New York legalized marijuana for recreational use last March. The law was promulgated to limit the power of large cannabis companies to take over the recreational cannabis market and to help small business and minorities. Nearly a year has passed and we are still in the dark about what the process will look like and how many licenses will be granted.
As per the Gothamist, Tremaine Wright, chair of the state's recently formed Cannabis Control Board recently stated that regulations for the state's marijuana startups will be issued by the Cannabis Control Board “this winter or early spring.” But she urged people to start familiarizing themselves with the types of licenses that will be available and drafting their business plans.
“We have an aggressive schedule of 18 months [to complete the licensing process],” Wright said. “We are setting up a system soup to nuts and trying to time the market so that people are entering with product [to sell], and aren't given licenses and sitting on them for long periods of time.”
The Marijuana Regulation and Taxation Act sets out an ambitious goal of reserving half of all licenses for so-called “social and economic equity” applicants, including minority- and women-owned businesses, distressed farmers, disabled veterans , and those from communities disproportionately impacted by the war on drugs.
Although many questions remain about the application process — and how it will help or hinder the state's equity agenda — Wright offered some insights into what applicants can expect.
When will dispensaries be open for business?
If everything goes according to the Cannabis Control Board's 18-month timeline, recreational dispensaries should be licensed to operate by summer 2023.
When will license applications become available?
There's no set date, but it will likely take several months. The Cannabis Control Board aims to issue draft regulations for the licensing process in the first quarter of this year. Then, there will be two months for public comment before the regulations are finalized; only after that will applications become available.
How much will it cost to apply for a license?
The application fees for different types of recreational cannabis licenses have yet to be determined, but Wright said people can get a sense of the fee scale by looking at the new rules that have been issued for the state's hemp program. The fee for a hemp extraction and manufacturing license is $3,500, while the license fee for a dispensary is $300 per retail location.
“I don't anticipate recreational marijuana being that low,” said Wright, but she added, “We are very deliberate that we do not have astronomical pricing because we want this to be an equitable program.”
The Marijuana Regulation and Taxation Act notes, however, that fees should be reduced or waived for “social and economic equity” applicants.
Will the state help applicants with startup capital?
In other states, and in New York's own medical market, legal marijuana has largely been dominated by companies helmed by white men with access to wealthy investors. As part of the effort to make the adult-use market more accessible, the Marijuana Regulation and Taxation Act indicates that the state should make low- and no-interest loans available to “qualified social and economic equity applicants.”
But Wright said those loans are not guaranteed to be available in the first round of licensing because the money to fund them will largely come from tax revenue generated by the industry.
“[The Office of Cannabis Management] is not going to be able to right all the wrongs of the financial services industry,” Wright said.
The law does say, however, that the state's existing medical marijuana companies must pay fees up-front that are sufficient to fund an incubator that can provide assistance to some of the new startups. Wright suggested that people also seek to tap into other incubator programs, including those that are not cannabis-specific.
She and members of Community Board 12 encouraged people to reach out to NYC Small Business Services for assistance in developing business plans and raising capital.
How will the Office of Cannabis Management protect so-called “legacy” applicants who previously sold in the underground market? Will they have to show how they raised capital?
Wright said she's not sure exactly what type of documentation the Office of Cannabis Management will ask for in the application process. But she assured the audience, “We do not want to put a system in place that creates exposure for people that we want to keep protected.”
Will applicants be able to open a chain of dispensaries?
Probably not. Wright said she anticipates that companies will only be able to get one retail license for one location. The intent is “not to have any one entity owning 10 stores at this time.”
But that doesn't mean there won't be any major dispensary chains in New York. The state's existing medical marijuana companies were each initially allowed to open four medical dispensaries. Under the new law, they will be able to double their total number of dispensaries to eight.
Will I have to have a lease on a space for the business when I apply?
“We are leaning toward you not having to have it already, but you might need a letter of intent” from a landlord, Wright said. She added that as part of the application process, people will likely have to inform their local community board of their plans, as one would when applying for a liquor license, which also involves knowing where the site will be located.
“We really want to be able to get people who are ready to hit the ground running, so get your ducks in a row,” Wright said.
A lot of people want to open cannabis dispensaries or lounges. What other licenses should people consider that get overlooked?
The Marijuana Regulation and Taxation Act lays out nine different types of licenses companies can apply for and details what each entails: cultivator, nursery, processor, distributor, retail-dispensary, delivery, on-site consumption, adult-use cooperative, and microbusiness.
“I don't hear many people [talking about] processing and manufacturing, however I know there are lots of makers in our communities,” Wright said. She noted that processor licenses cover the production of edibles like candy and baked goods, which create a good opportunity to establish a brand.
“Delivery is a fantastic option because it is designed to be a small business and create jobs as well as the potential for wealth,” Wright added. She said delivery companies would likely be capped at 25 employees in order to prevent behemoths like Uber from entering the market.
“We're trying to focus on not creating a space where monopolies can take over and kill all our small businesses,” she said.