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What You Need to Know
How to Prepare for the Application Process

The New York Marihuana Regulation & Taxation Act (MRTA), passed March 31, 2021, (also spelled as marijuana, and also more commonly known as Cannabis), in part, legalizes the possession and use of Cannabis for Adult Use. MRTA created a framework from which the Cannabis Industry will operate within. Aside from accomplishing a number of social justice reforms for individuals affected by Cannabis prohibition in the past, MRTA creates 9 Adult Use Licenses, and a number of regulatory agencies organized under an overarching agency named the New York State Cannabis Control Board (“the Board”).

• Cannabis use and limited possession (up to 3 ounces and 24 grams of concentrated cannabis) is legal for adults over 21
• Operating a Motor Vehicle under the influence of Cannabis is still legal
• Smoking of Cannabis is legal anywhere smoking tobacco is permitted
• Business Owners can still terminate an employee for cause of working under the influence of Cannabis
• Crossing State Boarders while possessing Cannabis is illegal
• Consumers growing their own Cannabis for personal use is not permitted under MRTA until the Board adopts regulations outlining the rules (NYS projects that such rules will be published within of the first retail dispensary sale).

MRTA, from a regulation perspective, preformed two (2) general functions. First, it passed a general framework for how the New York Cannabis Industry would operate by compartmentalizing the industry into nine (9) different Cannabis Licenses. Second, it created a large regulatory agency called the “New York State Cannabis Control Board” (“Control Board”) that will essentially regulate and police the entire New York State Cannabis Industry. The Control Board’s initial function is to pass additional regulations that will essentially ‘fill-in’ the framework created by MRTA. The Control Board is empowered to pass regulations governing the industry, to create the various application forms to apply for licensing, to award and deny licenses, to renew and revoke said licenses, and to enforce compliance with no-notice on-site inspections and also possesses subpoena power to effect compliance.

New York State Cannabis Control Board

The New York State Cannabis Control Board “the Control Board” will consist of five (5) board members, three (3) appointed by the Governor Cuomo (one of which will be the Chairperson), one (1) from the Senate, and one (1) from the Assembly

The Board has the following powers and duties:

• Award licenses, registrations and permits, limit, or not limit, the number of licenses, registrations and permits awarded, revoke, cancel or suspend any license, registration or permit
• Promulgate regulations and enforce the various Cannabis Laws, hold hearings, subpoena witnesses, and administer oaths
• Create the different cannabis license applications and reporting forms
• Develop and establish minimum criteria for certifying employees to work in the cannabis industry
• Advise on the issuance of low or zero interest loans to social and economic equity applicants
• Make any final decisions of the OCM on any matters appealed to the Board by a licensee, registrant or permit holder
• Approve any price quotas or price controls set by the Executive Director of the OCM

Office of Cannabis Management

It should be noted, that as a licensee within the New York State Cannabis Industry, you are most likely not going to interact directly with the Control Board, instead, MRTA has empowered a second regulatory (a.k.a. the Office of Cannabis Management; hereinafter “OCM”) agency operating underneath the Control Board to implement and enforce the both MRTA compliance as well as the Boards’ additional rules and regulations. The OCM exercises its powers and duties through an Executive Director. The Executive Director is appointed by the Governor and confirmed by the Senate. In general, the powers and duties of the Executive Director are to implement the day-to-day administration of the OCM and carry out any functions delegated to the Executive Director by the Control Board. The Executive Director has the following powers:

• Keep records of all licensees, registrants, and permit holders
• Inspect any premises where medical cannabis, adult-use cannabis, or cannabinoid hemp is manufactured or sold
• Create applications and reporting forms for all applicants and licensees as approved by the Board
• Issue industry guidance and advisories.
• Any other powers necessary to implement the Cannabis Law that are not specifically vested to the Board

MRTA also establishes the role of a Chief Equity Officer in the OCM. The Chief Equity Officer is appointed by the Control Board and is responsible for overseeing the social and economic equity initiatives of the OCM. In addition to developing the Social and Economic Equity Plan, the Chief Equity Officer is also tasked with establishing a public education program dedicated to providing communities that have been impacted by cannabis prohibition with information about how to obtain a license from the OCM, and the various support and resources that the OCM can provide. Obviously anyone who may qualify as a social economic equity applicant should plan to take advantage of some of these free services.

