authorize processor licensees to operate in more than one location.
  • The CCB will issue minimum operating requirements for processor licensees.

Cooperative License

What activities are authorized? Basically, the cooperative license allows for vertically integrated operations: acquisition, possession, cultivation, processing, distribution and sale from the licensed premises.

What are the licensing limitations? To qualify as a cooperative, the licensee must:

  • Be comprised of New York residents;
  • Be registered as an LLC, LLP, or another business structure as authorized by the CCB;
  • Subordinate capital, both in terms of control over the cooperative undertaking and the ownership of the pecuniary interests arising from the cooperative’s operations;
  • Be democratically controlled by the cooperative members on a one vote per member basis;
  • Vest in and allocate with priority to and among cooperative members of all increases arising from their cooperative in proportion to the members’ respective active participation; and
  • Must operate according to the 7 cooperative principles publish by the International Cooperative Alliance in 1995.

What else do I need to know?

  • Cooperative members cannot be members in more than one cooperative.
  • Cooperatives and cooperative members cannot have any interest in any other licensees.
  • The CCB will issue regulations for cooperatives, including canopy limits on the size and scope of cooperative licenses, with the goal of incentivizing the use of cooperatives.

Distributor License

What activities are authorized? Purchasing cannabis and cannabis products from authorized licensees and selling cannabis and cannabis products to retail dispensaries and on-site consumption sites.

What are the licensing limitations? Distributor licensees can only have interests in a cultivator and processor licensee, but can then only distribute cannabis cultivated and processed by such licensee.

What else do I need to know?

  • Distributor licensees can charge an appropriate fee (as authorized by the CCB), for distributing cannabis, including based on the volume of cannabis distributed.
  • The CCB will issue minimum operating requirements for distributors.

Retail Dispensary License

What activities are authorized? Selling and delivering cannabis and cannabis products from a licensed premises.

What are the licensing limitations? No person can have an interest in more than 3 retail dispensaries.  If a person or entity has a retail license, the licensee cannot have any other license issued under the MRTA.

What else do I need to know?

  • Applicants for a retail license must demonstrate ownership or possession of the premises to be licensed within 30 days of final approval of a license through a lease, management agreement, or another agreement, with the lease term at least as long as the license period.
  • Retail dispensaries must be located in a storefront, with the principal entrance accessible from street level and located on a public thoroughfare.
  • The licensed premises must be commercial and at least 500 feet from any school or 200 feet from any house of worship.

Microbusiness License

What activities are authorized? Limited cultivation, processing, distribution, delivery, and sale of the microbusiness’ own cannabis and cannabis products.

What are the licensing limitations? Microbusinesses cannot hold any interest in any other license and can only distribute their own cannabis and cannabis products to retail dispensaries.

What else do I need to know?

  • The size, scope, and eligibility of microbusinesses will be determined by the CCB.
  • Microbusiness licenses will be issued in a manner that promotes social and economic equity applicants.

Delivery License

What activities are authorized? Delivery of cannabis and cannabis products independent of another adult-use cannabis license.

What are the licensing limitations? Delivery licensees cannot have more than 25 individuals providing fulltime paid delivery services per week. Delivery licensees cannot have an interest in more than one delivery license.

What else do I need to know?

  • The criteria and scope for permitted activities for delivery licensees will be determined by the CCB.
  • Delivery licenses will be issued in a manner that promotes social and economic equity applicants.

Nursery License

What activities are authorized? The production, distribution, and sale of clones, immature plants, seeds, and other agricultural products used for planting, propagation, and cultivation of cannabis.

What are the licensing limitations? Cultivator licensees may be issued one nursery license to sell directly to other cultivators, cooperatives, microbusinesses, and registered organizations.

What else do I need to know?

  • The Office of Cannabis Management will provide recommendations for the application process, license criteria, and scope of licensed activities.
  • Nursery licenses will be issued in a manner that promotes social and economic equity applicants.

On-Site Consumption License

What activities are authorized? The sale and consumption of cannabis and cannabis products, including smoking and vaping, within the licensed premises.

What are the licensing limitations? Owning an interest in up to 3 on-site consumption licenses is permitted, but a licensee cannot have an interest in any other license authorized by the MRTA.

What else do I need to know?

  • Applicants for an on-site consumption license must demonstrate ownership or possession of the premises to be licensed within 30 days of final approval of a license through a lease, management agreement, or another agreement, with the lease term at least as long as the license period.
  • The licensed premises must be commercial and at least 500 feet from any school or 200 feet from any house of worship.
  • No one under the age of 21 can enter on-site consumption facilities.

That covers all of the license types. The biggest takeaway is that vertical integration is generally prohibited. Prospective applicants will have to give a lot of thought to the specific license sought. As it stands now, once a license is issued, the licensee is confined to operating in a defined segment of New York’s cannabis industry.

