New York state regulators awarded the first round of adult-use cannabis retail licenses to a cohort of 36 nonprofits and individuals, impacted by cannabis convictions.
"Today is a monumental day for New York's nascent cannabis industry," said Tremaine Wright, chair of the Cannabis Control Board, in a statement. "With the first adult-use retail dispensary licenses in the hands of businesses and eligible nonprofits, we've ensured the first sales will be made at dispensaries operated by those impacted by the unjust enforcement of cannabis prohibition."
Of the conditional adult-use retail (CAURD) licenses awarded, eight were for nonprofits and 28 for "qualifying individuals," or people who personally have a cannabis-related conviction in New York or have a family member who does. They also had to have owned at least 10 percent of a business that was profitable for at least two years during the time that individual was an owner. In order to qualify as a nonprofit, the group had to prove it had profits or net assets for two years, a history of working with the currently or formerly incarcerated, a justice-involved board member, and at least five employees.
At least one license was awarded in every available region of the state.
"Today marks another huge win for so many advocates who fought for years to end cannabis prohibition in New York State," Office of Cannabis Management Executive Director Chris Alexander said in a statement. "Last year, we ended prohibition, and now we're making sure those harmed by prohibition are launching New York's market."
Even as the first round of licenses get underway, a lawsuit questioning whether the CAURD licensing program violates the dormant commerce clause is currently working its way through New York's legal system. Regulators had planned to recommend as many as 18 additional licenses from regions including the Finger Lakes, the Mid-Hudson, Western New York, Central New York, and Brooklyn, but acknowledged that the active litigation prevented it.
"While OCM is excited to announce New York's first CAURD licensees, the office has an obligation to be transparent about challenges to our state's cannabis law," the Office of Cannabis Management wrote in a series of tweets.
The Office of Cannabis Management also unveiled draft regulations for other parts of the industry, a long-awaited moment for entrepreneurs and businesses that may not have qualified for the first round of licenses to see what it will take to break into an industry projected to be worth billions. The regulations will open to a 60-day commentary period for the public. Already, some are sounding the alarm.
"The draft adult use regulations that were approved for public comment today present a number of serious concerns. In the coming weeks, MCIA will continue its vocal advocacy for reforms that both protect patients, who have for too long struggled due to the restrictive nature of the state's medical program, and ensure a successful, equitable adult-use program that takes into account the experience and investment of existing operators," the New York Medical Cannabis Industry Association noted in its statement.
The proposed regulations cap existing cultivation, and do not permit expansion of production, according to analysts at Cantor Fitzgerald. They would permit existing medical operators to double their number of medical dispensaries from four to eight, but would only permit them to colocate retail locations at three of those stores.
Furthermore, the registered medical operators would have to wait three years before beginning sales while other licensees get a head start. There was no mention of a possible $20 million entry fee that was previously reported by the New York Times.
"In short, the rules make it difficult for medical incumbents (mostly owned by the [multistate operators]) to build sizeable market share," Cantor Fitzgerald analyst Pablo Zuanic wrote in a note.
How and when existing medical operators might be able to enter the market has been a point of contention among advocates and the industry. States that have legalized before like Illinois have often permitted existing adult-use operators to pivot to adult-use first. That enabled the industries to get up and running more quickly but also gave the existing companies quick access to the outsized profits that typically characterize the exuberance of the early days of legalization.
While these regulations, if passed, could represent a win for proponents of a broader industry with more players, they could also limit gains for some of the country's biggest players. Companies including Curaleaf, Columbia Care. Acreage Holdings, and Green Thumb Industries all possess medical licenses in the state.