New York Cannabis Licensing, Part 3: The Social and Economic Equity Plan

arizona social equity cannabis licensing

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 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 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!

In the meantime, check out the earlier posts in this series: