§ 116.1 Definitions. Section 116.1 defines terms used in Part 116, including but not limited to “licensee”, “conditional period”, “eligible applicant”, “fund”, “justice involved” “qualifying business”, and “true party of interest”.

§ 116.2 Application for Conditional Adult-Use Retail Dispensary License. Establishes the application process under the Office of Cannabis Management for persons interested in applying for a conditional adult-use cannabis retail dispensary license. The section also provides for the information that an applicant will be required to include in their application for the license and that the applicant must provide notification to the Office of any changes to such information.

§ 116.3 Attestations. Requires applicants to attest that they will, among other things, submit to the jurisdiction of New York courts, only obtain and sell adult-use cannabis product as permitted by the Cannabis Law and its rules and regulations, provide complete disclosure of required information, not attempt to conceal ownership or control over the operations, enter into a labor peace agreement with a bona fide labor organization, and comply with all applicable state and local laws, regulations and guidance.

§ 116.4 License Eligibility and Evaluation. Establishes the minimum requirements that an applicant must meet to be eligible for the conditional adult-use retail dispensary license. Establishes the criteria based on which the applicant will be evaluated to determine which applicant is issued a license. Establishes a process for selection of applicants in the event there are greater number of applicants than available licenses.

§ 116.5 Denials. Establishes the basis on which an application will be denied a license, including, among others, failure to submit materials by the required deadline, failure to submit fingerprints, failure to comply with state, local and federal laws, revocation of cannabis license in other jurisdictions, delinquency in filing any required tax returns and paying any amounts owed related thereto, violation of Cannabis Law.

§ 116.6 Application for Renewal or Transition. Establishes the process under the Office of Cannabis Management by which licensees can renew their registration within the conditional period. Requires the submission of a renewal application. Provides an opportunity for a licensee to transition to a non-conditional adult-use retail dispensary license upon the expiration of the four-year conditional period.

§ 116.7 Requirements and Prohibitions for Conditional Adult-Use Retail Dispensary License. Lists requirements for conditional adult-use retail dispensary licensees, including ownership and control requirements, compliance with all terms and conditions of any agreements approved by the Cannabis Control Board, including any loan and lease agreements, and compliance with all local and state laws and regulations.

§ 116.8 Suspension, Revocation, and Surrender. Establishes the process for deeming a license surrendered in the event the licensee fails to comply with all state and local laws, regulations and guidance. Establishes the process for ceasing operations in the event licensee wishes to cease operating a conditional adult-use retail dispensary.

§ 116.9 Severability. Provides for the severability of the provisions in the regulations in the event any provision or its application is found to be invalid.

Statutory Authority:

Section 13 of the Cannabis Law provides, in part, that the Cannabis Control Board (Board) shall propose such rules and regulations as the Board may deem necessary or proper to fully effectuate the provisions of the Cannabis Law. These proposed rules and regulations shall include the application, eligibility and licensing of applicants seeking to obtain a conditional adult-use retail dispensary license.

Legislative Objectives:

The Legislature intended to regulate, control, and tax cannabis, generate significant new revenue, make substantial investments in communities and people most impacted by cannabis criminalization, reduce participation of otherwise law-abiding citizens in the illicit market, end the racially disparate impact of existing cannabis laws, create new industries, and increase employment.

The proposed regulations accomplish this objective by establishing application requirements for initial and renewal licensure as a conditional adult-use retail dispensary (CAURD). This will, in turn, create retail dispensary spaces in New York State for the initial phase of adult-use retail dispensaries roll-out. The proposed regulations create a structure to define who eligible applicants are, the relationship they must have to being justice involved, and ensuring that there are no fraudulent activities by vetting all in the ownership structures, including true parties of interest, all while creating a process to determine eligibility and evaluate which eligible applicants would be placed in regional geographic locations, with considerations of preference and need. Finally, the proposed regulation outlines the process for renewal of the license, how to transition out of the conditional period and what requirements and prohibitions exist for running a conditional adult-use retail dispensary. The regulation details what constitutes a surrender of a license and what a licensee needs to do to cease operations.

Needs and Benefits:

The proposed rule establishes the framework necessary to address common challenges faced by adult-use cannabis programs in other states on providing access and opportunity in the market to those most impacted by the enforcement of the prohibition of cannabis. The common challenges faced by programs in other states tend to be: (1) access to capital; (2) access to real estate, and (3) timing into the market. The application process, eligibility and evaluation criteria, and requirements and prohibitions for a CAURD license seek to address each identified barrier and ensure that New York realizes the foundational social and economic equity goals of the Cannabis Law and Marihuana Regulation and Taxation Act (the Act).

