ALBANY — Recreational marijuana licenses in New York will completely divide businesses growing and processing the plant from those that will sell it, except in the case of “microbusinesses,” according to a Thursday preview of draft industry rules.
The heavily anticipated regulations will be considered next week by the state Cannabis Control Board, months after it sent draft packaging, labeling and testing rules for public comment and approved short-term conditional licenses for both growers and processors.
The market structure described in Thursday’s release doubles down on a key principle in the state’s recreational marijuana legalization bill passed in late March 2021.
“If you operate or invest in a business on the supply side, you cannot also hold any interest in a retail business,” the draft rules state.
Regulators clarified that microbusiness license holders can have separate retail shops in addition to their cultivation and processing centers. But those licensees will only be able to grow up to 3,500 square feet of cannabis crop indoors, or 10,000 square feet outdoors.
The limits are much lower than the ones for the conditionally licensed growers who are preparing to supply the state’s first legal recreational shops; they have been allowed to grow up to one acre outdoors or 25,000 square feet indoors; many are planning to process their first crop into oils and tinctures rather than selling it as smokable flower.
The two-tiered market structure, which will mirror New York’s alcohol industry, differs from the seed-to-sale system in the state’s medical cannabis market. That divergence has drawn protest from industry hopefuls concerned that “vertically integrated” businesses would be more viable competition for the state’s existing medical operators; these multi-state businesses will eventually be allowed to sell to recreational clients, according to state law.
“With the adult-use (recreational) program, you’re not able to spread risks and costs along the supply chain, you’re not able to control your supply and meet the demand, because you are hamstrung by the regulations,” Rev. Kirsten Foy, a Brooklyn-based activist and president of Arc of Justice, said in an interview over the summer.
Foy thinks the “Black and brown” New Yorkers who may soon be entering the state’s recreational industry will be “structurally prohibited from accessing the greatest opportunity” due to the rules.
But so far, seed-to-sale medical companies have not been allowed to sell to recreational customers in New York, and both the timeframe and price tag for their inclusion in the industry is unclear. Meanwhile, in Thursday’s preview, regulators reiterated their stance that “this key principle of the law (barring vertical integration) creates opportunity, opens the market to more potential players and will help establish a diverse and equitable industry.”
Their draft regulations will include specifications for seven license types: those for cultivation, nurseries, processing, distribution, retail dispensaries, microbusinesses and cannabis collectives (co-ops).
A “cannabis collective” license will require at least five members to initiate, according to the draft rules, but license holders will be able to then scale up their operation proportionally as new members join. The unusual category is designed to encourage cooperatives, according to regulators, and ensure “these entities can receive investments.”
If approved by the Cannabis Control Board in Monday’s meeting, the regulations will enter a 60-day public comment period.
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