MRTA’s provisions regarding the license application process

The MRTA requires the CCB to deliver its first annual report by January 1, 2023, which means that the MRTA contemplates cannabis sales in 2022.

Where can I obtain a license application?

From the Office of Cannabis Management (OCM). Eventually. As we have repeatedly stressed, the CCB will be creating the rules and regulations for adult use licenses, including the form of the license application. The OCM will be responsible for administering the application process.

What information will be required for a license application?

The MRTA requires the following information to be included as part of the application created by the CCB (as well as anything else the CCB comes up with):

  • Information about the applicant’s identity, including racial and ethnic diversity. Although not expressly discussed, we assume this includes information about anyone who has an ownership interest in the applicant if the applicant is an entity (which we strongly recommend for just about any licensee).
  • Ownership and investment information for entity applicants, including a detailed explanation of the applicant’s corporate structure.
  • Evidence of good moral character, which we presume is clearing the criminal background check as required in the MRTA’s general provisions article.
  • Fingerprints for the applicant (principals, officers, directors, etc. if an entity).
  • Information about the premises that will be licensed.
  • Financial statements for the applicant.

Is there a license fee?

The license application will require a check for the license fee, so it is safe to say that a license fee will be required. But we don’t know what the license fee will be across the different license types.

The license fee will be set by the CCB. Interestingly, the MRTA provides that the license fee may be based on cultivation and/or production volume, implicitly contemplating a sliding scale for license fees.

Another fun inclusion: the CCB also has the right to charge a biennial license fee (after the initial license is issued), which would be based on the amount of cannabis cultivated, processed, distributed and/or dispensed by the licensee (as applicable) or gross annual receipts of the licensee for the previous license period.

What are the selection criteria?

At a minimum, plus anything else the CCB adds as part of issuing the industry rules and regulations:

  • Whether the applicant is a social and economic equity applicant.
  • The applicant’s ability to demonstrate effective controls against the illegal diversion of cannabis.
  • The applicant’s ability to comply with applicable state laws and regulations.
  • The applicant’s and its officers’ ability to properly carry on the activities for which a license is sought, including with assistance from the social and economic equity and incubator program, if applicable.
  • Whether the applicant possesses or has leased sufficient land, buildings, and equipment to carry on the activities described in the application or has a plan to do so if qualifying as a social and economic equity applicant.
  • If a non-social and economic equity applicant, whether such applicant sets out a plan for benefiting communities and people disproportionately impacted by the enforcement of cannabis laws.
  • Whether it is in the public interest that the applicant be granted a license.
  • Whether the applicant and its managing officers are of good moral character and do not have ownership or controlling interests in more licenses or permits than allowed by the MRTA.
  • Whether the applicant has entered into a collective bargaining agreement.
  • The applicant’s plan for contributing to communities and people disproportionately harmed by enforcement of cannabis laws.
  • For adult-use cultivator or processor applicants, the environmental and energy impact of the facility to be licensed.

Who evaluates license applications?

The OCM performs the initial evaluation of every application and submits its recommendation to the CCB. If the CCB is not satisfied with an application, the CCB’s executive director is required to notify the applicant of the specific reasons for the denial. An administrative appeal process has not been released, but the MRTA’s general provisions contemplate that a denied applicant can appeal through an Article 78 proceeding.

How long is the license term?

All initial licenses will be for 2 years.

Can a license be renewed?

It can, upon submitting a renewal application to the OCM and paying a renewal fee.  Renewal applications will be issued at least 90 days prior to the expiration of the existing license.

Beyond requiring information that we expect will be consistent with the initial license application, renewal applicants will also have to:

  • Submit documentation of the racial, ethnic and gender diversity of the licensee’s owners and employees prior to a license being renewed.
  • Provide evidence that the licensee has executed their plan for benefiting communities and people disproportionately impacted by cannabis law enforcement as detailed in the licensee’s initial application.
  • Maintain a labor peace agreement with a bona-fide labor organization (maintaining such an agreement is a material condition of licensure).

Can a license be transferred?

Yes, but not without the CCB’s approval.  Transfers and any changes in the underlying license information, such as changes in ownership, substantial changes to the licensee’s corporate structure, and changing the licensed locations, require CCB approval. Changes without CCB approval constitute grounds for suspension, revocation or cancellation of a license.

The broad takeaway from the MRTA’s adult-use licensing provisions is that applicants will need to have a lot of bases covered prior to submitting an application. As we all eagerly await the CCB’s issuance of its rules and regulations, we here at the Canna Law Blog will continue our series on the MRTA and provide regular updates on developments in New York’s cannabis industry.

