Governor Kathy Hochul announced the largest expansion of New York State’s legal cannabis market to date, with hundreds of licenses being made available to individuals and businesses interested in legally growing, processing, distributing, and selling cannabis. The application period is open as of today, October 4, and will remain so for two months. The Governor also announced the results of continued aggressive enforcement against the illegal sale of cannabis across the state undertaken by the Office of Cannabis Management and the Department of Taxation and Finance, which to date has yielded the seizure of more than 8,500 pounds of illicit product with an estimated street value of more than $42 million. She also announced new partnerships with localities that will enable them to pursue padlocking orders against businesses illegally selling cannabis from State courts, and a new multi-agency initiative to target illegal operators for labor violations, thus significantly increasing fines and penalties that businesses may face. New York’s legal cannabis market is now poised to be one of the largest in the world; one that will ultimately generate hundreds of millions in revenue annually, as well as create or sustain thousands of jobs across the state, all while prioritizing equity, promoting small business growth, ensuring product quality, and maintaining consumer safety.
“We know there’s room for improvement as New York works to launch a brand-new cannabis industry and crack down on illicit operators, and I’m committed to working with all stakeholders to get the job done right,” Governor Hochul said. “My Administration is laser-focused on shutting down illegal storefronts, protecting the health and safety of children, and helping small businesses thrive. We will continue working to build the most equitable adult-use cannabis industry in the nation that invests in communities and rights the wrongs of the past.”
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Chris Alexander, Executive Director of New York State Office of Cannabis Management said, “This is a significant moment for entrepreneurs who have been waiting for an opportunity to join this consequential market. We’re building the biggest and fairest cannabis market in the world, and the opening of a new application window means an expansion of opportunity. New York’s market is centered around equity, with the nation’s strongest anti-trust protections in place that ensures small operators will forever have a place in our cannabis industry. I appreciate Governor Kathy Hochul’s fierce commitment to anti-trust regulations in cannabis, and I’m eager to see what this new crop of entrepreneurs can do to transform cannabis in and out of New York.”
Tremaine Wright, Chair of New York State Cannabis Control Board said, “New York State remains steadfast in its efforts to build an equitable, competitive and diverse cannabis industry. Today, the day our general application window opens, marks a huge step forward in making our vision of an equitable and accessible New York cannabis market a reality. Under Governor Hochul’s leadership New York has ushered in strong rules and protections to ensure all licensed cannabis businesses have a real chance to compete. I am excited to continue working with the Governor and the Office of Cannabis Management to grow this sector responsibly, thoughtfully, and in ways that acknowledge and correct the damage caused by a century of cannabis prohibition.”
Largest Expansion of Legal Market to Date
Read the Application Guidance and Frequently Asked Questions here.
Starting today, October 4, 2023, and lasting through December 4, 2023, all eligible applicants will be able to apply for licenses for cultivation, processing, distribution, sale, or to operate a microbusiness. This will be a significant expansion of the existing market that is being expanded in phases to ensure that New York’s cannabis market grows in a stable way, avoiding the price shocks and collapses seen in other states that have resulted in the failure of small businesses and significant contractions in overall market value.
OCM and the CCB will accept applications for review and will begin awarding licenses for cultivators, processors, distributors, microbusinesses, and retail dispensaries in early 2024. During this application window, currently operational Adult-Use Conditional Cultivators and Conditional Processors will also be able to apply to transition to full, non-conditional licenses. Entrepreneurs seeking to apply for licenses will be able to file their applications through the New York Business Express (NYBE) platform, accessible here.
The regulations governing all categories of licenses were approved by the CCB on September 12. These regulations create a framework for an equitable and sustainable cannabis industry grounded in public health best practices, including keeping cannabis products out of the hands of youth, establishing product quality and safety guidelines, outlining employee training standards, and defining business security requirements to protect public safety. These regulations also incentivize sustainable cannabis operations by prioritizing energy and resource efficiency and protecting against wasteful business practices. Critically, these regulations maintain the equity goals laid out in New York’s Cannabis Law and the Marihuana Regulation & Taxation Act (MRTA). The finalized regulations are the result of significant public feedback, with OCM and the CCB receiving more than 4,000 comments between December 2022 and July 2023.
The CCB anticipates issuing a significant amount of retail licenses are adopting an approach that has the ultimate goal to ensure that New Yorkers have access to as many locations as possible to legally buy cannabis as quickly as possible. Owing to the constantly shifting nature of the retail environment and because the process of opening a storefront is both resource-intensive and lengthy, the number of retail licenses initially issued will likely be larger than the number of stores that are anticipated to open in this first phase. This approach is designed to guard against market volatility, help small businesses enter the market, and expand consumer access.
Aggressive Crackdown on Illegal Operators: Results to Date and New Partnerships
Governor Hochul announced today the results of the last four months of aggressive enforcement against unlicensed cannabis businesses undertaken by OCM and DTF, which were granted new powers only in May of this year under a new law championed by the Governor. By taking decisive action against unlicensed cannabis businesses, New York State is making a significant stride toward cracking down on unlawful cannabis operations that jeopardize public safety, consumer well-being, and the integrity of New York State’s legal cannabis market.