The most defining feature of MRTA’s framework is a general prohibition against large scale vertical integration, i.e. seed-to-sale operations. The Cannabis Industry varies considerably from State to State. In States that have permitted companies to vertically integrate on a large scale, or otherwise perform all functions necessary to grow, process, distribute and dispense Cannabis, larger companies have come to dominate the industry. Although this model may have been safer for some of the earlier states that were more concerned on proving the concept that Cannabis could be responsibly regulated, it left little opportunity for smaller businesses. MRTA’s framework is intentionally designed to even the playing field by prohibiting large scale vertical integration operations, establishing special licenses with a lower barrier to entry, as well as prioritizing social equity applicants in the licensing process.

MRTA provides guidance as to some of the characteristics that the Control Board will consider in approving or denying an Adult-Use Cannabis License (this is not an exclusive list):

• Applicant is a Social Economic Equity Applicant (hereafter “SEE Applicant”) (MRTA has tasked the Control Board as a goal to award 50% of all licenses to SEE Applicants);
• Applicant can maintain effective control against the illegal diversion of cannabis (security and operating plan);
• Applicant can comply with all State and local laws and regulations (no outstanding violations and proof of compliance with local building codes)
• Applicant and its officers are willing and able to properly carry-on activities for which a license is sought (proper equipment, standard operating procedures and sufficient commercial space)
• Applicant possesses or has the right to use sufficient land, buildings and equipment to properly carry on the activity descried in the application or has a plan to do so if qualifying as a SEE Applicant
  • Here we can find guidance that SEE Applicants are not going to be required to take on a commercial lease before being awarded an Adult-Use Cannabis Application whereas it seems that non-SEE Applicants may not be afforded the same luxury.
• Applicant qualifies as a SEE Applicant or sets out a plan for benefitting communities and people disproportionately impacted by enforcement of cannabis laws.
• Application must show that it is in the public interest that Applicant be awarded the privilege of an adult use license. MRTA provides guidance that eight (8) different factors must be considered in assessing whether licensure can be found to be in the public interest (this should not be considered an exhaustive list)
  • Applicant can show appreciation that licensure is a privilege not a right
    • This will most likely be shown in a wide range of factors; everything from the integrity of the presented operating plan, the proposed location, the locations proposed improvements, a thoughtful and effective plan for benefiting communities and people disproportionately impacted by enforcement of cannabis laws, a strong security plan for preventing the illegal diversion of cannabis, obviously qualifying as a SEE Applicant will also be helpful here as well
  • The Number (total licenses), classes (the 9 different licenses), and character (size) of other licenses in proximity to the proposed location
  • Evidence that all necessary licenses and permits (e.g. Certificate’s of Occupancy, certificates of compliance, sign permits, etc.) have been obtained from all relevant state and local municipalities (please note, local municipalities cannot require their own local permits or licenses for operating an adult use cannabis company of any type)
  • Effect of traffic and parking in proximate to the location
  • Existing noise level and any increases the proposed business would cause
  • The ability to mitigate adverse environmental impacts, including but not limited to water usage, energy usage and carbon emissions
  • Effect on the production and availability of cannabis and cannabis products
  • Any other factors later deemed relevant by the Control Board
• The Applicant and managing officers/members are of good moral character (includes but may not be limited to a criminal background check and credit check) and do not have an ownership or controlling interest in more licenses or permits than allowed
• Applicant has entered into a Labor Peace Agreement, with a bona-fide labor organization that is actively engaged in representing or attempting to represent the cannabis workforce community (maintaining an active Labor Peace Agreement [LPA] will be a material condition of licensure, failure to maintain an active LPA can result in an awarded license being revoked). If applicant has or at any point achieves a workforce of twenty-five (25) or more full time employees, applicant will be required to enter into a collective bargaining agreement with a bona-fide labor union in New York and must show that it will use union labor to construct its licensed facility

The nine (9) licenses created by MRTA and their descriptions are the following:

• Cultivators License
  Cultivator’s License, permits the license holder to acquire, possess, distribute, cultivate, grow, clone, harvest, dry, cure, grade and trim cannabis. The Control Board is tasked in MRTA to pass regulations permitting certain types of minimal processing without a need for a processor’s license but otherwise, any company interested in cultivation and processing will have to acquire a separate processors license and preform processing functions in a separate commercial space that may or may not be adjacent to the licensed cultivation premises. A Company and its members interested in cultivating cannabis may only have one (1) cultivator’s license which may limit a company to one cultivation premises but we will look to the Control Board’s initial rules publication for guidance. A Company and its members who hold a cultivator’s license may not possess a retail license, a distributor’s license, a small business cooperative license, or a micro business license. A Licensee may however possess a processor’s license, a delivery license, and a nursery license
• Nursery License
  A Nursery License will permit a licensee to acquire, possess, distribute cannabis seeds and immature plants. The Nursery License is a great example of the limited nature of MRTA’s framework; MRTA does not provide much substance pertaining to qualifying criteria or as to the scope of limitations of the nursery license but instead has tasked the Control Board to expand upon the scope and limitations of the Nursery License, but clearly, any interested Cultivator is going to want to also possess a nursery license as well.
• Delivery License (identified as a low barrier for entry license)
  A Delivery License is again a great example of the limited nature of MRTA’s framework; MRTA also has tasked the Control Board to expand upon the scope and limitations of the Delivery License. We do know however, that a Delivery Licensee may not have more than 25 full time employees and is generally authorized to delivery cannabis and cannabis products to other licensees
• Processors License
  The Processors License is essentially a license to create products from the cannabis plant. Processor Licensees will be authorized to acquire, possess, blend, extract, infuse, package, label, brand (and otherwise make or prepare cannabis products), as well as to process and sell cannabis products only from the licensed premises and only to other cannabis licensees (in other words, processor’s cannot sell directly to a consumer).A Company interested in processing cannabis products may have up to three (3) processor licenses, covering three different locations, however each license would have to be applied for and awarded independently by the Control Board. A Company and its members who hold a cultivator’s license may not have or possess whether “directly or indirectly” a retail license, a distributor’s license, a small business cooperative license, or a micro business license. A Licensee may however possess a cultivator’s license, a delivery license, and a nursery license. A processor’s licensed premises must be used exclusively for Cannabis processing activities and cannot preform other services or otherwise conduct other business on the licensed premises.
• Distributors License
  A Distributors License authorizes the acquisition, possession, distribution and sale of cannabis from a licensed cultivator, processor, small business cooperative, or micro business. A Distributor Licensee may not have a direct or indirect economic interest with any other license
• Retail License
  A Retail Licensee authorizes a licensee to operate a Cannabis Dispensary and to acquire, possess, and sell cannabis from the licensed premises to Cannabis Consumers (the general public). Companies interested in operating a dispensary may have up to three (3) retail licenses, however each license would have to be applied for and awarded independently by the Control Board. A Company and its members who hold a retail licensee may not have a direct or indirect interest in any other cannabis related license. An applicant must show that it is either the owner of the premise to be licensed, or shall be able to possess the subject premises within thirty (30) days of approval of said license through either a lease, management agreement or other agreement for a term not less than the licensed period (all licenses are granted for a two [2] year period). Licensed premises shall be in a store, with principle entrance on the street level and located on a public thoroughfare in premises zoned for business, trade or industry.An applicant’s premises must not be within 500 feet of school grounds (School grounds means any public or private school used for purposes of the education of more than 12 children in kindergarten or any of grades 1 to 12, inclusive, but does not include any private school in which education is primarily conducted in a private home(s).) However, it is likely that the Control Board may pass additional restrictions as well as local municipalities. Said restrictions may extend the 500 ft buffer rule as well as include additional entities such as places of worship, playgrounds, parks etc…
• Onsite Consumption License (identified as a low barrier to entry license)
  • Must possess lease of commercial property with a term of at least two (2) years, or be the owner to the proposed licensed space
  • May only have three (3) locations (each location will require its own independent awarded license)
  • May not also have a retail license, cultivation, processor, microbusiness , cooperative or distributor license (does not mention delivery license [or nursery])
  • Proposed premises may not be within 500 feet of school grounds (School grounds means any public or private school used for purposes of the education of more than 12 children in kindergarten or any of grades 1 to 12, inclusive, but does not include any private school in which education is primarily conducted in a private home(s).) However, it is likely that the Control Board may pass additional restrictions as well as local municipalities. Said restrictions may extend the 500 ft buffer rule as well as include additional entities such as places of worship, playgrounds, parks etc…
    • The Control Board may consider the following factors when considering an applicant for licensure:
    • Criteria Specific to Onsite Consumption:
      • Whether there is a demonstrated need for spaces to consume cannabis
      • Operating Plan must contain assurances that
        • Applicant will not permit any products within the premises that are not purchased from a licensed distributor, adult use cooperative, microbusiness and only in containers approved by the board, and only in quantities approved by the board
        • Applicant will not permit any gambling, contests, fireworks, exposing or simulated exposing or any other activities deemed inappropriate by the Control Board
        • That premises shall maintain records of all transactions involving the business transacted by such licensee which shall show that amount of cannabis products, in applicable metric measurements,
      • Proposed premises must not have any opening or means of entrance or passageway for persons or things between the proposed licensed premises and an unlicensed premises unless ingress and egress is restricted by an employee, agent of the employee (security), or other means approved by the board (e.g. electronic recognition system).
• Microbusiness License (identified as a low barrier to entry license)
  • May not hold an interest in any other license
  • May only distribute to retail licensees
  • Licensed Activities
    • Authorizes only limited cultivation, processing, distribution, and dispensing of ones own cannabis, and cannabis products. This limitation may extend to the licenses premises’ square ft lot space, as well as a limit on the maximum amount of Cannabis plants that the licensee may cultivate at any one-time.
    • Size and scope of a micro business shall be determined by the NYS Cannabis Control Board with a focus on social and economic equity applicants
• Small Business Cooperative License (seed to sale, just not to the consumer) (identified as a low barrier to entry license)
  • May not sell to consumers/general public
  • No member may have any other direct or indirect relationships in any other cannabis license
  • Licensed Activities
    • Acquisition, possession, cultivation, processing and sale from the licensed premises to licensed distributors, on-site consumption licensees, and retail licensees
  • Criteria
    • Company must be NYS limited Liability Company (LLC) or NYS Limited Liability Partnership (LLP) (other entities may be authorized by the NYS Cannabis Control Board, but MRTA does not designate any other entities as authorized)
    • The Business must be democratically controlled by the members themselves on the basis of one vote per member.
    • The Business must subordinate capital, both as regards to control over the cooperative undertaking, and as regards the ownership of the pecuniary benefits arising therefrom
    • The Business must vest in and allocate with priority to and among the members of all increases arising from their cooperative endeavor in proportion to the members’ active participation in the cooperative endeavor
    • The Business must operate according to the 7 cooperative principles of the International Cooperative Alliance in 1995
    • All coop members shall be natural persons and shall not be a member of more than 1 small business coop
    • Canopy limits?

