New York Approves Revised Adult-Use Cannabis Regulations; Set to Open Application Window in October

As many of New York’s social equity cannabis licensees are bleeding money amid a court injunction preventing them from opening shop, the state’s regulators approved revised adult-use regulations Sept. 12 to expediate market entrances for big players.

The revised regulations, part of a 344-page package, paves way for New York’s 10 existing cannabis operators—referred to as registered organizations (ROs) in New York—to pay their way into the adult-use retail market by the end of this year via a $175,000 retail license fee in addition to an initial $5-million installment toward a one-time $20 million “special licensing fee.”

RELATED: New York’s Medical Cannabis Operators Could Switch to Adult Use by Year’s End

This means some of the nation’s largest multistate cannabis operators, like Curaleaf, Columbia Care, Cresco Labs and Green Thumb Industries, which are among New York’s ROs, won’t have to wait until the end of 2025 to serve customers 21 and older. That three-year wait from the program launch was originally put forward by the state’s Office of Cannabis Management (OCM) in an effort to allow social equity licensees enough time to find equal footing in the market before the larger companies were allowed to expand their footprints.

Notably, OCM has approved 463 conditional adult-use retail dispensaries (CAURD) for the state’s social equity applicants since late 2022, but only 23 CAURD businesses—18 dispensaries and five delivery operators—have become operational since adult-use sales launched in December. The other 440 licensees are in limbo as a temporary restraining order prohibits them from opening dispensaries until a lawsuit filed by four service-disabled veterans unravels.

The New York Medical Cannabis Industry Association (NYMCIA), whose membership includes Columbia Care, Cresco, Curaleaf, Green Thumb, Acreage Holdings, iAnthus, PharmaCann, Ascend Wellness and Vireo Health, applauded Tuesday’s decision by the OCM, calling it a positive step forward in a statement provided to Cannabis Business Times.

“Today marks a pivotal step toward expanding and sustaining the state’s medical program and creation of an economically viable and equitable adult-use cannabis industry in New York,” according to NYMCIA’s statement. “Once up and running, this market will help squeeze out illicit operators putting consumers at risk, provide growers with more opportunities to sell their products, and generate tax revenue for communities disproportionately impacted by the cannabis prohibition.”

Although there are various metrics to gauge the success of a program rollout, New York has fallen short in terms of overall sales.

Specifically, the state’s CAURD licensees have reported $66.1 million in adult-use cannabis sales through the first eight months of 2023, averaging nearly $8.3 million per month, according to the OCM. Meanwhile, recently launched programs in neighboring New Jersey and Maryland are each averaging more than $50 million per month in adult-use sales (more than six times as much despite have smaller populations). 

For OCM regulators and their office’s Cannabis Control Board (CCB), attempting to roll out an equitable program has taken priority over dollar figures. But that priority has its limits through the state’s Seeding Opportunity Initiative, which has focused on licensing those with cannabis-related convictions and nonprofit organizations that assist or provide services to these individuals.

This exclusive licensing process will soon come to an end.

During Tuesday’s board meeting, CCB members also approved a resolution to open a new licensing application window for adult-use dispensaries, cultivators, processors, distributors and microbusinesses as early as Oct. 4, 2023. The application period will be open for 60 days to all entrepreneurs through the New York Business Express (NYBE) platform, closing on Dec. 4, 2023.

The OCM provided an example of the adult-use application form.

In addition, adult-use conditional cultivators and processors who are in good standing with the OCM can apply to transition to more permanent licenses through the NYBE portal once applications open. Until now, adult-use cultivation licenses have been limited to outdoor farmers who previously participated in New York’s hemp program.

Also, CCB members approved a resolution to expand the state’s medical cannabis program through licensing additional ROs, with an application portal expected to open in October. This will mark the first opportunity to enter the state’s medical market since the Department of Health opened the original application window in 2015.

Currently, ROs are allowed to cultivate up to 100,000 square feet of indoor canopy, allowing for multiple harvests a year—a perk that hasn’t been afforded to conditional licensees currently serving the adult-use market. ROs also have the advantage of vertical integration.

As ROs transition to adult-use operations, CCB member Jennifer Gilbert Jenkins asked during Tuesday’s board meeting what percentage of each RO’s 100,000-quare-foot canopy would be allowed to enter the adult-use market.

“Do we have an estimate of just how much product we expect them to bring into the adult-use side?” she asked.                                                                                              

OCM Executive Director Christopher Alexander said any estimates are dependent upon when each operator completes its buildout and transitions to the adult-use market. Not all ROs are currently operating at their maximum allowable capacity, he said.

When new ROs are licensed, they’ll be afforded the same canopy capacities as existing ROs, but Alexander said he doesn’t anticipate the state’s new medical operators to come online with harvests for at least two years. And how much product those new licensees provide to the medical market is not set on a particular square footage but is rather based on a previous year’s patient activity, Alexander said.

“We do have requirements that they continue to supply the medical market itself,” he said. “And so, there’s provisions in the law and in the regulations that require them to maintain product access and supply and prioritization.”

The same rules will apply for current and forthcoming ROs alike, Alexander clarified.

“Just to be clear, that allocation of the 100,000 [square feet] is to supply both medical demands and the adult-use demands that may come of them, but, at the onset, these folks are medical operators,” he said.

Clarity on how much cannabis ROs plan to cultivate and for what market will remain an important detail for other licensed growers, Gilbert Jenkins said, especially considering the excess in biomass that state farmers produced last summer without the demand to match it in New York’s slowly growing adult-use retail program.

After the CCB members finished their orders of businesses Tuesday, Alexander said during his director’s report, “today is a day of mixed emotions for many who are excited to see the market launch, who are excited of the steps that have been taken to roll out general licensing and really take the next step here for New York’s cannabis market.”

He also directed a statement toward New York’s CAURD licensees and conditional cultivators and processors, whom the state made certain promises to prioritize with regard to their equitable opportunities over the first-mover advantages of big business.

“I acknowledge our licensees who are currently working diligently to get open, and I just want to express on behalf of the office a continued commitment to the success of those licensees,” Alexander said. “We will continue to work diligently to realize the Seeding Opportunity Initiative and what it represented for New York to take that necessary step of starting a market in a way that nobody else had with those who have been most impacted [by the drug war] and with our small farmers.”

Alexander added, “Our commitment has not wavered, and it will not.”

The public comment period of the meeting ensued with with more than 40 New Yorkers pleading with the OCM for more than two hours to fix the pain points associated with the state’s adult-use program rollout. 

But with only 23 of 463 CAURD licensees operational amid a court injunction, and now with more licensees on deck to enter the market, an opportunity shift appears imminent in New York.