By: Dustin Robinson
On March 31, 2021, the Marijuana Regulation and Tax Act (“MRTA”) was signed into law. MRTA established New York’s adult-use cannabis regulations and expanded upon the state’s medical cannabis program. The state’s Office of Cannabis Management (“OCM”) and Cannabis Control Board (“CCB”) will oversee the state’s adult-use cannabis industry and establish rules for cannabis operations and licensing. The CCB will consist of five members appointed by the governor and each house of the state legislature. As of July 2021, the CCB has not been established. Until the CCB is established, New York cannot begin forming regulations for operators or establish the licensing process for adult-use cannabis businesses. Right now, it looks like we will see licensing open up in early 2022.
The state plans to offer several types of cannabis licenses. While the total number of licenses to be issued has not been decided, New York has established which type of licenses will be available. Adult-use cannabis licenses in New York include:
- Cultivator – A cultivation licensee is permitted to grow cannabis to be sold to processors, distributors, retailers, and on-site consumption sites. A cultivator can only have one cultivator license. In addition, a cultivator can obtain one processor license and one distributor license solely for the distribution of the cultivator’s own products. Yet, an owner of a cultivation license cannot have a direct or indirect interest in more than one cultivation center. In addition, an owner of a cultivation license cannot also hold a direct or indirect interest in a retail dispensary license.
- Processor – A processor license permits the creation of cannabis products through cannabis extractions. A processor can only have one processor license. A processor may obtain one cultivation license and one distributor license solely for the distribution of the processor’s own products. Yet, the owner of a processor license cannot also hold a direct or indirect interest in a retail dispensary license.
- Distributor – A distributor purchases cannabis and cannabis products from licensed cultivators, processors, cooperatives, microbusinesses, or registered organizations and sells the cannabis and cannabis products to licensed retailers and on-site consumption sites. A person or entity issued an adult-use cannabis cultivator, processor, and/or distributor license may hold and operate all issued licenses on the same premises. Yet an owner of a distributor license cannot have a direct or indirect financial interest in any microbusiness, adult-use retail dispensary, adult-use on-site consumption licensee or in any registered organization.
- Retailer – A retailer sells cannabis and cannabis products to consumers who are older than 21. Nobody can have a direct or indirect financial or controlling interest in more than three adult-use retail dispensary licenses.
- Delivery – A delivery license allows the licensee to deliver cannabis directly to customers older than 21. A delivery licensee cannot have more than 25 individuals providing full-time paid delivery services. New York has made clear that microbusiness licenses are intended to promote social equity applicants.
- On-Site Consumption – An on-site consumption license permits consumers to purchase and consume cannabis at a facility. The CCB will develop more regulations, but it has made clear that activities such as gambling, contests, and fireworks are prohibited at on-site consumption facilities. In addition, no person can have a direct or indirect financial or controlling interest in more than three on-site consumption licenses.
- Microbusiness – A microbusiness license allows for limited cultivation, processing, distribution, delivery, and dispensing of their own adult-use cannabis and cannabis products. The CCB will determine the size of microbusinesses and the operating requirements for microbusinesses. Yet, the CCB has already established that a microbusiness may only distribute its own cannabis and cannabis products to dispensaries. A microbusiness licensee cannot hold a direct or indirect interest in any other New York cannabis license. New York has made clear that microbusiness licenses are intended to promote social equity applicants.
- Cooperative – A cooperative license allows for vertically integrated (cultivation, processing, distribution/sale) of cannabis and cannabis products to other licensed cannabis business. The big caveat here is that a cooperative cannot sell products directly to consumers. That means a cooperative cannot operate a retail dispensary or deliver to consumers. Additionally, to qualify as a cooperative, the applicant must be a registered LLC or LLP in New York and comprised of New York residents, among other corporate requirements. No member of a cooperative can have a direct or indirect financial interest in another New York cannabis license.
- Nursery – A nursey license permits the production, sale and distribution of clones, immature plants, seeds, and other agricultural products to licensed cultivation, cooperative, microbusinesses, and registered organizations in New York. In addition, a licensed cultivator is allowed to obtain one nursery license.
