Legal Guidance for Launching a Cannabis Business in New York

If you are thinking of applying for one of the cannabis industry licenses that will be available under the New York Marijuana Regulation and Taxation Act (MRTA) on October 4, 2023 then Hrbek Kunstler is here to help you.

Hrbek Kunstler will:

Give you all the information and background materials you will need to participate in the New York Adult-Use cannabis industry

Choose the type of license that you are best suited for and review the specific requirements and responsibilities

Prove your residence, work, arrest history (if you are an applicant) and guide you to obtain any other documents you will need for your application

Select the business entity that will serve you best

Provide guidance for the development of your business plan

Contact us to arrange for a fixed-fee consultation.

Hrbek Kunstler has been engaged in actively pursuing responsible legalization of marijuana for well over a decade. When the NY Compassionate Care Act for the legalization of the medical use for marijuana was proposed, Hrbek Kunstler founded NY Cannabar, bringing together, doctors, lawyers, drug policy experts and patients to make medical marijuana more widely available. The group opposed financial and other barriers to entry, such as the requirement of huge investments simply to apply for a medical marijuana registered organization (RO) license. NY Cannabar worked to create public awareness of the NY medical marijuana program and to expand access to participation in the cannabis industry.

Over the past two years of the program license applications have been granted in the following three categories:

The Adult-Use Conditional Cultivator license under which licensed hemp growers were eligible to apply for a license to grow cannabis containing THC. Cultivator licenses received approval between March 15, 2022 – June 30, 2022. This license also temporarily authorizes the distribution of cannabis products to duly licensed adult-use retail dispensaries after which conditional processors will be required to apply for a separate distributor license to engage in this activity.

The application window for the Adult-Use Conditional Processor license was open between June 28, 2022 and August 31, 2022. For the time being, this application opportunity is only available to active cannabinoid hemp processor license-holders who applied for their license before January 1, 2022. This license also temporarily authorizes the distribution of cannabis products to duly licensed adult-use dispensaries after which conditional processors will be required to apply for a separate distributor license to engage in this activity.

The Adult-Use Conditional Retail Dispensary license was limited to CAURD (social justice) applicants with a marijuana-related offense conviction prior to the passage of MRTA (or their parent, legal guardian, child, spouse or dependent with a marijuana-related offense). The CAURD application window closed on in September 2022 — the OCM received over 900 applications and granted 150 licenses, subsequently expanded to 300 licenses. A list of new licensees will be announced soon.

Starting on October 4, 2023, the full licensing program will begin. Note that the license categories are divided into two major categories: preparation and sales. Ownership of a license must remain within one of the two categories to minimize the participation of large corporations because of the controlled, horizontally-structured licensing of industry defined segments prevents vertical and undemocratic control. Licenses are competitively chosen on a point system within each category and there are points for industry knowledge and study.

We encourage anyone who is planning to submit a license to follow the website of the Office of Cannabis Management and note their calendar of events, including educational seminars and monthly public meetings. In addition, a number of NYS institutions have offered various specialized courses to prepare residents to enter the cannabis industry. In the spring, Medgar Evers will offer a BA program in cannabis science, offering some eligible students the chance to earn the degree without paying tuition.

In New York, the war on drugs began in force 1973 when Nelson Rockefeller—who had previously been a supporter of a relatively liberal drug policy—wanted to build a “tough on crime” image, perhaps in anticipation of his bid for the 1976 Republican presidential nomination. Under the laws Governor Rockefeller endorsed, conviction for the sale of two or more ounces of heroin, morphine, opium, cocaine, or cannabis required a sentence with a minimum of 15 years to life in prison and a maximum of 25 years to life. Crack cocaine was added later, adding even more disparities between white and Black and brown communities.

In 1977, part of the Rockefeller law relating to marijuana was changed. Possession of 25 grams of marijuana or less was decriminalized. Nonetheless, possession in public view remained a misdemeanor. Unfortunately, the change in law did not result in a significant reduction of the number of arrests or their racial disparity. Shockingly, between 1997 and 2019, police arrested and jailed 400,000 people for public view possession. Almost all of these arrests were a violation of the Fourth Amendment of the US Constitution. Often based on the legally disparaged allegation of a cannabis “odor”—Black and brown people were being ordered by the police to empty their pockets, thus creating “public view." This practice became known as the notorious Stop-and-Frisk police procedure, later declared unconstitutional in the 2013 landmark ruling, Floyd, et al. v. City of New York. Law enforcement statistics illustrate that drug laws were enforced three times more frequently against Black and brown people who also received substantially more jail time. The war on drugs became outsized proof of institutional racism.

The New York Marijuana Regulation and Taxation Act (MRTA) was passed in 2021, in part as a recognition of the disastrous effect of the war on drugs had on communities and individuals unfairly targeted by law enforcement. MRTA set out a program for legalizing the entire industrial process of the adult cannabis industry from seeding to sale. The historic importance of this law—and one that makes it stand out against legalization efforts in other states—is that it includes a payback remedy— a debt owed by the state for the racism practiced against the Black and brown individuals people who were arrested and jailed under discriminatory laws. and their communities.

The remedy of reparations is radically direct, especially in the current political climate. Only one other instance is to be found: in Evanston Illinois, voters allocated the first $10 million of tax revenue derived from the January 1, 2020 law which legalized the sale of recreational marijuana to address the gaps in wealth and opportunity of Black residents.

In New York, a preference is given in the licensing process to social justice applicants— in the main, people who can prove that they were arrested for a cannabis crime before the passage of MRTA. Their communities will benefit from the allocation of a portion of the tax revenue from the sales to health and education projects. Today, the social justice category includes women, struggling farmers and disabled veterans in addition to people of color.

• The roll out of the new law has not been without problems. A sea change is never simple. The first licenses offered were the Conditional Adult-Use Retail Dispensary (CAURD) were the start of the new social equity rules. The concept was so new that they were no precursors to rely on. The writing of the hundreds of pages of regulations and the creation of the large and complicated administrative structure was an enormous task without precedent to learn from. Everything took more time than was predicted.
  
  
• There has been a delay in the opening of legal dispensaries. The delay has caused serious financial problems for the licensees. There is ample supply and robust demand, but an insufficient number of stores to distribute last year’s abundant harvest. More than 200 licensed growers produced more than 300,000 pounds of cannabis. This year’s crop will add to the problem. 

• Funds to support the building of the CAURD dispensaries has recently come through. On July 1, Chicago Atlantic, an asset management firm, made an investment of $150 Million to the New York State’s Cannabis Social Equity fund. The investment will support the social equity licensees with grants for buildouts of dispensaries and will enable their construction.
  
  
• The lapse of time between legalization and the availability of legal cannabis has encouraged the growth of illegal sources. This reflects both the history of the NYS cannabis trade and the lack of legal sources to meet the high demand. Civil penalties are in place, but the means of enforcing them to reduce illegal sales is being worked out among the enforcement agencies. It is accepted as a social reality that will take time, patience and creativity to work out.

Impatience is tempered by the fact MRTA is grounded in social equity and is imbued with the goal of reparation. The dedicated and hardworking Office of Cannabis Management staff has gained public support and respect. Hrbek Kunstler congratulates New York State and the OCM administrators and workers who are tirelessly committed to see this through. We are committed to work with them and make MRTA a success.

Reach out to Hrbek Kunstler for a consultation to help you prepare to become a participant in the cannabis industry.