New York’s social and economic equity program

With a target goal of 50% of New York cannabis licenses issued to social and economic equity applicants (Equity Applicants), we thought it would be helpful to provide a detailed explanation of the Marijuana Regulation and Taxation Act’s (MRTA) social and economic equity plan, how the license application process works vis-à-vis Equity Applicants, and critical differences in the application process for non-Equity Applicants. Here at the Canna Law Blog, we think the social and economic equity program could do a LOT of good for New York State.

Who qualifies as an Equity Applicant?

The overall goal of the Equity Plan is to promote diversity in commerce, ownership, and employment, and to provide opportunities for social and economic equity. The MRTA identifies the following applicants as Equity Applicants:

  • Individuals from communities are disproportionately impacted by the enforcement of cannabis laws.
  • Minority-owned businesses.
  • Women-owned businesses.
  • Distressed farmers.
  • Service-disabled veterans.

What constitutes a women- or minority-owned business?

In terms of ownership interest in a business enterprise, at least 51% of the business must be owned by one or more US citizens or permanent residents for the applicable category (i.e. 51% women owned).

The business must qualify as a small business and the women or minority ownership cannot be a façade: no straw owners allowed. Equity Applicants will have to demonstrate that the women or minority ownership is real, substantial, and continuing, with the Equity Applicant having and exercising authority to independently control day to day business decisions.

The MRTA defines minorities as US citizens or permanent residence that are able to demonstrate membership in one of the following groups:

  • Black persons having origins in any of the black African racial groups.
  • Hispanic persons of Mexican, Puerto Rican, Dominican, Cuban, Central or South American of either Indian or Hispanic origin, regardless of race.
  • Native American or Alaskan native persons having origins in any of the original peoples of North American.
  • Asian or Pacific Islander persons having origins in any of the far east countries, south east Asia, the Indian subcontinent or the Pacific islands.

How many licenses are going to be issued to Equity Applicants?

The expressed goal is to award 50% of licenses to Equity Applicants. The MRTA does not provide any indication if the target is allocated across all license types and we, along with everyone else, are eagerly waiting for the Cannabis Control Board (CCB) to issue the rules and regulations that will govern adult-use licenses.

Are there any differences in the application process for Equity Applicants?

A few. One critical potential difference is that Equity Applicants only need to provide a plan for having sufficient real estate and equipment to operate a proposed cannabis business, while non-Equity Applicants will need to own or have a contract to operate in a specific location. We note that the CCB will need to confirm if the “plan” exception applies to retail dispensary Equity Applicants.

Another related difference is that certain applicants will receive priority in the licensing process. The MRTA provides that “extra” priority will be given if the applicant is:

  • Is a member of a community disproportionately impacted by the enforcement of cannabis laws;
  • Has an income lower than 80% of the median income in the county in which the applicant resides; and
  • Was convicted of a marijuana related offence prior to the effective date of the MRTA or had an immediate relative (or guardian) of an individual who was convicted of a marijuana related offence prior to the effective date of the MRTA.

What support does New York State provide to Equity Applicants?

As of now, two significant programs will provide tangible support to Equity Applicants. The first is a loan program operated by the Office of Cannabis Management and/or the Urban Development Corporation that will issue low interest or interest free loans to Equity Applicants.

The second is an incubator program that will be created by the CCB. The incubator program will be designed to encourage Equity Applicants to apply for a license and, if licensed, will provide direct support in the form of counseling services, education, small business coaching and financial planning, and compliance assistance.

How does the Social and Economic Equity Plan affect non-Equity Applicants?

One of the enumerated evaluation criteria for applicants, generally, is that the applicant provides a plan to contribute to communities and people disproportionately harmed by the enforcement of cannabis laws, including the social responsibility framework established by the MRTA. Broadly speaking, we expect that being able to demonstrate a substantial benefit to such communities, from both employment and overall community perspective, will be a major consideration in evaluating applicants.

Can you transfer a license issued to an Equity Applicant?

Not for the first three years of licensure, unless the transfer is to a qualified Equity Applicant and the CCB has given written approval of the conveyance. In the event of a sale, the transfer agreement must require the new license holder to pay the CCB all outstanding amounts due for any loans issued by the Office of Cannabis Management or the Urban Development Corporation and any other fees later determined by the CCB.

In closing our three-part series on the MRTA’s adult-use licensing provisions, we here at the Canna Law Blog think the MRTA’s social and economic equity plan has the potential to begin correcting social and economic injustices caused by decades of inequitable enforcement of marijuana laws.

With reasonable licensing requirements and a sufficient number of initial licenses issued, the implementation of the social and economic equity plan should also leave room for non-Equity Applicants to succeed and thrive. Stay tuned as we detail other sections of the MRTA and New York’s developing cannabis industry!

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