Since June 7, OCM and DTF have conducted 246 inspections across the state, and have seized more than 8,500 pounds of illegal cannabis products, which have an estimated street value of more than $42 million. The Governor also announced today the results of concentrated enforcement actions on the West Side of Manhattan and in Downtown Brooklyn, two areas of New York City with a proliferation of illegal cannabis shops. These actions, which took place just in the last two days, resulted in the seizure of nearly 150 pounds of product worth close to $600,000.
Businesses found to be illegally selling cannabis have been issued Notices of Violation and have also had Orders to Cease Unlicensed Activity affixed to the outside of the doors. Those businesses must now appear at an administrative hearing, where the final fines and penalties they will face will be determined. Fines for the illegal sale of cannabis start at $10,000 per day and can rise up to $20,000 per day for the most egregious conduct. An additional fine of $5,000 can be levied for removal of the Order, and the inspected businesses may also be subject to additional violations and penalties under the Tax Law. Additional fines may be assessed. The enforcement legislation passed in May also authorized OCM to seek a State court order to ultimately padlock businesses found to be in repeated violation of the law. In addition, the law makes it a crime to sell cannabis and cannabis products without a license.
To bring many levels of government together to combat the illicit sale of cannabis, Governor Hochul announced today new partnerships between OCM and the Attorney General’s Office through which municipalities across the state can receive training on how to utilize a particular provision — Section16-A — of the new enforcement law signed by Governor Hochul in May to pursue padlocking orders in State Court. 16-A authorizes local governments, including county attorneys, to pursue padlocking orders based on inspections conducted by OCM and DTF without OCM having to petition the court for such an order against a business found to be engaged in egregious conduct. This authority significantly augments the ability for different levels of government to work together to shut down illegal cannabis operators.
New York Attorney General Letitia James said, “Expanding the number of cannabis licenses while simultaneously taking action against unlicensed sellers is a common sense way to support small businesses and incentivize entrepreneurs to legally enter the marketplace. My office worked closely with the Office of Cannabis Management and Governor Hochul to shut down unlicensed dispensaries, and we will continue to coordinate with our partners in government to ensure New York’s cannabis laws are upheld. By holding unlicensed cannabis sellers accountable, my office is helping ensure New York can realize the intended purpose of MRTA, namely to remediate some of the societal harm caused by the so-called war on drugs.”
Governor Hochul also highlighted the recent success by the City of Syracuse to leverage OCM and DTF inspections conducted against illegal operators together with the application of the State Property Maintenance Code to pursue closures of buildings the City deemed unfit or unlawful under the Code, another example of how municipalities can play an active role in combating the illicit market.
In addition to these new partnerships with localities, the Governor announced that several additional State agencies will now be bringing the weight of their business enforcement powers to bear as part of the State’s creative and aggressive approach to combating the illicit market. The Department of Labor and the Workers Compensation Board will join these efforts to ensure businesses suspected of selling cannabis without a license are compliant with New York State labor and workers compensation laws:
Workers Compensation Board: If a business is found to have employees and not carry workers’ compensation insurance, the WCB may impose a Stop Work Order. Penalties are issued up to $2000.00 for each 10 day period of non-compliance based on the number of employees.
Department of Labor: Payrolls will be inspected to ensure employers are paying their employees the state’s minimum wage to include any eligible overtime, employees are allowed sick time and are compliant with the New York Health and Essential Rights Act (NY HERO Act) and COVID sick pay. Fines for failure or late payment of wages, failure to provide sick leave, illegal deductions from wages, hours and payroll records, notices to employees, paystubs, tip appropriation are up to $1,000 for 1st violation, up to 2,000 for 2nd violation, up to $3,000 for 3rd and subsequent violation. Similar fines for other violations may also be imposed, including lack of Minimum Wage posting, failure to cooperate with an investigation and failure to allow employee interviews, and underpayment of wages may bring fines of up to 200 percent of wages owed in addition to wage owed.
New York State Department of Labor Commissioner Roberta Reardon said, “If a business is selling a product without the proper license, there is a concern that they may also be violating other state laws that protect workers, including minimum wage, overtime, and sick leave, among others. All employers, unlicensed or not, should be providing the same worker protections that are required under the law. We are proud to join our state and local partners in this effort to ensure that the rights of workers are not being violated.”
New York State Workers’ Compensation Board Chair Clarissa M. Rodriguez said, “We commend Governor Hochul for protecting New Yorkers and ensuring their safety when it comes to this new market by leveraging a strong network of New York State agencies. One of the Board’s most important jobs is ensuring employers comply with the Workers’ Compensation Law. We’re proud to partner with other New York State agencies in taking the critical steps to see that businesses are compliant. By utilizing our authority to support this enforcement effort, we’re helping to guarantee hard-working New Yorkers have access to the protections they are entitled to under the law.”
This approach, which combines the enforcement powers of labor law, tax law, and cannabis law, can result in non-compliant business owners potentially facing tens of thousands in penalties as the result of a single inspection, significantly enhances the State’s ability to crack down on those who engage in illicit sales, and reaffirms the Governor’s deep commitment to ensuring that the law is being followed and that New Yorkers are protected from potentially unsafe products.
