New York Regulators Release Guidelines For Cannabis Retailers

New York’s Office of Cannabis Management has released guidelines for recreational marijuana dispensaries, which are expected to begin opening in the state by the end of the year.

The New York Office of Cannabis Management on Friday released new guidance for retail adult-use cannabis dispensaries, only weeks before the state’s newly legal recreational marijuana market is expected to launch later this year. New York lawmakers legalized cannabis last year with the passage of the Marihuana Regulation and Taxation Act (MRTA), with regulated sales of recreational marijuana slated to begin by the end of 2022.

Regulators began accepting applications for adult-use cannabis dispensaries this summer with a program that sets aside the state’s initial recreational marijuana retailer licenses for those with past convictions for cannabis-related crimes. The guidelines released last week are designed to help prospective marijuana retailers to develop their business and operational plans.

“This guidance document serves to provide the framework that will assist Conditional Adult-Use Retail Dispensary licensees plan for how to operate their dispensary before regulations are formally adopted,” the Office of Cannabis Management (OCM) wrote in the 27-page document released on Friday.

The new rules give guidance on issues including cannabis dispensary record keeping, employee training requirements and inventory management. The rules require adult-use dispensaries to source their products only from regulated distributors and oultlines what types of merchandise can be sold. The document also includes guidance for cannabis sales via in-store, drive-through, and delivery channels. 

Under the rules, dispensaries must be located at least 500 feet from schools and at least 200 feet from buildings that are used solely as houses of worship. The agency noted that the guidance will govern adult-use cannabis retailers until complete regulations are approved and posted online, which must occur before the recreational marijuana officially opens.

“Compliance with any current and future state rules, regulations, and laws is required by all licensees to remain in good standing with the Office,” the OCM wrote in the introduction to the guidelines. “This guidance document provides clarity on what the Office’s expectations are in relation to those regulations and laws currently in place and the regulations that will be promulgated in the future.”

Guidelines Bar MSOs in New York

After reviewing New York’s guidance for adult-use cannabis dispensaries, Kaelan Castetter, managing director of the consulting firm Castetter Cannabis Group, told local media that the OCM’s initial rules seem relatively standard for the industry. But he added that one section of the new rules could cause problems for the fledgling industry. 

According to the new guidelines, the “true parties of interest” behind dispensaries including owners, passive investors, and service providers are prohibited from having an interest in any business that is licensed to cultivate, process, or distribute cannabis in New York or any other state. The regulation effectively bars multistate operators (commonly referred to as MSOs) and other vertically integrated cannabis companies from doing business in the New York market.

“I see what they’re trying to do, but it’s a very protectionist approach,” Castetter said. “What it basically says is: if you are in business in any other state – unless you only own a dispensary in another state – you can’t be part, in any way shape or form, a retailer here … it’s very anti-MSO.”

Brandon Kurtzman, partner at the cannabis and psychedelics law firm Vicente Sederberg, said that the “release of this guidance speeds up the implementation and standing up of the CAURD licensees because it forgoes the minimum 60-day comment period that would be required for new regulations.”

“Without the required public comment period for new regulations, there isn’t a formal opportunity for potential licensees and stakeholders to provide feedback based on practical implications and lessons learned from other markets,” Kurtzman added. “However, as we’ve seen with other guidance released by the OCM, it’s subject to updates and changes, so it’ll be interesting to see if/how this guidance changes as the CAURD program evolves.”

Earlier this month, New York Governor Kathy Hochul confirmed that the state’s first regulated recreational cannabis dispensaries will open this year, with nearly two dozen shops opening by the end of December. In an interview with the Advance Media New York editorial board on October 5, Hochul said the state’s plan to have 20 conditional adult-use retail dispensaries open by the end of 2022 is “still on track” and that “another 20” retailers would open about every month after that.

Hochul noted that New York’s plan to regulate recreational cannabis includes social equity provisions designed to ensure that those harmed by decades of cannabis prohibition have a path to ownership in the regulated marijuana industry. Under the state’s regulations, the initial 100 licenses for adult-use cannabis retailers will be awarded to applicants who have past convictions for marijuana-related offenses.

“We’re going to make sure that this is a model for the rest of the nation – especially with our desire to make sure that people who’ve been affected by the criminal justice system adversely … have the opportunity to work in this area,” Hochul said.

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