Revised Adult-Use Cannabis Regulations in New York

New York Cannabis Control Board Issues Proposed Adult-Use Cannabis Regulations

On May 11, 2023, the New York Cannabis Control Board adopted revised proposed regulations developed by the Office of Cannabis Management (“OCM”) for its emerging recreational cannabis market.

A full copy of the revised proposed adult-use regulations can be accessed here.

INDUSTRY STRUCTURE

Generally, the industry is divided into:
- the “Supply Tier” consisting of cultivation, nursery, processing, distributor and microbusinesses; and
- the “Retail Tier” consisting of dispensaries, on-site consumption lounges and delivery services.
Supply Tier licensees and their “True Parties of Interest” (as defined below; referred to herein as a “TPI”) are permitted to:
- be fully integrated within the Supply Tier with respect to their own products (but generally not third-party products) (Prop Reg Section 123.3(b)); and
- share common ownership with a microbusiness licensee, which is permitted one retail location (Prop Reg Sections 123.3(c), 123.5(g) and 123.11(c)).
Retail Tier licensees and their TPIs are prohibited from participating with the Supply Tier (other than permitted ordinary course commercial relationships (as described below under “Retail”) (Prop Reg Section 123.9(j)).
True Parties of Interest (“TPIs”) of an applicant/licensee include (Prop Reg Section 118.1(a)(105)(i)):
- sole proprietors;
- limited and general partners;
- members;
- managers;
- presidents;
- vice presidents;
- secretaries;
- treasurers;
- officers;
- board members;
- trustees;
- directors;
- persons with equivalent titles in the applicant, licensee or any entity in the applicant or licensee’s ownership structure;
- stockholders;
- each person that makes up the ownership structure of each level of ownership for an applicant or licensee that has a multilevel ownership structure;
- spouses of each of the preceding individuals;
- persons with the right to receive aggregate payments in a calendar year exceeding the greater of:
  - 10% of licensee’s gross revenue;
  - 50% of licensee’s net profit; or
  - $250,000;
- persons with a financial interest in the applicant/licensee;
- persons with the authority to exercise control over applicant/licensee;
- persons assuming responsibility for the debts of applicant/licensee; and
- any other person that may have a direct or indirect interest, as may be determined by the OCM.
TPIs of an applicant/licensee do not include persons who (Prop Reg Section 118.1(a)(105)(ii):
- receive payment for rent on a fixed basis under a lease or rental agreement relating to the applicant/licensee;
- receive a bonus or commission from the applicant/licensee based on the individual’s sales (not to exceed 10% of the sales of the applicant/licensee in any given period);
- contract with the applicant/licensee to receive a commission for the sale of the business or real property;
- consult and receive a flat or hourly rate of compensation from the applicant/licensee unless such aggregate compensation in a calendar year exceeds the greater of:
  - 10% of licensee’s gross revenue;
  - 50% of licensee’s net profit; or
  - $250,000;
- are goods and services contractors (without control over the applicant/licensee’s business) and such provider’s aggregate compensation in a calendar year exceeds the greater of:
  - 10% of licensee’s gross revenue;
  - 50% of licensee’s net profit; or
  - $250,000;
- are financial institutions (as defined herein); and
- are financiers (as defined herein).
Financial interest refers to any actual or future right to ownership, inclusive of all restricted stock units, options, warrants, or any other interest that can be converted into a share of voting stock or equity investment, or compensation arrangement with another person (including indirectly through a business or certain family members), where the compensation exceeds the greater of (Prop Reg Section 118.1(a)(42)):
- 10% of gross revenue;
- 50% of net profit; or
- $100,000.
Many requirements applicable to TPIs do not apply to “Passive Investors”, which are defined as TPIs (Prop Reg Section 118.1(a)(76)):
- with no more than:
  - 5% ownership interest in a publicly traded applicant or licensee;
  - 10% ownership interest in a non-publicly traded ROD license and microbusiness license, or
  - 20% ownership interest in any private entity; and
- that do not otherwise have any control or influence over the applicant/licensee.
OCM has the right to review any agreements between licensees and third parties (Prop Reg Section 124.4(a)). Such third parties shall be deemed a TPI if such agreement:
- compels the licensee to promise to not purchase or sell products, services or materials to specific businesses;
- is not bargained for in an arms-length transaction;
- does not allow either party to terminate with due notice; or
- Generates a share of revenue paid by a licensee in excess of the greater of:
  - 10% of gross revenue of such applicant or licensee;
  - 50% of net profit of such applicant or licensee; or
  - $250,000, in one calendar year based on actual or anticipated annual performance.
- The OCM may terminate a goods and services provider’s interest in the licensee when the provider violates the financial interest and controlling conduct prohibitions set forth in Section 124.4 (Prop Reg Section 124.4(a)(5)).

CULTIVATORS

There are multiple tiers of cultivation licenses based on canopy size for indoor, mixed use and outdoor cultivation, with escalating license fees based on size (Prop Reg Section 120.3(b)(1) and 120.4(b)(2)).
Cultivators can also have a processor and distributor license, but must have a processor license to hold a distributor license (Prop Reg Section 123.3(b)).
Cultivators can only sell to a licensed processor, including a microbusiness, a cooperative, a Registered Organization with Dispensing (“ROD”), a Registered Organization Non-Dispensing (“ROND”) or a cannabis research licensee (Prop Reg Section 123.3(a)(2)).
Cultivators can have their cannabis processed by third party processors on a tolling basis (Prop Reg Section 123.3(a)(3).
If a cultivator also holds a processor license, then it may purchase cannabis from another cultivator only for processing (Prop Reg Section 3(a)(4)).
A cultivator or its TPI may be a TPI in a nursery, research, processor, distributor, cooperative or collective, microbusiness, ROD, or ROND license (Prop Reg Section 3(c)).
No person can be a TPI in more than one cultivator, except a TPI of a cultivator may be a passive investor in an unlimited number of cultivators, cooperatives, collectives, microbusinesses, RODs or RONDs (Prop Reg Section 3(d)).
A cultivator, or its TPI, may have a goods and services agreement with an adult-use nursery, cultivator, processor, distributor, cooperative or collective, microbusiness, ROD, or ROND license, subject to all restrictions governing such relationships, including, but not limited to, undue influence, control and TPI requirements (Prop Reg Section 3(e)).
A cultivator shall only allow pesticides to be applied on the licensed premises by a person certified by the New York State Department of Environmental Conservation as a pesticide applicator or technician, or by an individual who is a pesticide apprentice acting in accordance with 6 NYCRR section 325.10 (Prop Reg Section 4(e)(1)).
Cultivators also have requirements with regard to maintenance of drying areas and will maintain records of proposed staggered harvests and harvest periods (Prop Reg Sections 4(g)(1) and 123.4(g)(3)).

PROCESSORS

Processing consists of blending, extracting, infusing, making, preparing, manufacturing, packaging, labeling or branding cannabis (Prop Reg Section 118.1(a)(83)). Each processor license may cover all or a designated portion of these activities. (Prop Reg Section 120.3(d)). Processors appear designed to play a key gatekeeping role in the chain of the distribution of cannabis products in New York.
Processors may hold one distributor license (Prop Reg Section 123.5(d)).
A processor may acquire cannabis from cultivators and sell to other processors or distributors (Prop Reg Section 123.5(a)).
A processor may purchase mature cannabis from a nursery if the cannabis was grown for seed production and the seeds have been removed (Prop Reg Section 123.5(e)).
A processor may not be a TPI in another processor (Prop Reg Section 123.5(g)).
- A TPI of a processor may be a TPI in a cultivator, processor, distributor, cooperative or collective, microbusiness, ROD or ROND (Prop Reg Section 123.5(g)).
Licensed processors must submit proof of a qualified 3^rd party GMP (good manufacturing practice) audit of the licensee’s extraction and/or manufacturing processes within one year of commencing licensed operations (Prop Reg Section 123.6(a)(2)).
- The OCM will determine who is a qualified 3^rd party GMP auditor (Prop Reg Section 123.6(a)(2)).
A processor is prohibited from processing any cannabis products which, among others:
- contain synthetic cannabinoids and/or cannabimimetic agents (Prop Reg Section 123.6(e)(5)); or
- add phytocannabinoid concentrate or extract to commercially available candy or snack food items without further processing (Prop Reg Section 123.6(e)(10)).
All cannabis products processed for distribution for retail sale shall, among other requirements:
- Not contain less than 85% or more than 115% of the concentration of total THC, CBD, or other phytocannabinoid and terpene content as listed on the label and reflected on the lab testing certificate (Prop Reg Section 123.6(f)(2)).
- Contain only ingredients appropriate for the product type and unless required to be pharmaceutical grade, be at a minimum food grade ((Prop Reg Section 123.6(f)(5)).
  - No ingredient or component shall be used to manufacture edibles unless that ingredient or component is permitted by the FDA (Prop Reg Section 123.6(f)(5)(i)).
- If vaporized or inhaled, licensees shall maintain records with full information on the source of all botanically derived terpenes and provide this information to the OCM upon request (Prop Reg Section 123.6(f)(9)(v)).
- Be identified and categorized in a processor’s inventory tracking system, including, but not limited, to information detailing the milligrams of total THC in the cannabis product (Prop Reg Section 123.6(f)(11).
A processor shall not package any other good in the same package as a cannabis product, unless such good complies with all requirements of Section 129.3 (Prop Reg Section 123.6(j)).
A conditional processor shall be given priority by the OCM in review of its application for a full processor or distributor license (123.5(k)).

DISTRIBUTORS

A distributor may acquire cannabis from a licensed processor or a microbusiness, cooperative, collective, ROD or ROND (Prop Reg Sections 123.7(b)).
A distributor may only sell to a Retail licensee, a ROD or on-site consumption licensee (Prop Reg Section 123.7(c)).
A distributor shall not be prohibited from transporting or warehousing cannabis products for another distributor or conducting activities related to any of the foregoing as determined by the OCM (Prop Reg Section 123.7(d)).
Distributors must maintain records of all cannabis products purchased and distributed to distributors, retail dispensaries or on-site consumption premises (Prop Reg Section 123.8(a)(4)).
There are no restrictions on the number of distributor licenses a person may own, have a financial interest in or in which such person can be a TPI (see generally Prop Reg Section 123.7).
Licensees engaged in distribution shall:
- Execute written contracts between all parties engaged in cannabis transactions (Prop Reg Section 124.2(a)(1).
- Not discriminate in price, payment terms or discounts for time of payment, but can offer volume-based discounts (Prop Reg Section 124.2(a)(3) and (4)).

RETAIL

Each retail licensee operates one physical brick and mortar dispensary.
- TPIs, including Passive Investors, may only hold an interest (controlling or financial, direct or indirect) in up to three retail licenses (Prop Reg Section 123.9(h)).
- A TPI in a retail dispensary may concurrently be a passive investor in any number of retail dispensary, delivery and on-site consumption licenses.
Each retail dispensary may:
- Operate a delivery business (Prop Reg Section 123.9(c); and
- Have an adjoining premises for the consumption of adult-use cannabis products sold by such retail dispensary called “limited retail consumption facilities” (Prop Reg Section 9(e) and 123.10(o)(1)).
  - There will be an additional $3,000 fee for all retail dispensaries approved to operate a limited retail consumption facility (Prop Reg Section 123.9(e)(3)).
- Guidelines for operating a Limited Retail Consumption Facility include:
  - Cannabis products sold at a limited retail consumption facility may not be rolled, packed, split, infused, mixed, or otherwise prepared by a licensee or any persons affiliated with the licensee, including, but not limited to, the licensee’s employees (Prop Reg 123.10(o)(2)); and
  - There cannot be a point of sale within the facility (Prop Reg 123.10(o)(4)).
- Retail dispensaries will be able to purchase seedlings and immature plants from licensed nurseries after adult-use home cultivation is authorized by the Cannabis Control Board (18 months after the first adult-use retail dispensary sales) (Prop Reg Section 9(b)).
- Time, manner and place restrictions imposed by local municipalities are prohibited from being unreasonably impracticable (Prop Reg Section 119.2(a)).
- Retail dispensaries may not:
  - include in their name, or in the description of their services, the words “drugs”, “medicines”, “drug store”, “apothecary” or “pharmacy” (Prop Reg Section 123.10(g)(2);
  - provide samples (Prop Reg Section 123.10(g)(8));
  - sell any food, beverage or personal care item which is not a cannabis product (Prop Reg Section 123.10(g)(11)(iv));
  - market through third-party platforms (Prop Reg Section 123.10(g)(21));
  - fulfill orders referred by third-party platforms (Prop Reg Section 123.10(g)(23)); or
  - be located within geographic areas set by the regulations or determined by local municipalities within parameters set by the regulations (Prop Reg Sections 119.1(a) and 119.4).

MICROBUSINESS

Only products exclusively processed and manufactured by microbusinesses and Tier I cultivators may receive “craft designation” and label their products as such (Prop Reg Section 118.1(a)(31)).
Microbusiness cultivation area varies by type of cultivation (Prop Reg Section 120.3(c)(1)):
- Indoor: 3,500 square feet;
- Mixed light: 5,000 square feet; or
- Outdoor: 10,000 square feet.
Microbusiness licensees must cultivate and engage in at least one of the following: (1) processing, (2) distributing or (3) retail sales (Prop Reg Section 123.11(a)), and may (Prop Reg Section 123.11(b)):
- sell cannabis to processors;
- sell cannabis products to distributors and deliver such products; and
- directly sell cannabis products it cultivated or processed to consumers;
- purchase cannabis flower;
- send cannabis or cannabis products to a processor for processing without relinquishing ownership of that cannabis or cannabis product; and
- operate a consumption facility.
A microbusiness can be a TPI in a distributor (see Prop Reg 123.11).
A microbusiness shall not be a TPI in a cultivator, processor, cooperative, collective, ROD, or ROND license (Prop Reg Section 123.11(c)); provided, however, a TPI in a microbusiness may be a TPI in a processor or a passive investor in a cultivator, cooperative, collective, ROD or ROND license (Prop Reg Section 123.11(c) and (d)).
A TPI in a microbusiness may be a passive investor in any number of microbusiness licenses (Prop Reg Section 123.11(d)).
A microbusiness or its TPI may have a goods and services agreement with an adult-use cultivator, processor, cooperative or collective, microbusiness, ROD or ROND license (Prop Reg Section 123.11(e)).
Microbusinesses are subject to restrictions on licensed activities as applicable to each applicable license type (Prop Reg Section 123.12(a)(2)).
Microbusinesses are able to purchase up to 500 pounds of cannabis, or the extract equivalent, per year from a cultivator, microbusiness, cooperative or collective, ROD or ROND (Prop Reg Section 123.12(a)(4)).
A Microbusiness licensee may be authorized to process up to 1,700 pounds of biomass per year, unless processed exclusively at its licensed premises (Prop Reg Section 123.12(a)(6)).
Microbusiness retail dispensaries must be (Prop Reg Section 123.12(a)(9)(ii) and (iii)):
- if in a city with over one million persons, in the same county as its cultivation and processing premises; or
- if outside such a city, within 25 miles of its cultivation and if applicable, processing premises.

COOPERATIVES/COLLECTIVES

Cooperatives will be organized pursuant to New York State Cooperative Corporation Law (Prop Reg Section 123.13(g)).
Collectives will be divided into traditional collectives and limited collectives (Prop Reg Sections 123.13(h) and (i)).
- A traditional collective shall:
  - Give all voting rights to the members who contribute primarily with labor and such members shall:
    - Each have 1 vote (Prop Reg Section 123.13(h)(1)(i)).
    - Comprise no less than two-thirds of the governing body (Prop Reg Section 123.13(h)(1)(ii)).
    - Maintain a controlling interest at all times and own no less than 51% of the equity of the collective at all times (Prop Reg Section 123.13(h)(1)(iii) and (iv)).
    - Not have their capital or interest subordinated to any other member group or shareholders (Prop Reg Section 123.13(h)(1)(v)).
  - Have its profits, earnings and losses distributed to members based on labor and not based on capital investment (Prop Reg Section 123.13(h)(2)).
- A limited collective shall
  - Give at least two-thirds of its voting rights members who contribute primarily with labor. Such members shall:
    - Not have their capital contributions proportionately tied to voting rights (Prop Reg Section 123.13(i)(1)(i)).
    - Comprise a majority of the governing body (Prop Reg Section 123.13(i)(1)(ii)).
    - Receive at least 51% of profits and distributions and own at least 51% of the equity (Prop Reg Section 123.13(i)(1)(iv) and (v)).
  - Cooperatives and collectives are authorized to act as cultivators, processors and distributors, and are governed by the applicable regulations with respect to each licensed activity (Prop Reg Section 123.13(a)).
    - Cooperatives and collectives may conduct processing activities at an unlimited number of premises (Prop Reg Section 123.13(a)(1))
      - Additional fees may apply for each premises over two locations (Prop Reg Section 123.13(a)(1)); and
    - Cooperatives and collectives may cultivate at an unlimited number of premises (Prop Reg Section 123.13(a)(2)).
      - Each premises over the sixth carry additional application and licensing fees (Prop Reg Section 123.13(a)(2)).
    - Members of cooperatives or collectives may only be members of one cooperative (Prop Reg Section 123.13(b)).
    - Members of cooperatives or collectives are TPIs (Prop Reg Section 123.13(c)).
      - No person shall be a TPI in more than one (1) adult-use cooperative or collective, but may be a passive investor in any number of cooperatives or collectives, cultivators, processors, distributors, microbusinesses, RODs or RONDs (Prop Reg Section 123.13(e)).
    - Cooperatives and collectives must have at least five members that contribute primarily with labor (Prop Reg Section 123.13(i)). There is no requirement that a member be an individual or any particular kind of entity.
    - All traditional or limited collectives shall be certified and recommended by a national trade association that has been listed in guidance by the OCM (Prop Reg Section 123.13(k)).

