New York To Let People With Marijuana Convictions Open Dispensaries Before Big Businesses Can Enter Market

New York regulators are set to approve a rule making it so people with prior marijuana convictions, or whose family members have been harmed by criminalization, will get the first round of adult-use marijuana retailer licenses—ahead of existing medical cannabis businesses.

The proposal to create the conditional licenses will be taken up by the New York State Cannabis Control Board (CCB) on Thursday. It’s a move that would set the state apart from others that have enacted legalization but faced criticism over a lack of promised equity results.

Gov. Kathy Hochul (D) is expected to announce the plan on Thursday, as first reported by The New York Times. Office of Cannabis Management (OCM) Executive Director Chris Alexander told the newspaper that he expects upwards of 200 “justice involved” applicants to receive the priority licenses under the proposal, with retailers potentially coming online by the year’s end.

To qualify for the conditional license, an applicant would need to have been convicted of a cannabis-related offense prior to March 31, 2021, when the state’s adult-use legalization law was enacted. Those who have a “parent, legal guardian, child, spouse, or dependent” who faced such convictions would also be eligible, as would those who were themselves dependent on someone with a conviction.

There are some business-related requirements in order for eligible applicants. For example, the measure states that they must “hold or have held, for a minimum of two years, at least ten percent ownership interest in, and control of, a qualifying business, which means a business that had net profit for at least two of the years the business was in operation.”

Non-profit organizations could also be eligible to hold the licenses if they “intentionally serve justice involved individuals and communities with historically high rates of arrest, conviction, incarceration or other indicators of law enforcement activity for marihuana-related offenses.”

Existing medical marijuana operators, called “registered organizations” under the state’s cannabis code, would generally not be able to obtain the proposed conditional licenses. This seems to be part of the state’s overall goal of ensuring that the industry that emerges is equitable and not dominated by monied multi-state operators.

“I could press the green button right now and have 40 dispensaries online,” Alexander said, referencing the existing medical marijuana retailers operating in the state. “But instead we’ve decided that the folks who have been most impacted actually have the space and the real runway to participate in a meaningful way.”

To further ensure that those most impacted by criminalization are able to compete as the market opens and matures, the conditional licenses would need to be reserved to applicants with at least 51 percent ownership by justice involved people as outlined in the measure.

Conditional adult-use retail licenses would be valid for four years. Licensees would need to notify regulators of their intent to continue participating in the recreational market within 120 calendar days of the expiration of the conditional license. Regulators would conduct a review before approving them for the standard adult-use retailer licenses that will eventually be made more widely available to any interest parties.

Meanwhile, the state has also taken separate steps to get the industry in a position to have products available by creating provisional marijuana cultivator and processor licenses for existing hemp businesses that take certain steps to promote equity in the emerging industry. Hochul signed that legislation late last month, and applications for those businesses will open next week.

As it stands, adults 21 and older can possess and publicly consume cannabis, as well as gift marijuana to other adults as long as they aren’t being compensated. But regulators are still finalizing licensing rules, and there are currently no retailers that are authorized to sell cannabis for adult use in the state.

Hochul has repeatedly emphasized her interest in efficiently implementing the legalization law.

The governor released a State of the State book in January that called for the creation of a $200 million public-private fund to specifically help promote social equity in the state’s burgeoning marijuana market.

Hochul said that while cannabis business licenses have yet to be approved since legalization was signed into law last year, the market stands to generate billions of dollars, and it’s important to “create opportunities for all New Yorkers, particularly those from historically marginalized communities.”

That proposal was also cited in the governor’s executive budget, which was released in January. The budget also estimated that New York stands to generate more than $1.25 billion in marijuana tax revenue over the next six years.

Assembly Majority Leader Crystal Peoples-Stokes, who championed the state’s adult-use legalization bill that was enacted last year, told the Times that “we’re trying to do what no other state has done, and that’s focus on their people,” adding that this is “critical because it’s a huge industry that’s going to grow our economy a lot, and I think it makes sense to let that growth begin with New Yorkers.”

Enacting legislation that expedites licensing could help the state reduce the number of businesses that are effectively using the legal “gifting” provision of the state’s marijuana law to give away cannabis for “free” if a non-marijuana-related purchase is made.

New York regulators recently issued warnings to more than two dozen businesses that they allege are either illegally selling marijuana without a license or exploiting the “gifting” component.

Here are some other ways that New York lawmakers and regulators are working to build upon the legalization law as the state prepares to implement retail sales: 

Last month, for example, a state senator filed a bill that would promote recycling in the marijuana industry once retail sales officially launch.

Sen. Michelle Hinchey (D) is also sponsoring that legislation, which would require cannabis shops to apply a $1 deposit for any marijuana products sold in single-use plastic containers and also reimburse consumers for that fee if they return the container.

The senator is also behind a separate bill filed last year that would prioritize hemp-based packaging over synthetic plastics for marijuana products.

The recycling bill is identical to an Assembly version filed by Assemblywoman Patricia Fahy (D) last year.

Sen. Jeremey Cooney (D) is sponsoring a recently introduced bill to allow licensed cannabis companies to deduct certain business expenses on their state tax returns. He’s also behind the aforementioned measures to expand the marijuana law’s equity definition and provide provisional licenses to get the market ready.

The state Department of Labor separately announced in recent guidance that New York employers are no longer allowed to drug test most workers for marijuana.

Meanwhile, a New York lawmaker introduced a bill in June that would require the state to establish an institute to research the therapeutic potential of psychedelics.

Another state legislator filed legislation in December to legalize psilocybin mushrooms for medical purposes and establish facilities where the psychedelic could be grown and administered to patients.

Meanwhile, as New York prepares the launch of its adult-use marijuana market, OCM announced this month a significant expansion of the existing medical cannabis program.

Now doctors will be able to issue medical marijuana recommendations to people for any condition that they feel could be treated by cannabis, rather than rely on a list of specific eligible maladies.

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Photo courtesy of Brian Shamblen.