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On March 31, 2021, Governor Cuomo signed into law the Marijuana Regulation and Taxation Act (MRTA, S.854A), legalizing weed in NY state.  It is now known officially as the New York “cannabis law.”  Although it will take many months for the newly created Office of Cannabis Management (OCM) to promulgate the rules and applications for the business licenses and permits, certain parts of the new law go into effect immediately.

Here’s a summary of the main components of the New York Cannabis Law:

Decriminalization:  Effective immediately, New York has decriminalized possession of up to three ounces of cannabis (weed) or 24 grams of marijuana concentrates, and people could store up to five pounds of cannabis at home.

  • No presumption of a crime —Police could not use the odor of cannabis to justify searches.
  • Expungement — People with convictions for marijuana-related activity made legal under the legislation would have their records automatically expunged.
  • Driving while impaired from marijuana would remain a misdemeanor.

Recreational Adult-Use.  Adults 21 and older would be able to possess and purchase marijuana products from licensed retailers (which are expected to open sometime in 2022).

Home grow.  Adults could also cultivate up to six plants for personal use, three of which could be mature. A maximum of 12 plants could be grown per household with more than one adult. However, home grow rules have yet to be adopted to legalize it — which could take up to six months to do so for medical patients and up to 18 months for adult-use cultivation after the first retail recreational sales begin.

Housing / Employment Discrimination.  Protections against discrimination in housing, educational access and parental rights would be instituted for people who consume cannabis or work in the marijuana industry.

Business Opportunities.  Licenses and permits for commercial cultivators, processors, distributors, retailers, cooperatives, on-premises consumption, delivery and nurseries would be created.  However, vertical integration would be prohibited EXCEPT for microbusinesses and existing medical cannabis operators.

Opt-Out.  Towns and local communities would be allowed before December 31, 2021 to opt out of allowing retailers or social consumption sites, but residents could seek to override such bans via a local referendum process.

A new Office of Cannabis Management, operating as part of the New York State Liquor Authority, would be responsible for regulating the recreational cannabis market as well as the existing medical marijuana and hemp programs and would be overseen by a five-member Cannabis Control Board. Three members would be appointed by the governor, and the Senate and Assembly would appoint one member each.

Social Equity/MBE/WBE.  The state is endeavoring to reserve 50 percent (50%) of marijuana business licenses for social equity applicants, defined as people from “communities disproportionately impacted by the enforcement of cannabis prohibition” as well as minority- and women-owned businesses, disabled veterans and financially distressed farmers.

Taxation

  • Cannabis products would be subject to a state tax of nine percent (9%), plus an additional four percent (4%) local tax that would be split between counties and cities/towns/villages, with 75 percent (75%) of which going to the municipalities and 25 percent (25%) of which going to the counties. Marijuana distributors would pay a THC tax based on potency and type of product: 0.5 cents per milligram for flower, 0.8 cents per milligram for concentrated cannabis and 3 cents per milligram for edibles.
  • Tax revenues would pay for the costs of administering the cannabis program. Tax revenues exceeding those costs would then pay for a community reinvestment fund (40%), state’s public schools (40%) and fund drug treatment facilities and public education programs (20%).

Medical Marijuana.

  • Existing qualifying conditions for medical marijuana patients will be expanded and would include flower.  Patients can also buy a 60-day supply.
  • Current medical cannabis businesses (also previously known as “registered organizations”) could participate open up adult-use recreational sales in exchange for licensing fees that will help to fund the social equity program.

Bringing products to market and opening businesses in a highly regulated space is particularly challenging due to the risks and costs involved.  Commercial success in the cannabis industry requires thorough planning to prepare you and your business for application (which includes individual and business character profiles, land-use, zoning, brand strategy and business planning, product selection and production, regulations and compliance, and many other legal and business considerations).

Please contact us or call (212) 688-8944 to discuss your interests and explore your options. We can discuss some of the legal issues and compliance required to help prepare your business for success in the cannabis space.

**This post is for informational purposes only, For legal advice, contact a Canna Business Lawyer**

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