REGISTERED ORGANIZATION NON-DISPENSING (ROND)

No person shall be a TPI in more than one (1) ROND license, but may be a passive investor in any number of ROND, cultivator, cooperative, microbusiness, or ROD licenses (Prop Reg Section 123.15(a)).
Required to pay fees in accordance with the fees for each activity (cultivation, processing and distribution) done under the license (Prop Reg Section 120.4(b)(10)).
ROND licensees are subject to the applicable requirements for cultivators, processors and distributors (Prop Reg Section 123.16(a)(1)).
ROND licensees are required to maintain a medical prioritization plan, including (Prop Reg Section 123.16(a)(3)):
- sales breakdowns;
- maintenance of medical cannabis necessary to supply to the greater of the highest monthly sales volume within the last 12 months or a minimum threshold set by the Cannabis Control Board; and
- attestation to stocking sufficient products of different concentrations and dosages.
ROND licensees are limited to 100,000 square feet of canopy (Prop Reg Section 123.16(b)(1).
ROND licensees require written authorization of the Cannabis Control Board to:
- begin construction or major renovations on indoor cultivation and facilities (Prop Reg Section 123.16(b)(3)); and
- contract with a laboratory for voluntary testing services (Prop Reg Section 123.16(b)(4)).
A registered organization shall hold a ROD or ROND license to sell adult-use cannabis or cannabis products. (Prop Reg Section 123.16(c).

REGISTERED ORGANIZATION WITH DISPENSING (ROD)

