People With Marijuana Convictions to Get Head Start on Dispensary Ownership in New York

Mar 10, 2022

By: David Standa, Partner and Irina Dashevsky , Partner

Under a proposal to be voted on by the New York Cannabis Control Board (CCB), applicants with prior marijuana convictions, or family members that have been negatively impacted by marijuana laws, will receive the first round of dispensary licenses—ahead of even the Registered Organizations that are currently operating dispensaries under New York’s medicinal cannabis structure. The proposal is expected to be voted on and pass later this week. If passed, the proposed regulations will not be final for 45 days and may be subject to challenge during this time. New York’s Office of Cannabis Management (OCM) Executive Director, Chris Alexander, told the New York Times that he expects upwards of 200 “justice involved” applicants to receive licenses under the proposal, with retailers potentially coming online before the end of the year.

As currently proposed, to be eligible for a justice involved licenses, an applicant would need to be 51% owned by an individual meeting the “justice involved” definition. That requires an individual to have been convicted of a cannabis-related offense prior to New York’s Marihuana Regulation and Taxation Act (MRTA) being passed on March 31, 2021. Applicants with a “parent, legal guardian, child, spouse, or dependent” who faced such convictions would also be eligible. But being impacted by the “War on Drugs” is not the only requirement for eligibility. There are also business-related requirements that are going to reduce the number of eligible applicants, including that a qualifying applicant needs to “hold or have held, for a minimum of two years, at least ten percent ownership interest in, and control of, a qualifying business, which means a business that had net profit for at least two of the years the business was in operation.” There is also a way for non-profit organizations to qualify if they “intentionally serve justice involved individuals and communities with historically high rates of arrest, conviction, incarceration or other indicators of law enforcement activity for marihuana-related offenses.”

These licenses would be valid for four years, and licensees will need to notify regulators of their intent to continue participating in the recreational market within 120 calendar days of the expiration of the conditional license. Licensees would then be subject to a review before approving a transition to a standard adult-use retailer license, which is the same license that will eventually be made available to applicants that do not meet the “justice involved” definition.

This proposal is certainly a blow to the Registered Organizations that have shepherded New York’s fledgling medical cannabis industry for the last few years. Nevertheless, this seems an intentional part of the New York’s stated goal of achieving an equitable rollout. “I could press the green button right now and have 40 dispensaries online [from the existing Registered Organizations]” Alexander said, “but instead we’ve decided that the folks who have been most impacted actually have the space and the real runway to participate in a meaningful way.”

The question remains, however, where will the product to stock the shelves of these hundreds of new dispensaries come from? New York’s recent decision to allow hemp farmers to grow cannabis (which we wrote about here) is certainly not likely to fill the void—at least not in the near future.

All eyes are on New York as it rolls out its highly anticipated adult use market. Be sure to follow our blog for more information on these regulations and all cannabis developments in New York. If you have any questions or would like to contact the authors, please email David Standa ([email protected]) or Irina Dashevsky ([email protected]).

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People With Marijuana Convictions to Get Head Start on Dispensary Ownership in New York

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