- Registered Organization – Existing medical registered organizations can obtain a license to engage in adult-use cannabis activities. However, registered organizations are limited to dispensing adult-use cannabis at 3 retail dispensaries and are only allowed to sell their own products. Furthermore, registered organizations must continue to offer medical marijuana in compliance with regulations to be developed by the CCB.
New York plans to issue 50% of licenses to individuals from communities disproportionately impacted by cannabis prohibition, minority- and woman-owned businesses, distressed farmers, and service-disabled veterans. A disproportionately impacted community is a geographical area that was adversely affected by cannabis prohibition during a certain time period when compared to the rest of the state. A minority-owned business is at least 51% owned by one or more minority group members, which is defined as black persons, Hispanic persons, Native American persons, and Asian and Pacific Islander persons. A women-owned business is at least 51% owned by one or more women. A distressed farmer is a New York state resident or business enterprise that either (1) meets the small farm classification developed by the USDA and has been disproportionately impacted; or (2) is a small farm operator and a member of a group that has been historically underrepresented in farm ownership. A service-disabled veteran business is at least 51% owned by one or more a veteran who received a compensation rating of 10% or greater from the United States Department of Veterans Affairs or from the United States Department of Defense because of a service-connected disability incurred in the line of duty.
Cities, towns, and villages have until December 31, 2021, to enact local laws which prohibit retail sales and on-site consumption of cannabis. After December 31, 2021, local governments cannot prohibit retail dispensaries and on-site consumption sites if a local law has not been enacted. Yet, the local government may place reasonable time, place and manner restrictions on retail dispensaries and on-site consumption sites. In other words, the local government can limit where and when retail dispensaries and on-site consumption sites can operate so long as the restrictions are not overly burdensome and allow the businesses adequate time to operate.
New York has the potential to become one of the largest cannabis markets in the United States. As millions of people from all over the world visit, New York’s adult-use cannabis market is poised to succeed. We look forward to regulations being published in late 2021 and for applications for businesses to open up by early 2022.
By: Dustin Robinson
On February 22, 2021, Governor Phil Murphy signed into law “The New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act” (“CREAMMA”) which established New Jersey’s adult-use marijuana industry. Under the act, the Cannabis Regulatory Commission (“CRC”) will oversee the state’s adult-use marijuana industry and expand upon the 240 pages of legislation passed. The CRC met for the first time on April 12, 2021. The purpose of the CRC is to decide the start date of adult-use sales, establish the licensing process and the number of licenses to be awarded, and determine how tax dollars generated from adult-use marijuana sales are spent.
The CRC is mandated to adopt rules within 180 days after enactment of CREAMMA. The rules are expected to be released at the end of August or early September 2021. The initial rules and regulations adopted by the CRC will be in effect for a period not longer than one year. The CRC will begin accepting and processing applications for licenses within 30 days after the CRC’s initial rules and regulations have been adopted. Licenses will need to be renewed annually.
There are several different types of adult-use licenses available, which include:
- Class 1 Cultivator License – A cultivator grows, cultivates, and produces marijuana plants and raw materials. Cultivator licenses are capped at 37 for the first 24 months.
- Class 2 Manufacturer License – A manufacturer manufactures, prepares, and packages marijuana items.
- Class 3 Wholesaler License – A wholesaler stores, sells, and transfers marijuana items for resale to cannabis retailers or other wholesalers, but not to consumers.
- Class 4 Distributor License – A distributor transports bulk amounts of marijuana between licensed facilities.
- Class 5 Retailer License – A retailer sells adult-use marijuana to consumers from a retail store.
- Class 6 Delivery Service License – Delivery service is a business authorized to deliver cannabis products from cannabis retailers to customers’ homes.