Required to pay up front a license fee of $175,000 and a one-time special licensing fee of $20,000,000, payable as follows:
- $5,000,000 fee due at the time the ROD license is issued; and
- the remainder of the $20,000,000 total by the earlier of:
  - The opening of the ROD’s second co-located dispensary (Prop Reg Section 120.4(b)(11)(ii)(a) or in $5 million installments paid within 30 days of each $100 million in revenue generated by the ROD up to $300,000,000 (Prop Reg Section 120.4(b)(11)(ii)(b); or
  - December 31, 2033 (subject to exceptions).
- ROD licensees are prohibited from opening their first co-located stores before December 29, 2023 and may not open second or third stores until June 29, 2024 (Prop Reg Section 123.18(b)(12)(i) and (ii)).
- TPIs of a ROD may be TPIs to only one ROD, but may be a passive investor in any number of RODs, cultivators, cooperatives, microbusiness or RONDs, (Prop Reg Section 123.17(a)).
- A ROD or its TPI may have a goods and services agreement with an adult-use cultivator, processor, distributor, cooperative, microbusiness, ROD and ROND (Prop Reg Section 123.17(b).
- Unlike TPIs in retail licenses, TPIs in RODs are not restricted from investing in or having an interest in out of state cannabis businesses (Prop Reg Section 123.17(c)).
- ROD licensees and their TPIs may not hold a direct or indirect interest in, or be a TPI, passive investor, or have a goods and services agreement with, a retail dispensary, on-site consumption, deliver, registered organization or cannabis laboratory (Prop Reg Section 123.17(c)).
- ROD licensees must dedicate at least 70% of their available shelf space for products cultivated and processed by third parties which are not RODs until January 1, 2026 and 40% of shelf-space thereafter (Prop Reg Section 123.18(a)(3)).
- ROD licensees must co-locate their medical and adult-use dispensaries (Prop Reg Section 123.18(a)(4)).
  - If an ROD has multiple sites, one must be outside of the counties of New York, Kings, Bronx, Queens, Richmond, Nassau, Suffolk and Westchester (Prop Reg Section 123.18(a)(5)).
  - Limited to three co-located dispensaries (Prop Reg Section 123.18(b)(7)).
  - May not have more than one (1) co-located facility in the same county or borough (Prop Reg Section 18(b)(8)).
- ROD licensees must maintain a medical prioritization plan like RONDs (Prop Reg Section 18(a)(8)).
- ROD licensees are limited to 100,000 square feet of canopy (Prop Reg Section 123.18(b)(1)).
- ROD licensees require written authorization of the Cannabis Control Board to:
  - begin construction or major renovations on indoor cultivation and facilities (Prop Reg Section 123.18(b)(2)); and
  - contract with a laboratory for voluntary testing services (Prop Reg Section 123.18(b)(4)).
- ROD licensees may not process more than 80,000 pounds of biomass in one year if such licensee has purchased more than 25,000 pounds of cannabis or cannabis products at wholesale from another licensee in that calendar year (Prop Reg Section 123.18(b)(3)).
- ROD licensees are prohibited from substituting adult-use cannabis products for medical cannabis products (Prop Reg Section 123.18(b)(6)).

DELIVERY

A delivery licensee may deliver cannabis products that have been ordered and paid for prior to delivery from a licensee authorized for the retail sale of cannabis (Prop Reg 123.19(a)).
A delivery licensee or its TPI may also be TPIs in a retail dispensary or an on-site consumption license (Prop Reg 123.19(b)).
No person shall be a TPI in more than one delivery license, or in a delivery license and retail dispensary or on-site consumption license (Prop Reg 123.19(c)); provided, however, a TPI in a delivery license may also be a passive investor in any number of delivery, retail dispensary and on-site consumption licenses (Prop Reg 123.19(c)).
All licensees authorized for a providing delivery of cannabis must have a written delivery plan (Prop Reg Section 123.20(a)).
Delivery licensees shall not, among other things:
- conduct sales of cannabis (Prop Reg Section 123.20(c)(1)).
- deliver outside of NYS ((Prop Reg Section 123.20(c)(3).
- deliver cannabis to anyone other than the individual detailed in the order and only upon verifying their identity and age (Prop Reg Section 123.20(c)(5)).
- deliver cannabis or cannabis products to any of the following (Prop Reg Section 123.20(c)(6):
  - public buildings;
  - public spaces including parks;
  - community centers;
  - school grounds;
  - day-care centers; or
  - houses of worship.
- Delivery licensees and their employees shall not:
  - have a total of more than twenty-five (25) individuals providing full-time paid delivery services to cannabis consumers per week under on license (Prop Reg Section 123.20(c)(7)); and
  - possess more than $20,000 of cannabis products in total at any time in an enclosed vehicle or $5,000 in a non-enclosed vehicle, including bikes and scooters or by foot (Prop Reg Section 123.20(d)(3)(i) and (ii)).
- At least 30% of the total value of cannabis products in the possession of the delivery employee must have been ordered and paid for prior to leaving the licensed location (Prop Reg Section 123.20(e)).