Local Opt-out

Cities, towns, and villages can opt-out of allowing only adult-use cannabis retail dispensaries or on-site consumption licenses from locating within their jurisdictions, County Municipalities cannot. Municipalities cannot optout of adult-use legalization or any other licensed activity. Possession and use of cannabis by adults 21 years of age or older is legal in New York State.

An Opt-Out option means that MRTA originally designates all local municipalities as participating and otherwise permitting Adult-Use retail and Adult Use On-site Consumption, but gives these local municipalities an option to “opt-out”. In order for a local municipality to opt-out, a municipality must pass a local law within the calendar year of 2021. This means that if a municipality has already passed a local law or resolution prohibiting adult-use cannabis licensees from operating in its jurisdiction, the municipality will have to pass a new local law conforming to the opt-out requirements outlined in the MRTA if the municipality still chooses to opt-out. Local municipalities may elect to opt out of both retail and on-site consumption or may elect to opt out of just one type.

If a municipality does not opt-out by December 31, 2021, the municipality will be unable to opt-out at a future date. If a municipality elects to opt-out, it may always opt-(back)in by repealing the local law which established the prohibition.

If a town passes a local law to opt-out, it only affects the area of the town outside of any village within the town.

Any local law opting out of adult-use retail dispensaries or on-site consumption licenses will be subject to a permissive referendum as outlined in section 24 of the Municipal Home Rule Law.

This allows voters within the municipality to petition whether or not to approve the local law at the next local election.