- Microbusiness License – There is no cap on the number of licenses issued to microbusinesses. Furthermore, microbusinesses must account for at least 10% of each category of license issued and 25% of total licenses issued. To qualify as a microbusiness, (1) all the owners must be New Jersey residents who have resided in the state the last two consecutive years and (2) more than 51% of the owners, officers, directors, or employers live in the municipality that the microbusiness is located, (3) there are no more than 10 employees. If the microbusiness is a cultivator, the microbusiness is limited to no more than 2,500 square feet of grow space. If the microbusiness is a manufacturer, the microbusiness is limited to acquire no more than 1,000 pounds of cannabis per month to create products. If the microbusiness is a retailer, the microbusiness is limited to acquire no more than 1,000 pounds of cannabis per month to sell.
- Testing Facility License – A testing facility analyzes and certifies cannabis items and medical cannabis for compliance with applicable health, safety, and potency standards.
During the initial 24-month period following enactment of CREAMMA, there are limitations on the number and classes of licenses any one licensee which include:
- A licensed cultivator, manufacturer, wholesaler, distributor or delivery service cannot also be a licensed retailer and vice versa;
- A cultivator or manufacturer may only hold two licenses at the same time; and
- A wholesaler could not hold any other license besides distributor.
All adult-use cannabis applicants (except microbusiness applicants) must submit an attestation signed by a bona fide labor organization stating that the applicant has entered into a labor peace agreement with such bona fide labor organization. Maintenance of a labor peace agreement with a bona fide labor organization is an ongoing material condition of maintaining a license. Additionally, priority for business licenses will be given to:
- Applicants that are party to a collective bargaining agreement with a bona fide labor organization that currently represents, or is actively seeking to represent cannabis workers in New Jersey;
- Applicants that are party to a collective bargaining agreement with a bona fide labor organization that currently represents cannabis workers in another state;
- Applicants that submit an attestation affirming that they will use best efforts to utilize a signed project labor agreement with a bona fide building trades labor organization; and
- Applicants that submit a signed project labor agreement.
Licensed cannabis retailers are granted the exclusive opportunity to offer one social space for patrons to consume marijuana on the same premises as the retail location. These areas are considered “cannabis consumption areas” (“CCAs”). Licensed cannabis retailers will need to obtain state and local government cannabis consumption area endorsement before allowing consumption of marijuana on the premises. A local governmental entity (i.e., “a municipality”) may authorize the operation of a CCA for the personal use, medical use, or both personal use and medical use of cannabis within its jurisdiction through the adoption of an ordinance. A CCA may be either indoors or outdoors.
An indoor CCA is an enclosed area of the cannabis retailer that is separate from the retail sales area. The indoor CCA must be separated by solid walls or windows from the retail sales area, can only be accessed through an interior door after first entering the retailer, and must comply with all ventilation requirements applicable to cigar lounges. An outdoor CCA is an exterior structure on the same premises as the cannabis retailer, that is separate from or connected to the facility. It is not required to be completely enclosed, but it needs to have sufficient walls, fences, or other barriers to prevent any view of persons consuming cannabis items within the CCA from any persons outside the cannabis facility.
At least 70% of tax revenues generated from retail sales of cannabis products will be appropriated for investments to municipalities defined as “impact zones.” Specifically, impact zones are defined as any municipality, based on past criminal marijuana enterprises contributing to higher concentrations of law enforcement activity, unemployment and poverty within parts of or throughout the municipality, that:
- Has a population of 120,000 or more according to the most recent census; or
- Ranks in the top 40% of municipalities in the state for minor marijuana possession arrests; has a crime index of 825 or higher based upon the latest Uniform Crime Report of the Division of State Police; and has an annual average unemployment rate that ranks in the top 15% of all municipalities in the state.
New Jersey has reserved several applications for social equity applicants. Specifically, at least 15% of marijuana licenses are reserved for minority-owned business, at least 15% of marijuana licenses are reserved for women-owned and disabled-veteran-owned businesses, and at least 25% of marijuana licenses are reserved for applicants who have resided in an impact zone for three or more consecutive years at the time of making the application. In addition, priority is given to applicants who: (i) are located in an impact zone that has less than two licensees, (ii) are current residents of an impact zone and have resided there for three or more consecutive years before making the application, and (iii) presents a plan to employ at least 25% of its employees who reside in an impact zone.