LICENSE APPLICATIONS

Applicants of all license types are required to submit a community impact plan which demonstrates the applicant or licensees plan benefitting communities and individuals disproportionately impacted by the enforcement of cannabis prohibition (Prop Reg Section 121.4(a)).
Some license fees, such as cultivation, can be considerably expensive (Prop Reg Section 120.4(b)(2)).
Priority may be given to license applications submitted by social and economic equity applicants (Prop Reg Section 120.7(c)(2)).
A social and economic equity applicant must be solely controlled by an individual in one of the social equity groups (minority-owned, woman-owned, distressed farmer, service-disabled veteran or a member of a community disproportionately impacted by the war on drugs) (Prop Reg Section 121.1(a)(1)).
Extra priority will be given to individuals who (Prop Reg Section 121.1(k)):
- are from communities disproportionately impacted by the enforcement of cannabis prohibition;
- have an income lower than 80% of the median income of their county of residence; and
- were convicted of a marihuana-related offense prior to March 31, 2021, or had a parent, guardian, child, spouse, or dependent who was, or were the dependent of an individual who was, so convicted.
Licenses have 2-year terms, subject to renewal in which the following are factors (Prop Reg Section 120.10(a) and (Prop Reg Section 120.11(c)(1-5)):
- contribution to communities harmed by the war on drugs;
- executed labor peace agreement with a bona-fide labor organization;
- diversity of owners and employees;
- adherence to social responsibility requirements; and
- compliance with OCM and local government regulations and requirements by the licensee and TPIs.

LICENSE CHANGES

Licenses are transferrable upon the written approval of the Cannabis Control Board. A change in majority ownership, controlling interest, or person with sole control over the license or its holder constitutes a transfer of the license (Prop Reg Section 120.9(e)).
Failure to provide notifications or reports to the OCM pursuant to Section 120.18 may result in fines and/or suspension, cancellation or revocation of a license (Prop Reg Section 120.18(c)).
A licensee shall notify the OCM within 10 business days of the licensee becoming aware or from when it should have been aware of any of the following:
- Whenever a new or existing shareholder holds at least 10% aggregate ownership interest (Prop Reg Section 120.18(b)(1)(i)(a)).
- When a person other than a shareholder ceases to be a TPI (Prop Reg Section 120.18(b)(1)(i)(b)).
- When a person lends greater than 10% of a licensee’s capital (Prop Reg Section 120.18(b)(1)(i)(d)).
60-day prior notice and OCM approval will be required for:
- adding any new TPI, except a Passive Investor and their spouse (Prop Reg Section 120.18(d)(i)); and
- any other change that requires a background check of the required parties (Prop Reg Section 120.18(d)(ii)).
Notification and approval of the Cannabis Control Board will be required for:
- change in the composition of a licensee, including a transfer in ownership, structure or control (Prop Reg Section 120.18(e)(1));
- change in the ability to control at least 50% of voting shares (Prop Reg Section 120.18(e)(2)); and
- changing location (Prop Reg Section 120.18(e)(3)).
Notice to the OCM within 3 days of the party becoming aware will be required for:
- any criminal conviction or civil judgement in amounts greater than five thousand dollars ($5,000) against the licensee or any of its TPIs, other than a Passive Investor (Prop Reg Section 120.18(b)(2)(i));
- any regulatory disciplinary action being taken or pending against the licensee or any of its TPIs, other than a Passive Investor (Prop Reg Section 120.18(b)(2)(ii));
- the initiation or conclusion of any new judgement, lawsuit, legal proceeding. charge or governmental investigation against the licensee or any of its TPIs, including a Passive Investor (Prop Reg Section 120.18(b)(2)(iii)); and
- Any proposed material amendments or changes to the business (Prop Reg Section 120.18(b)(2)(v)).