To find out if a particular Town, City or Village has passed any local laws affecting Cannabis licensees or otherwise electing to opt-out of Cannabis Retail and On-Site Consumption you may use the following link: https://locallaws.dos.ny.gov/search/laws

Local Control and Preemption

Except for the opt-out provision described in the section above, all municipalities including counties, are preempted from adopting any law, rule, ordinance, regulation, or prohibition pertaining to the operation or licensure of adult-use cannabis, medical cannabis or cannabinoid hemp licenses.

However, towns, cities and villages are permitted to pass local laws and regulations governing the time (hours of operation), place (zoning), and manner (content neutral regulations on business conduct and adherence to local building codes) of adult-use retail dispensaries and on-site consumption licensees, provided such laws and regulations do not make the operation of the license unreasonably impracticable.

For example, cities, towns, and villages may pass laws and regulations pertaining to local zoning and the location of licensees, hours of operations and adherence to local building codes. Municipalities may not issue or require local licenses for cannabis businesses.

Notification to municipalities

At least 30 days prior to applying for an adult-use retail dispensary or on-site consumption license, an applicant must notify the municipality of the applicant’s intent to apply for such license. The notification must be made to the clerk of the village, town, or city, or if in the city of New York, the community board in which the proposed premise is located. When the municipality expresses an opinion for or against the granting of the license, the opinion shall be deemed part of the record and used by the OCM to determine whether to grant or deny the application. The Cannabis Control Board must then respond in writing to the city, town, village, or community board, with an explanation of how such opinion was considered in the granting or denial of an application.

MRTA establishes a social and economic equity program to prioritize and provide
resources to members of communities who have been disproportionally impacted by the policies of cannabis prohibition, to participate in the new industry through the implementation of a social and economic equity plan. The OCM is tasked with overseeing the social and economic equity initiatives which are to:

• Create an incubator program to encourage social economic equity applicants (hereinafter “SEE Applicants”) to apply for licensure and to provide direct support in the form of counseling services, education, small business coaching, financial planning and compliance assistance.
• Actively promote social economic equity applicants by, among other things, mentoring potential SEE Applicants and prioritizing their applications

MRTA establishes a goal to award 50% of all adult-use licenses to SEE Applicants.

SEE Applicants must be American Citizens or Permanent Resident Aliens and shall possess at least one of the following characteristics:

• Individuals from communities disproportionately impacted by the enforcement of cannabis prohibition
  • The Board will issue guidelines to determine how to assess which
    communities have been disproportionately impacted and how to assess if someone is a
    member of a community disproportionately impacted).
• Minority-Owned or Woman-Owned Businesses
  • A business entity (i.e. sole proprietorship, partnership, limited liability company or corporation) that is at least fifty-one percent (51%) owned by one or more individuals that can demonstrate membership in one of the following groups:
  • Black persons having origins in any of the Black African racial groups
  • Hispanic persons of Mexican, Puerto Rican, Dominican, Cuban, Central or South American of either Indian or Hispanic origin, regardless of race;
  • Native American or Alaskan native persons having origins in any of the original peoples of North America; or
  • Asian and Pacific Islander persons having origins in any of the far east countries, south east Asia, the Indian subcontinent or the Pacific islands.
  • Individuals who are also Female
  • Individuals who are also Service Disabled Veterans
• Distressed Farmers
  • A New York state resident or business entity that meets the small farm classification developed by the Economic Research Service of the United States Department of Agriculture (e.g. an entity or individual with an annual gross cash farm income under $350,000.00 USD), has filed a schedule F with farm receipts for the last three (3) years, qualifies for an agriculture assessment and meets other qualifications defined in regulation by the board to demonstrate that they operate a farm operation and has been disproportionately impacted, including but not limited to incurring operating losses, by low commodity prices and faces the loss of farmland through development or suburban sprawl and meets any other qualifications as defined in regulation by board; or
  • a small farm operator and a member of a group that has been historically underrepresented in farm ownership and meets any other qualifications as defined in regulation by board.
• Extra priority shall be given to applications that demonstrate that an applicant:
  • Is a member of a community disproportionately impacted by the enforcement of cannabis prohibition;
  • has an income lower than eighty percent of the median income of the county in which the applicant resides; and
  • Was convicted of a cannabis-related offense prior to the effective date of this chapter, or
  • Had a parent, guardian, child, spouse, or dependent, or was a dependent of an individual who, prior to the effective date of this chapter, was convicted of a cannabis-related offense.
• Low Barrier-to-Entry License Types prioritized for SEE Applicants
  • The adult-use micro business;
  • Cooperative;
  • On-site consumption; and
  • Delivery license

Social equity programs in other states have struggled due to barriers of entry for social and economic equity applicants, including having the access to capital to start a new business. To address this, the MRTA establishes a two-tier market structure which prohibits licenses from being vertically integrated and owning the majority of the market.