Building the Nation’s Most Equitable Cannabis Market: Social and Economic Equity
The Cannabis Law establishes a robust social and economic equity (SEE) program to prioritize and provide resources to members of communities who have been disproportionately impacted by cannabis prohibition policies, with the goal of elevating their participation in the new industry through the implementation of the Office’s SEE plan. Pursuant to the MRTA’s requirements, OCM and the CCB’s goal is to issue 50 percent of licenses to qualifying SEE applicants, defined as those individuals from communities disproportionately impacted (CDI) by the past enforcement of cannabis prohibition, minority- and women-owned businesses, distressed farmers, and service-disabled veterans, who will also be eligible for application support and technical training through the Cannabis Hub & Incubator Program (CHIP), which will be launching this Fall.
Following over a year of rigorous data analysis, the Governor announced today that OCM has arrived at a determination for how to assess whether an area is a CDI. The term CDI refers to, but is not limited to, a certain geographic area that has a history of arrests, convictions, and other law enforcement practices where a disparate enforcement of cannabis prohibition as compared to the rest of the state during a certain time period took place.
To identify CDIs, OCM analyzed population, number of arrests, and census tract over a period of time. OCM relied on arrest data from the Division of Criminal Justice Services and decennial census surveys (1980, 1990, 2000, 2010, and 2020) to determine the arrest rates for a particular census tract. Census tracts with arrest rates that were higher than the state’s arrest rate over a given period of time were identified as CDIs.
The CDI census tracts represent approximately one quarter of NYS population that experienced three quarters of the arrests over the last four decades. CDI maps, as well as additional detailed information about the application process can be found here.
Tabatha Robinson, Director for Economic Development, Policy, & Research at New York’s Office of Cannabis Management said, “As a native New Yorker who grew up in East Brooklyn at the height of the stop-and-frisk era, I could not be more proud of our work analyzing decades of arrest and enforcement data to determine which entrepreneurs will qualify as individuals from communities disproportionately impacted by the enforcement of cannabis prohibition. I witnessed firsthand how the enforcement of prohibition destroyed lives and deprived New Yorkers of much-deserved opportunities. Now, work begins to ensure that these communities reap the benefits of our legalized cannabis market through access to licensure and the community reinvestment fund.”
State Senator Liz Krueger said, “Establishing a functional and self-sustaining legal cannabis market in New York State is a critical endeavor that has to be kept on track if we are going to offer the opportunities to individuals and communities deeply harmed by the war on drugs, not to mention small businesses and farmers, that were envisioned by the Legislature when we passed the MRTA. I am grateful to Governor Hochul for taking these vigorous steps to expand licensing while cracking down on the unlicensed operators who threaten the viability of the market, as well as for orienting OCM to better fulfill its role.”
State Senator Jeremy Cooney said, “Opening the licensing process to all New Yorkers helps us combat the illicit market, while building and investing in communities most negatively impacted by the failed “war on drugs.” I thank Governor Hochul for her actions to combat illegal sales and work to grow our recreational market quickly. I look forward to learning more about increasing retail sales during our upcoming legislative hearing at the end of the month.”
Assembly Majority Leader Crystal Peoples-Stokes said, “Governor Hochul and OCM are taking necessary steps to advance and honor the full intent of the MRTA. Our cannabis program was designed to be the most equitable in the nation. Allowing all New Yorkers to apply for various cannabis-related licenses is essential to meeting MRTA’s social equity goals and establishing a safe and thriving cannabis market. When we legalized and regulated cannabis in New York, the underlying principles were to provide opportunity for people who otherwise would not have it and begin to repair communities harmed from the failed War on Drugs. With today’s announcement, hundreds of cannabis licenses will be awarded to social equity applicants, and communities harmed by cannabis prohibition will soon have the resources they desperately need. I also want to commend Governor Hochul and OCM for continuing to strengthen enforcement against illegal cannabis operations; these illegal operations are not paying any sales tax revenue to New York State, which is a vital component of our ability to be able to reinvest into our communities.”
Building the Nation’s Most Equitable Cannabis Market: Protecting Independent Operators and Small Businesses
New York’s cannabis market has some of the strongest protections for a sustainable and competitive market in the nation. The approach is designed to prevent market monopolization by large corporations and to ensure that small businesses have real opportunity to compete and thrive in New York’s cannabis market. The MRTA established a “two-tier” system, which prevents licensees on the supply side of the market from having more than a minimal financial interest in businesses on the retail side of the market.
To ensure transparency, accountability, and regulatory compliance, OCM will implement a robust system for tracking the ownership and financial interests of cannabis license applicants and owners. This includes the requirement for applicants to list their “True Parties of Interest” (TPI), which will enable OCM to assess ownership stakes of individuals and businesses operational in one tier of the market across the other tier. This critical information will serve a vital function in upholding the integrity of New York’s two-tier market and the viability of small businesses to compete across the supply and retail sides of the market.
