As we previously broadly summarized on December 27, 2022 (here), in late December 2022, the Office of Cannabis Management (“OCM”) released its first proposed adult-use cannabis rules and regulation for New York (the “Proposed Regulations”). The official document is 282 pages, so we won’t cover every detail. But we will highlight the big-ticket items, significant issues that all applicants should be aware of, and the license application process as a whole. Also, keep in mind that the Proposed Regulations are still pending as OCM receives the final public comments to the Proposed Regulations.
One of the less defined and still ambiguous portions of the Proposed Regulations relates to those applying for a cannabis license as a microbusiness, as we await on the determination of the size and scope of eligible microbusinesses.
What are microbusinesses and their licenses?
A microbusiness is a cannabis business subject to certain size and operational restrictions. The Marijuana Regulation and Taxation Act (the “MRTA”) allows certain businesses with less access to capital to enter into the legal cannabis market by applying for a microbusiness license which authorizes the small-scale production, sale, and delivery of cannabis.
A microbusiness licensee may, to a limited degree, engage in cultivation, processing, distribution, delivery, and sale of the microbusiness’ own cannabis and cannabis products. Such licensees cannot hold an interest in any other license; however, they may distribute their own cannabis and cannabis products to licensed retail dispensaries.
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How to qualify for and obtain a microbusiness license
The New York Cannabis Control Board (the “CCB”) will issue microbusiness licenses to a cannabis establishment that qualifies as a cannabis producer for the cultivation of cannabis, a cannabis processor, a cannabis distributor, and a cannabis retailer. A microbusiness license authorizes the limited cultivation, processing, distribution, delivery, and sale of the microbusiness’ own adult-use cannabis and cannabis products.
The size, scope, and eligibility of cannabis microbusinesses has yet to be determined by the CCB, however, the CCB will likely issue licenses to microbusinesses in a manner that promotes social and economic equity applicants.
What can a microbusiness licensee do?
A microbusiness shall engage in cultivation and at least one of the following additional activities authorized by the Proposed Regulations for a microbusiness: (1) processing, (2) distribution, or (3) retail sale. Additionally, a microbusiness may sell cannabis to a processor or distributor; sell cannabis products it has cultivated or processed to consumers; and send cannabis or cannabis products to a processor for processing without relinquishing ownership of that cannabis or cannabis product.
What can’t a microbusiness licensee do?
A microbusiness shall not, among other things, purchase cannabis cultivated by another cultivator unless the microbusiness suffered a significant crop failure and received prior written approval of the Office. In addition, no microbusiness or its true party of interest is permitted to have any direct or indirect interest in, including, but not limited to, being a true party of interest, passive investor, landlord, financier, or management services provider to a retail dispensary, on-site consumption, delivery, ROD, registered organization, or cannabis laboratory licensee or permittee.
For anyone considering applying for an adult-use license, we reiterate our recommendation of hiring an experienced, local cannabis attorney. At a minimum, understanding the overall framework of the licenses and the licensing process is a precursor to an in-depth consultation on a license application.
Stay tuned for future posts in this series, as well as coverage of New York cannabis generally.