• This allows for multiple opportunities for social and economic equity applicants and small businesses to apply for licenses.
• The adult-use microbusiness, cooperative, on-site consumption and delivery license types are all examples of low barrier-to-entry licenses, which the MRTA prioritizes for social and economic equity applicants.
• Licenses issued under the social and economic equity plan cannot be transferred or sold within the first three years of issuance, except to another qualified social and economic equity applicant with approval from the Cannabis Control Board.
• Additionally, all non-equity licensees are required as part of the application process, to develop and implement a social responsibility framework, which is designed to contribute to communities disproportionally harmed by cannabis prohibition and to annually report this progress to the Cannabis Control Board. Adherence to this requirement, is a condition of license renewal.

We have talked at some length now about New York’s Marihuana Regulation and Taxation Act, the regulatory agencies created therefrom, the nine (9) licenses established within MRTA, some of the selection criteria, New York’s preference for SEE Applicants, their characteristics, and have touched on some of the powers and limitations of local municipalities but we have not yet discussed the licensing process, specifically how to prepare for a New York State Cannabis Application.

This is because before you can start to prepare for the application, you must first understand the relevant rules and expectations.

A Cannabis application is first and foremost about two basic elements, who you and your company are and what you and your company propose to bring to the table. By presenting who you and your company are, you will be demonstrating whether you are a SEE Applicant, whether you and your company are of good moral character, that you understand that a cannabis license is a privilege not a right, and that you and your company are prepared to preform the functions for which a cannabis license would call for. In presenting what you and your company bring to the table you will be demonstrating what tangible and intellectual assets you can offer your community. You will be presenting not only a proposed commercial space and your proposed improvements both minor and/or major, but you will also be presenting your operational plan and your security plan, in other words you will be presenting your Standard Operating Practices.

Although Cannabis Applications tend to separate ones proposed Operational Plan and ones Security Plan, in preparing a company to participate within the Cannabis industry one should understand that there is actually quite a substantial amount of overlap between the two. Your operational plan will have much to do with running a structured and secure enterprise and your security plan will have much to do with operating a functional and free flowing experience. When presenting ones proposed commercial space and what you propose to build out within that space you, should be able to demonstrate how both your operational plan and security plan will synchronize.

To take a Retail Dispensary Business as an example, some of the more traditional layout designs are the Bank Model, the Pharmacy Model, the Mobil Model, and the Kiosk Model.

Bank Model
Pharmacy Model
Mobil Model,
Kiosk Model

All of these designs have everything to do with a synchronized operational plan and security plan

Operational Plan
A Successful applicant will present within their operational plan a brief company summary, their executive team comprised of both owners and employees, their store location including the space’s square ft dimensions, the facilities within that space, the equipment to be used in operating the business as well as their inventory management systems which should always include the use of inventory management software preferably one designed for cannabis companies.

Security Plan
A Successful applicant will present within their security plan both tangible characteristics and intellectual. The tangible characteristics should include (among other things) their commercial space’s exterior space (e.g. exterior lighting, fencing, landscaping, dumpster and dumpster area precautions etc.), their commercial space’s exterior structure (e.g. entrance doors visible from street and/or parking lot, door integrity, window design and locks, whether vents and other opening are properly secured) their commercial space’s interior areas (e.g. well lit rooms, clear lines of sight and minimal blind corners, integrity of interior doors and windows etc.), as well as the proposed sensor alarm systems (e.g. entrance, storage, cash register and safe sensors, employee alarm system training etc.). The intellectual characteristics of ones security plan should include opening and closing procedures, cash management procedures, procedures and handling emergencies, general alarm procedures, employee work procedures, trash and waste management procedures.