These criteria, shaped in tandem with State partners, strike a balance of licensing those most impacted, while also giving an early licensing opportunity to entrepreneurs that have demonstrated capacity to operate a business in what stands to be a dynamic, complex regulatory environment and potentially hyper-competitive market.

The proposed rule establishes parameters around how individuals may apply and what is needed to be eligible to apply, for a CAURD. The objective is to provide a cohort of entrepreneurs, whose lives have been directly and significantly impacted by the disproportionate enforcement of cannabis prohibition but who have also demonstrated the ability to grow and run a business, the first opportunity to obtain a retail license in New York’s legal adult-use cannabis market.

The CAURD license is a subset of the retail dispensary license but is distinguished from other retail license types in that it is only available to applicants who can meet the eligibility criteria and may receive support from New York State in the form of a loan or assistance finding and securing a retail dispensary location, if available.

Costs:

Costs for the Implementation of, and Continuing Compliance with the Regulation to the Regulated Entity:

There will be no costs associated with the proposed regulation to the regulated entity related to the application for licensure as a CAURD licensee. There is no application fee to initially apply for a CAURD license. Prior to the expiration of the first renewal period, the regulated entity will need to submit an application to renew the license but there is no renewal fee. Upon the expiration of the conditional period (which is four years from the date the CAURD license is granted), the regulated entity shall have an opportunity to transition to an adult-use retail dispensary as prescribed by the Office under forthcoming adult-use retail dispensary regulations, which are still in development.

Upon licensure, there will be costs related to the operation of a CAURD license imposed upon the regulated entity to comply with all the laws, rules and regulations governing adult-use retail dispensary licenses. Sections 72 and 85 of the Cannabis Law outline requirements for retail dispensary licenses including but not limited to, identification checks to ensure all customers are 21 years or older, security provisions to prevent inversion or diversion of cannabis products, record keeping requirements, tax collection and remitting responsibilities and making public health educational materials available at retail dispensary locations.

Costs to State and Local Governments:

The proposed rule does not require the state or local government to perform any additional tasks beyond those contemplated under the Cannabis Law. Additionally, the Cannabis Law imposes a four percent tax on the sale of adult-use cannabis sold at a retail dispensary to be directed to the localities where the retail dispensary is located.

Costs to the Office of Cannabis Management:

The Office of Cannabis Management anticipates the conditional adult-use retail dispensary program will require Office resources to support the application development and review and ongoing monitoring and compliance of licensees. Staff will be required to review and manage the applications submitted and enforce compliance associated with the conditional adult-use retail dispensaries once they are licensed. However, the Office anticipated these costs and is in line with the legislative intent of the Cannabis Law.

Local Government Mandates:

The proposed rule does not impose any new programs, services, duties or responsibilities on local government.

Paperwork:

The paperwork associated with processing applications for entities who wish to become CAURD licensees in New York State will include background information on the applicant and each individual associated with the ownership, management and financing of the applicant, among other requirements. It is anticipated that processing applications will be ongoing as applicants apply and renew. Additionally, applicants seeking prior written approval of the Office for changes to their operation or ownership structure will need to submit documents needed for the office to review and consider the request for approval or denial.

Paperwork will be associated with the maintenance of records for the applicant and licensee’s operating procedures as well other records required. Applicants and licensees are required to continue to disclose any change to the information provided to the office at the time of application and after licenses are disclosed.

Duplication:

The proposed rule does not duplicate any existing State or federal requirements that are applicable to a conditional adult-use retail dispensary license.

Alternatives:

There were no significant alternatives proposals to be considered for the adoption of the proposed regulations to be considered during the regulatory process as the alternative would have been to do nothing and not establish this license or to establish a more flexible licensure schematic which did not have rules, but policy decisions. Doing nothing was not a significant alternative because there was a need to provide licenses for adult-use purposes to address the legislative intent to regulate, control, and tax cannabis, generate significant new revenue, make substantial investments in communities and people most impacted by cannabis criminalization, reduce participation of otherwise law-abiding citizens in the illicit market, end the racially disparate impact of existing cannabis laws, create new industries, and increase employment. To establish such a lofty application and licensure process, SAPA would have mandated that where there are hard and fast rules, the flexibility in establishing the procedure through guidance was also not a significant alternative because there were going to be things required of each applicant where there would be no flexibility.

Federal Standards:

Federal requirements do not include provisions for a conditional adult-use retail dispensary licensure.

Compliance Schedule:

The proposed regulations will take effect upon publication of a Notice of Adoption in the New York State Register.