Local government can impact cannabis business operations. Municipalities have 180 days from the enactment of CREAMMA to enact ordinances prohibiting adult-use cannabis businesses from operating within the municipality. If a municipality does not enact an ordinance prohibiting cannabis operations within 180 days, cannabis businesses will be permitted to operate in the municipality for a period of 5 years. Once cannabis businesses are permitted, each municipality has the authority to determine the number of cannabis businesses allowed to operate. In addition, municipalities can regulate where cannabis businesses operate, the manner in which they operate, and place restrictions on the times of operation. Yet, the local government cannot regulate delivery service operations. Only the CRC has authority over marijuana delivery to consumers.
There is a lot of excitement surrounding New Jersey’s adult-use cannabis market. The state’s medical market is already strong, paving the way for a successful roll-out of an adult-use framework. We look forward to the end of August or early September 2021 for the state’s regulations to be published and applications available for cannabis businesses.
By: Dustin Robinson
On June 23, 2021, Governor Lamont signed into law the Responsible and Equitable Regulation of Adult-Use Cannabis Act (“RERACA”) which establishes Connecticut’s adult-use marijuana industry. Under the bill, certain cannabis convictions are expunged, licensing for marijuana businesses is established, limitations from the local government are permitted, and taxes on marijuana are established. The Department of Consumer Protection (“DCP”) will oversee the state’s adult-use marijuana industry and will establish the number of licenses it plans to issue. While the total number of licenses to be issued has not yet been determined, the DCP will only allow a maximum of one retailer and one marijuana micro-cultivator (which can sell at retail) per 25,000 residents, as determined by the most recent census until June 30, 2024, which is about 144 licenses each. Thereafter, a new limit will be established.
There are several types of licenses that will be offered by the DCP, which include:
- Retailer – A retailer sells adult-use marijuana directly to customers. For a social equity applicant, the retailer fee to enter the lottery is $250, the fee for a provisional license is $2,500, and the fee for a final license or renewal is $12,500. For all other applicants, the retailer fee to enter the lottery is $500, the fee for a provisional license is $5,000, and the fee for a final license or renewal is $25,000.
- Hybrid Retailer – A hybrid retailer sells both adult-use and medical marijuana. For a social equity applicant, the hybrid retailer fee to enter the lottery is $250, the fee for a provisional license is $2,500, and the fee for a final license or renewal is $12,500. For all other applicants, the hybrid retailer fee to enter the lottery is $500, the fee for a provisional license is $5,000, and the fee for a final license or renewal is $25,000.
- Cultivator – A cultivator grows marijuana in a facility with at least 15,000 square feet of grow space. For a social equity applicant, the cultivator fee to enter the lottery is $500, the fee for a provisional license is $12,500, and the fee for a final license or renewal is $37,500. For all other applicants, the cultivator fee to enter the lottery is $1,000, the fee for a provisional license is $25,000, and the fee for a final license or renewal is $75,000.
- Micro-Cultivator – A micro-cultivator grows marijuana in a facility that is between 2,000 and 10,000 square feet. The DCP will determine the starting size based on the projected marijuana supply. Subsequently, micro-cultivators can apply to expand their grow space by 5,000 square feet per year. The maximum size for a micro-cultivator is 25,000 square feet. After a micro-cultivation facility reaches 25,000 square feet, the business can apply for a cultivator license. The application for a cultivator license will not be conducted via a lottery. For a social equity applicant, the micro-cultivator fee to enter the lottery is $125, the fee for a provisional license is $250, and the fee for a final license or renewal is $500. For all other applicants, the micro-cultivator fee to enter the lottery is $250, the fee for a provisional license is $500, and the fee for a final license or renewal is $1,000.
- Product Manufacturer – A product manufacturer creates marijuana products through cannabis extractions. For a social equity applicant, the product manufacturer fee to enter the lottery is $375, the fee for a provisional license is $2,500, and the fee for a final license or renewal is $12,500. For all other applicants, the product manufacturer fee to enter the lottery is $750, the fee for a provisional license is $5,000, and the fee for a final license or renewal is $25,000.
