Saturday, July 13, 2024

New York’s Cannabis Control Board — What’s Going On?

The actual nomination of a Cannabis Control Board chairperson is the first tangible step towards a functioning cannabis industry in NY.

In all of the excitement over New York’s passage of the Marijuana Regulation and Taxation Act (MRTA), one of the things that often gets lost is that legalization was just the first step towards the issuance of adult-use cannabis licenses. The single most important administrative action item is the formation of the primary regulatory governing body, the Cannabis Control Board (CCB).

The CCB will be responsible for many of the prerequisites to adult-use licenses being issued. Chief among its responsibilities is the creation of the actual application process for both adult-use cannabis licenses and new registered organizations (ROs) and the industry’s rules and regulations, all of which will be issued within the framework of the MRTA.

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The CCB will consist of five board members: three appointed by the Governor and two appointed by the Senate and Assembly (one each). The CCB’s chairperson will be nominated by the Governor with the advice and consent of the Senate. CCB members will be appointed for a term of three years and must be citizens and residents of New York.

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It is difficult to overstate the importance of the CCB’s chairperson. The chairperson will have an outsized influence on the direction of New York’s cannabis industry. With so much leeway in issuing the industry’s rules and regulations, the chairperson has the ability to really prioritize social and economic equity applicants, decrease the early head start that could be held by the existing ROs, and establish a sustainable licensing process. The chairperson is also, technically, the individual who makes the preliminary determination as to whether a given license should be issued.

Below are a few practical examples of the CCB’s ability to steer the industry:

Restricting existing RO ability to sell other producer’s products at retail

As we previously noted, there is some debate as to whether the MRTA expressly limits RO ability to sell any adult-use products in their respective adult-use dispensaries, instead of just their own products. It will be up to the CCB to clearly regulate whether the apparent prohibition applies to retail sales. 

Confirming whether On-Site Consumption Licensees can sell retail

With separate licenses for retail and on-site consumption, as well as an almost complete ban on holding multiple license types, it is unclear whether an on-site consumption licensee can also sell retail cannabis. Allowing both retail sales and on-site consumption for on-site consumption licensees is likely the difference between having a potentially sustainable business model and a money-loser that will probably not survive.

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Setting application fees

Do we need to explain the significance of this one? The CCB has the authority to charge applicants a non-refundable application fee. How the CCB sets that fee will directly impact how many prospective licensees will submit applications.

Setting canopy limits for Cultivator Licensees

We have been pretty vocal about the importance of real estate as part of the licensing process. For prospective cultivator licensees, a major consideration in looking for real estate is how much usable square footage is needed. The CCB will determine if there is a canopy limit, which will directly correlate with cultivator license applicants’ need for real estate.

Defining a microbusiness

With the microbusiness license one of the exceptions to the ban on vertical integration, we have had many clients ask about whether they would qualify as a microbusiness. The CCB will provide its definition of microbusiness, which may (or may not) open an avenue for vertical integration for a number of prospective applicants.

The importance of the CCB is clear by just looking at a few practical issues. All of which begs the question: what is the status of Governor Cuomo’s nomination of the CCB’s chairperson?

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New York’s legislative session ended on June 10, 2021. The expectation had been that Governor Andrew Cuomo would have nominated someone in time for the chairperson to be approved by the end of the legislative session. With the overwhelming approval of legalization and excitement of impending tax revenue, contrasted by the cascading delays in accepting applications that would be caused by not appointing the CCB’s chairperson and four other board members by the end of this legislative session, it is difficult to comprehend that the Governor would take the risk of not timely making appointments. Yet here we are, over halfway through June, and we may now be waiting until January 2022 for the CCB’s chairperson to be appointed.

In terms of who might be nominated, a few names have been thrown out. It now appears that Governor Cuomo intends to nominate Karim Camara, a former Assembly Member and aide to the Governor. This is somewhat of a surprising development as it was widely expected that the Governor would nominate Norman Birnbaum, New York’s cannabis czar.

To avoid putting the cart before the horse, we will hold off on walking through the bios and our thoughts on prospective appointments until an actual nomination has been made. But like the rest of New York’s cannabis industry, we are eagerly awaiting the actual nomination as the first tangible step towards a functioning cannabis industry in New York.

Simon Malinowski is an attorney at Harris Bricken. This story was originally published on the Canna Law Blog and reposted with permission.


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