Effect of Rule:

This proposed rule will allow conditional adult-use retail dispensaries to become licensed to sell cannabis products in New York State. Each conditional adult-use retail dispensary may operate one physical location within New York State. There are no costs to existing small business establishments or government entities in New York State.

Compliance Requirements:

Applicants who receive a conditional adult-use retail dispensary license will need to comply with all the laws, rules and regulations governing adult-use retail dispensary licenses. Sections 72 and 85 of the Cannabis Law outline requirements for retail dispensary licenses including but not limited to, identification checks to ensure all customers are 21 years or older, security provisions to prevent inversion or diversion of cannabis products, record keeping requirements, tax collection and remitting responsibilities and making public health educational materials available at retail dispensary locations.

Professional Services:

No professional services will be required of small business entities and local governments.

Compliance Costs:

There are no small business entities which are currently licensed to operate a conditional adult-use retail dispensary in New York State. The proposed regulations do not impose an economic impact on any existing small business entity. Entities who wish to become licensed as a conditional adult-use retail dispensary in New York State will incur costs associated with the operation of a retail dispensary for cannabis product. These costs include but are not limited to record keeping requirements and security standards and protocols.

Economic and Technological Feasibility:

This proposal is economically and technologically feasible. The operations of a retail dispensary do not impose any unique technological or economic challenges to small businesses or local governments compared to other similar industries such as a liquor store or pharmacy. In addition, the Marihuana Regulation and Taxation Act (MRTA) requires the conditional adult-use retail dispensary to collect and remit a 13% excise tax to the Commissioner of Tax and Finance. This tax will provide for a return of 9% to New York State and 4% to the localities in which the adult-use cannabis is dispensed. Of the 4%, the county retains 1%, and the town, city, or village retains 3%.

Minimizing Adverse Impact:

These regulations will allow for the sale of adult-use cannabis to customers. The regulations permit for substantial investments in communities and people most impacted by cannabis criminalization, reduce illegal drug market, and increase employment. To minimize the potential for adverse effects associated with the sale of adult-use cannabis, towns, cities and villages were provided with the ability to opt-out of allowing dispensaries within their jurisdiction pursuant to the MRTA. Moreover, the regulations set-up the beginning of a regulatory framework to regulate the sale of adult-use cannabis products that requires public health protections including testing, labeling and packaging to minimize negative externalities of cannabis use. These regulations do not create an adverse impact to small business and local governments.

Small Business and Local Government Participation:

The proposed rule was developed in response to feedback from multiple organizations, state agencies, and advocates and who have provided feedback and suggestions for implementation of adult-use retail dispensaries and the state’s general goals of providing access and opportunity to those most impacted by the enforcement of the prohibition of cannabis. There will be a 60-day public comment period with the regulations that will allow for additional comments to be considered.

Types and Estimated Numbers of Rural Areas:

Outside of major cities and metropolitan population centers, the majority of counties in New York State contain rural areas. Entities that wish to become an entity licensed as a conditional adult-use retail dispensary may have up to one dispensary initially, and an additional two dispensaries thereafter as permitted by the Cannabis Law. Some of the dispensaries may be located in rural areas. The selection of conditional adult-use retail dispensaries will take into account geographic distribution to ensure the needs of consumers in rural areas are met.

Reporting, Recordkeeping and Other Compliance Requirements; and Professional Services:

There are no new reporting, recordkeeping or other compliance requirements imposed on rural areas as a result of the regulations. No new professional services will be required of rural areas. Compliance requirements will be limited to the entities who become licensed as a conditional adult-use retail dispensary.

Costs:

There are no compliance costs to existing establishments in rural areas since no new compliance activities are imposed upon them. Compliance costs will be limited to the entities who become licensed as a conditional adult-use retail dispensary.

Minimizing Adverse Impact:

The proposed rule will apply to individuals and entities who wish to operate a conditional adult-use retail dispensary. Applicants in rural areas of the state, as well as other areas of the state, will be able to obtain information regarding the license online and attend a videoconference to make the license requirement information easily accessible to all individuals and entities who wish to apply. Licensed conditional adult-use retail dispensaries will be located throughout the geographic regions to increase accessibility to consumer in rural areas.

Rural Area Participation:

The proposed rule was developed in response to feedback from multiple organizations, state agencies, and advocates who have provided feedback and suggestions for the commencing the adult-use cannabis program. There will be a 60-day public comment period with the regulations that will allow for additional comments to be considered.

A Job Impact Statement is not included because the Office has concluded that the proposed rule will not have a substantial adverse effect on jobs and employment opportunities. The proposed rule will allow for the opposite effect on jobs as new jobs will be created to support the activities created for conditional adult-use retail dispensaries.