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January 25, 2022

The Fifth New York State Cannabis Control Board Meeting

On Tuesday, January 25, 2022, the New York State Cannabis Control Board (CCB) of the Office of Cannabis Management (OCM) held its fifth public meeting. The CCB addressed OCM staffing, the delegation of hiring to the executive director, the proposed social and economic equity fund, and the executive director’s report.

The biggest news out of the CCB meeting was the formal OCM announcement of the proposed social and economic equity fund (the Fund). New York State Governor Kathy Hochul announced that her proposed budget includes a $200 million public-private fund, made up of licensing fees and private investments, that will provide funding to certain eligible applicants from communities impacted by disproportionate policing during the decades-long cannabis prohibition.

The Fund will provide support to certain licensed social and economic equity entrepreneurs for the cost of establishing and operating adult-use cannabis retail dispensaries. In addition, the Dormitory Authority of the State of New York (DASNY) will deliver a range of services directly to certain social equity cannabis retail operators, including but not limited to: (1) identifying and acquiring or leasing retail dispensary locations; (2) designing, constructing, and renovating the locations as adult-use cannabis dispensaries; and (3) outfitting locations with furniture and other equipment, as needed, to operate the establishments, among other activities.

Further details on the Fund are unknown, and the statements given by the OCM raise further questions, such as why are the funds limited to just retail dispensaries? Because dispensaries have the highest level of taxation by virtue of the federal income tax laws—specifically Section 280E—and lower revenues and margins than other areas of the cannabis industry, there may be pressure to expand the Fund to enable other licensees access. Further, will microbusiness licensees be eligible to participate, given that part of the business is retail and the law specifically states, “The granting of [microbusiness] licenses shall promote social and economic equity applicants . . .”?

According to CCB member Reuben McDaniel, DASNY will oversee aspects of the Fund to reduce barriers for eligible applicants. The funds to applicants may be available as the OCM begins issuing licenses. At this time, it is unknown when the full eligibility criteria and application process for funding will be released.

OCM Executive Director Chris Alexander gave a report to the CCB summarizing events since the previous CCB meeting. In his report, Alexander noted that the OCM has expanded the medical program under the MRTA, including clinicians’ ability to certify patients for any clinical condition per their discretion, which, according to Alexander, will greatly improve access and allow patients to see if medical cannabis may be right for them.

Alexander stated that the public comment period for the regulations governing home cultivation by medical cannabis patients is now closed. The OCM received over 160 comments, which are currently being reviewed.

Alexander then addressed the December 31, 2021, deadline for municipalities to opt out of retail dispensary licenses and on-site consumption licenses for adult-use cannabis. Alexander provided the following data and stated that New Yorkers will have access to adult-use cannabis.

Alexander noted in his report that municipalities that opted out can opt-in at any time. Further, municipalities cannot otherwise prohibit other cannabis businesses and conduct made legal with the passage of the MRTA, including cannabis possession and use by adults over 21 years old.

The data, based on information filed by localities with the CCB, shows that 10 percent of cities and 34 percent of municipalities have opted out of all cannabis sales—preserving market access.

The following table shows the breakdown of opt outs across municipalities:

Lastly, Alexander stated that the OCM will start an 11-part series called Cannabis Conversations to engage the public in the cannabis discussion. Participants can register and ask questions that the OCM will attempt to address.

The series will be held from 6:00 to 7:00 p.m. on the following dates for the particular regions:

  • Western New York: Thursday, January 27
  • Finger Lakes: Monday, January 31
  • New York City: Wednesday, February 2
  • Southern Tier: Thursday, February 3
  • Central New York: Monday, February 7
  • Mohawk Valley: Wednesday, February 9
  • North Country: Thursday, February 10
  • Capital Region: Tuesday, February 15
  • Mid-Hudson: Wednesday, February 16
  • Long Island: Thursday, February 17
  • Spanish Speaking: Monday, February 21

People can register for the event at www.ocmeventbrite.com and submit their questions in advance of the series.

The CCB then went into executive session to discuss pending and proposed litigation. The details of these types of litigation were not disclosed. However, the discussion may have pertained to MedMen, one of New York State’s 10 registered organizations, and its counterclaim against Ascend Wellness. The counterclaim alleges that Governor Hochul’s office improperly influenced the OCM to approve the sale of MedMen to Ascend. Any appearance of impropriety in the OCM this early could impact the OCM’s ability to successfully roll out the adult-use cannabis program in New York State.

Barclay Damon’s Cannabis Team will continue to closely monitor developments pertaining to the MRTA’s rules and regulations. If you have questions about the MRTA, please contact one of Barclay Damon’s cannabis attorneys. 

If you have questions regarding the content of this alert, please contact Jason Klimek, Cannabis Team co-leader, at jklimek@barclaydamon.com, or another member of the firm’s Cannabis Team.

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