New York Regulators Clear Path for Medical Marijuana Operators to Enter Adult-Use Cannabis Market

New York state regulators made a significant decision on Tuesday by approving the application process for adult-use retail licenses for the state's medical marijuana operators. This development opens the door for multi-state operators (MSOs) who had previously acquired the majority of the state's 10 "registered organization" permits to enter what is anticipated to become one of the largest East Coast cannabis markets.

Under the newly approved resolutions by the Office of Cannabis Management (OCM), applications for retail or microbusiness licenses will be accepted from October 4th to December 23rd. Additionally, a separate resolution allows registered organizations to submit applications during a yet-to-be-specified window, which will be determined by the Office.

Barry Carmody, a spokesperson for the New York Medical Cannabis Industry Association (NYMCIA), which represents eight of the existing MMJ licensees, including major MSOs such as Acreage Holdings, Cresco Labs, Green Thumb Industries, and Curaleaf Holdings, expressed optimism about the decision. He stated, "Today marks a pivotal step toward expanding and sustaining the state's medical program and the creation of an economically viable and equitable adult-use cannabis industry in New York."

The vote on this proposal has several implications:

1. Legal challenges aimed at opening licensing to all applicants may no longer be necessary. Some MSOs had filed a lawsuit against the state in March, known as the Coalition for Access to Safe and Regulated Cannabis, seeking expanded licensing opportunities.

2. Social equity applicants and licensees who were promised priority access to the adult-use market may feel abandoned, as many are still waiting to open their businesses due to bureaucratic delays and separate litigation related to the Conditional Adult-Use Retail Dispensary (CAURD) program.

Notably, a week before this decision, the CEOs of four MSOs urged Governor Kathy Hochul to allow them to enter the adult-use market in New York "without delay."

Small businesses are particularly unhappy with this development, feeling that their interests have been sidelined. The Cannabis Association of New York (CANY), representing small and state-based businesses, made several demands of New York regulators to level the playing field:

1. Reform the state's potency tax, which imposes higher rates on concentrates.
2. Apply identical canopy limits to "registered organizations" (ROs) and small businesses.
3. Address the illicit market in the state, with estimates suggesting as many as 2,000 unlicensed sellers in New York City alone.

While New York legalized adult-use cannabis in March 2021, retail licenses have been primarily available to "impacted individuals" of the war on drugs and certain nonprofits, who were also promised 50% of all licenses. Despite the issuance of numerous CAURD permits, only 23 licensees are currently operational, with five of them being delivery-only.

Legal challenges still loom over New York's adult-use licensing process, with two ongoing lawsuits against the OCM—one by the MSOs and another by a group of "service-disabled veterans" excluded from the CAURD program. The legality of the CAURD program itself has been questioned.

Small-business advocates have called on Governor Kathy Hochul to convene a special legislative session to formally codify the CAURD program, indicating that the program may continue to evolve in the future.