OPERATING REQUIREMENTS

On-site consumption, adult-use retail dispensary, microbusiness, or ROD licensees may, upon OCM approval, engage in cannabis events, including by going to the premises of other licensees of those types where they will temporarily be allowed to sell cannabis products to consumers (120.19(a) and (b)).
- Rules for these events can be found in Section 120.19(e)(2).
No employee can be in charge of more than one retail dispensary at the same time (Prop Reg Section 123.10(c)(1)).
Subsidiaries shall be wholly owned by the licensee (Prop Reg Section 124.6(a)(1)).
Subsidiaries shall transfer the following to the licensee:
- communications from the OCM (Prop Reg Section 124.6(a)(2)(i));
- enforcement proceedings (Prop Reg Section 124.6(a)(2)(ii)); and
- information related to compliance with the rules and regulations of the license (Prop Reg Section 124.6(a)(2)(iii)).
General Site and Operating Regulations:
- Licensees need to use odor mitigation technology, abide by lighting standards, HVAC system standards, water and air quality standards as applicable (Prop Reg Section 125.1).
- Licensees need to submit site plans with specific requirements for different license types (Prop Reg Section 125.2(a)).
  - Also need operating plans for licensed activities (Prop Reg Section 125.2(b)).
- Licensees need to document an energy and environmental plan (Prop Reg Section 125.2(c)).
- Security requirements for the facilities of licensees include storage, surveillance and locks (Prop Reg Section 125.3(a), (b) and (c)).
- Licensees are required to provide training, including free Responsible Workforce Training, to all persons performing activities under their authorizations, within 30 days of engagement (Prop Reg Section 125.5(a)).
  - Safety and hygiene training must also be provided to those involved in cultivation, processing or distribution (Prop Reg Section 125.6(c)).
- Inventory and Tracking:
  - Licensees are required to track all physical inventory of cannabis in an electronic real-time inventory tracking system as determined by the OCM. The inventory tracking system shall be capable of showing any cannabis that has been released for sale, to allow for a total recall of all cannabis if necessary (Prop Reg Section 8(a)).
  - Must tag or label all cannabis and cannabis products (including extracts, seeds, tissue, clone lots, seedlings, immature cannabis plants and cannabis waste) with a unique identifier (Prop Reg Section 8(a)(4)).
  - Licensees are required to conduct an initial comprehensive inventory of all cannabis and cannabis product in the possession of the licensee at the authorized premises on the date the cannabis licensee first engages in the cultivation, processing, distribution or sale of cannabis (Prop Reg Section 8(c)).
  - Licensees must conduct a monthly inventory audit of all cannabis and cannabis products (Prop Reg Section 8(d)(2)).
  - A licensee, as applicable, shall maintain records identifying the source of each ingredient used in the cultivation and processing of cannabis (Prop Reg Section 8(f)).
- Transportation:
  - All cannabis and cannabis products shall be transported in a secure manner, in motorized and unmotorized transportation owned and operated by the licensee, including, but not limited to, a vehicle, trailer, bicycle and motorcycle (Prop Reg Section 10(e)).
  - All transportation shall be equipped with (Prop Reg Section 125.10(e)(1):
    - Temperature controls designed, maintained and equipped as necessary to prevent deterioration of cannabis and cannabis products during transport.
    - A fully enclosed and locked container for transporting cannabis and cannabis products.
    - A GPS for identifying the location of the transportation.
  - Prior to transporting any cannabis or cannabis products, a licensee shall generate a shipping manifest that contains the purpose for the transport (Prop Reg Section 10(g)(1)).
    - Licensee is required to send the manifest to the recipient of the cannabis or cannabis product, prior to transport, in a manner determined by OCM (Prop Reg Section 125.10(g)(2)).
    - The licensee conducting the transport may be subject to enforcement action if there are discrepancies between the manifest and the product in its possession (Prop Reg Section 125.10(g)(10)).
    - Shipping manifests and any invoices shall be made readily available to the OCM, for inspection upon request, for a period of five years (Prop Reg Section 10(g)(11)).
  - Management of Cannabis and Other Waste:
    - Licensees are required to dispose of any cannabis or cannabis product that is outdated, damaged, deteriorated, contaminated or otherwise deemed not appropriate for cultivation, processing, distribution or sale (Prop Reg Section 11(a)).
    - Cannabis waste that will be processed in a composting facility or other organics recycler (anaerobic digester, etc.) can only be mixed with other organic waste that the receiving organics recycler can process effectively (Prop Reg Section 11(c)(2)).
    - There are additional requirements for licensees self-transporting their cannabis waste (Prop Reg Section 11(f)), including:
      - Such licensee shall be registered or permitted as a waste transporter and the waste shall only be transported by the licensee or its employees (Prop Reg Section 125.11(f)(1-2)); and
      - self-transported cannabis waste shall only be transported to a solid waste management facility that is permitted by the New York State Department of Environmental Conservation (Prop Reg Section 125.11(f)(3)).
    - Inspections and Audits:
      - Licensed or permitted premises, regardless of the type of premises, and all records, including, but not limited to, financial statements and corporate documents, shall be subject to inspection by the OCM and peace officers or police officers acting in accordance with their duties (Prop Reg Section 12(a)).
    - Licensees must maintain records for at least five years (Prop Reg Section 125.13(a)).

Nothing herein constitutes legal advice.

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Revised Adult-Use Cannabis Regulations in New York

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