On November 21st the Office of Cannabis Management (OCM) released the long-awaited proposed regulations for adult use cannabis licenses in New York. The regulations are released following the OCM awarding the first 36 Conditional Adult Use Retail Dispensary (CAURD) licenses to qualified social equity applicants. The proposed regulations are the next step in the state building the lucrative market in the Big Apple. Here is what we know about the different license types that will be available.
Nursery licenses will be available for the propagation of immature plants, seedlings, and clones to help New York pioneer future advances in cannabis science genetics. Nursery license holders will be able to sell to other licensees only. Mature plants may be propagated under specified restrictions. Three types of nursery licenses will be available based on the square footage of cultivation area and the light source used.
- Nursery Outdoor: outdoor cultivation not exceeding 100,000 square feet;
- Nursery Mixed-Light: mixed-light cultivation not exceeding 10,000 square feet; and
- Nursery Indoor: indoor cultivation not exceeding 10,000 square feet.
Prospective applicants for a nursery license must first obtain a Nursery Grower Certificate of Registration from the New York State Department of Agriculture and Markets Division of Plant Industry prior to submitting their application. More information on this process can be found here.
There will be four categories of cultivation licenses available based on the light source used for cultivating adult-use cannabis, including outdoor, indoor, mixed-light, and a combination of outdoor with mixed-light. The regulations will implement a tier system limiting the square footage of cultivation canopy allowed. Tier categories for indoor, mixed-light, and outdoor license types are set forth as follows:
- Tier 1: not exceeding 5,000 square feet;
- Tier 2: greater than 5,000 square feet and up to 12,500 square feet;
- Tier 3: greater than 12,500 square feet and up to 25,000 square feet;
- Tier 4: greater than 25,000 square feet and up to 50,000 square feet;
- Tier 5: greater than 50,000 square feet and up to 100,000 square feet.
Tier categories for the combination of outdoor with mixed-light license type are:
- Tier 1: not exceeding 5,000 square feet of outdoor canopy and 2,500 square feet of the mixed-light canopy;
- Tier 2: greater than 5,000 square feet and up to 12,500 square feet of outdoor canopy, and greater than 2,500 square feet and up to 6,250 square feet of mixed-light canopy.
- Tier 3: greater than 12,500 square feet and up to 25,000 square feet of outdoor canopy, and greater than 6,250 square feet and up to 12,500 square feet of mixed-light canopy.
- Tier 4: greater than 25,000 square feet and up to 50,000 square feet of outdoor canopy, and greater than 10,000 square feet and up to 15,000 square feet of mixed-light canopy.
- Tier 5: greater than 50,000 square feet and up to 100,000 square feet of outdoor canopy, and greater than 15,000 square feet and up to 30,000 square feet of mixed-light canopy.
Cultivators may only hold one type of cultivation license and must obtain approval from the OCM prior to changing their approved tier category. The Cannabis Control Board has emphasized the need for energy conservation and environmentally sustainable cultivation practices. The regulations stipulate sustainable cultivation requirements and regular reporting of compliance in meeting these standards.
Processors may also hold a distributor license. The regulations create three processor license types acknowledging the potentially cost-prohibitive nature of manufacturing cannabis products for more entry points into the market. Processor license types include:
- Branding, packaging, and labeling;
- Blending and infusion
The regulations also allow licensees to enter into white-labeling agreements with other licensees. Blending and infusion and extraction license types are required to maintain certification of good manufacturing practices (GMP) from an OCM-approved auditor.
Distributor license holders may acquire cannabis products from processors or distributors including microbusinesses and sell to another distributor or dispensary. The regulations prohibit selling to another distributor that also holds a cultivation or processing license.
Cannabis Collective (Co-op)
To encourage more cooperatives in New York’s cannabis market, the regulations allow for either cooperative associations or traditional cooperative models so that these entities can receive investments. The regulations also allow holders of this license to scale up their operation in proportion to how many members join with a minimum of five members required to get the license (not inclusive of investors). Additionally, the OCM imposed limitations on the total square footage of the cultivation canopy for cooperatives. The number of premises license holders are allowed to operate in are also limited based on the license type.
The first round of retail licenses has been reserved for qualified justice-involved entrepreneurs as part of the state’s commitment to establishing an equitable industry prioritizing those disproportionately impacted by cannabis prohibition. Retail licenses for non-social equity applicants will be made available at a future date to be determined by the OCM. The regulations provide operational requirements for retail licensees, including security and staffing requirements. The regulations allow retail sales to be conducted by delivery and on-site consumption lounges in approved locations. A drive-thru window service and pre-order customer pick-up lines with prior approval from the OCM shall also be allowed.
In an effort to minimize monopolization of the market, the state implemented limited vertical integration of cannabis businesses. The microbusiness license type allows license holders to require licensees to engage in cultivation and at least one additional activity including processing, distribution, and/or retail. There are three tiers for microbusiness license types based on the size of the cultivation canopy as follows:
- Indoor canopy up to 3,500 square feet;
- Mixed-light canopy up to 5,000 square feet;
- Outdoor canopy up to 10,000 square feet.
The cultivation and processing facilities may be located at a separate location from the dispensary. The regulations also restrict microbusiness license holders engaged in retail activities from selling their own cannabis products.
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