New York has been the most recent focal point of adult-use legalization activity following news last week that the Governor and Legislature have seemingly come to consensus on an adult use legalization bill. Just this weekend, the New York State Legislature made public its drafts of S854 and A1248, with a goal of passing these bills and signing them into law sometime this week. Admittedly, every state approaches adult-use legalization differently, such as New Jersey utilizing hard caps on the total number of licenses available, Arizona proceeding primarily through its medical operators, or Virginia gradually opening its adult use market over the course of several years (though even that is subject to renegotiation).
New York’s general statutory scheme demonstrates a commitment towards moving away from vertical integration, generally prohibiting it with the exception of those applying as microbusinesses, and those already operating as verticals by virtue of being registered organizations (“ROs”) in the medical program. But even the microbusiness licenses and ROs contain their own exceptions and/or restrictions associated with this rule. For instance, microbusiness licenses may only engaged in more “limited” cultivation, processing, and/or dispensing, with the bill punting to the regulatory body what “limited” operations actually means. Moreover, while ROs may continue as vertically integrated in the medical space, they may only co-locate their medical and adult-use licenses at three of their dispensary locations.
Even as it relates to the other license classes, there is permissible partial integration, and/or the ability to hold multiple licenses of the same class. For instance, a cultivator and/or processor may apply to obtain a license of the other class as well as a distribution license, provided that cultivator/processor only distributes its own product. Cultivators and processors are also permitted under the bill to operate in more than one location. Moreover, a cultivation license may also hold a nursery license.
A cooperative license, in contrast, permits a licensee to cultivate, process, and distribute, but not retail, all under one license. Cooperative licenses, however, contain other restrictions, including, but not limited to, ensuring that that they are democratically controlled, i.e., each person in the cooperative gets one vote. An on-site consumption license may not hold any other license class, but may hold up to three separate on-site consumption licenses. While there are no hard caps on the total number of licenses that may be issued in New York, much discretion is passed on to the regulator to analyze the number, classes, and character of licenses statewide, as well as the proximity of applicants to other license holders.
New York’s adult use bill also contains an effective union mandate for license holders, wherein it identifies that labor peace agreements are not only a requirement to apply, but also an ongoing material condition of licensure. These labor peace agreements must, “at a minimum, protect the State’s proprietary interests by prohibiting labor organizations and members from engaging in picketing, work stoppages, boycotts, and any other economic interference with the entity.” Moreover, for applicants with twenty-five or more employees,” consideration will be provided in the application process as to “whether applicants have entered into an agreement with a statewide or local bona-fide building and construction trades organization for construction work on its licensed facilities.”
The goal of the preceding is simply to provide an overview, and we will be providing additional blog articles discussing such relevant areas of New York’s bill including, but not limited to, how New York will rank and score applicants, prioritize diversity, permit/restrict municipal oversight, and ensure the continuation and expansion of the medical marketplace.
Please feel reach out to our Cannabis Practice team for any questions on New York’s adult-use legalization.