- Food and Beverage Manufacturer – A food and beverage manufacturer creates cannabis-infused food and drink products. For a social equity applicant, the food and beverage manufacturer fee or delivery service fee to enter the lottery is $125, the fee for a provisional license is $500, and the fee for a final license or renewal is $2,500. For all other applicants, the transporter fee to enter the lottery is $250, the fee for a provisional license is $1,000, and the fee for a final license or renewal is $5,000.
- Product Packager – A product packager is a person or company that is licensed to package and label marijuana products. For a social equity applicant, the product packager fee to enter the lottery is $250, the fee for a provisional license is $2,500, and the fee for a final license or renewal is $12,500. For all other applicants, the product packager fee to enter the lottery is $500, the fee for a provisional license is $5,000, and the fee for a final license or renewal is $25,000.
- Delivery Service – Delivery service is a person or company licensed to deliver marijuana products from micro-cultivators, retailers, and hybrid retailers to customers and patients. For a social equity applicant, the fee to enter the lottery is $125, the fee for a provisional license is $500, and the fee for a final license or renewal is $2,500. For all other applicants, the fee to enter the lottery is $250, the fee for a provisional license is $1,000, and the fee for a final license or renewal is $5,000.
- Transporter – A transporter is a person licensed to transport marijuana between licensed marijuana businesses, laboratories, and research programs. For a social equity applicant, the fee to enter the lottery is $125, the fee for a provisional license is $500, and the fee for a final license or renewal is $2,500. For all other applicants, the fee to enter the lottery is $250, the fee for a provisional license is $1,000, and the fee for a final license or renewal is $5,000.
Under RERACA, the DCP must reserve 50% of the maximum number of licenses it will issue to social equity applicants. To qualify as a social equity applicant, cannabis establishment license must be at least 65% owned and controlled by one or more individuals who: (1) have a median income for the last 3 years that is not higher than triple the state’s median income; and (2) lived in a disproportionately impacted area for either at least 5 of the past 10 years or 9 of their first 17 years of life. To meet the second requirement for social equity, a disproportionately impacted area is defined as a census tract that has either an unemployment rate of over 10% or a historical conviction rate for drug-related offenses greater than one-tenth. The DCP will publish a list of areas that qualify as disproportionately impacted areas by August 1, 2021, on its website. In addition to 50% of the licenses being reserved, social equity applicants receive a 50% reduction in license fees for the first three renewal cycles.
The DCP will conduct two different lotteries for selecting marijuana licenses. The lottery for social equity applicants is first. As discussed above, at least 50% of the total licenses to be issued are reserved for social equity applicants. In the lottery, each entrant will receive a numerical ranking. After the DCP or a third-party lottery operator selects applicants, Connecticut’s Social Equity Council created by RERACA will verify that each application selected from the lottery qualifies as a social equity applicant without looking at any identifying information beyond what is necessary to establish if the applicant fits within the definition of social equity. An applicant that does not fit within the definition of social equity will be entered into the second lottery if the applicant pays the other half of the lottery fee. After determining the applicant does not qualify as a social equity applicant, the DCP or lottery operator will identify the next-ranked applicant who will then be reviewed. After 50% of the state’s licenses are issued, a second lottery will be conducted. In the second lottery, applications will be selected from unsuccessful social equity applicants in the first lottery and from all other applicants that do not qualify as social equity applicants.
There are several documents that are required to be submitted with each application. The DCP will likely develop many more application requirements as well. So far, each application requires:
- A contract with an approved seed-to-sale vendor in accordance with the bill’s provisions;
- Evidence that the applicant has the right to occupy the location where the cannabis establishment will be located;
- Evidence that the cannabis establishment obtained local zoning approval, if necessary.
- A labor peace agreement entered into between the cannabis establishment and a bona fide labor organization;
- A certification that they are using a project labor agreement for construction projects of $5 million or more.
- A social equity plan;
- A workforce development plan;
- Written policies for preventing diversion and misuse of cannabis and sales to underage persons; and
- All other security requirements set forth by the department based upon the specific license type;
While RERACA permits adult-use marijuana within the state, adult-use marijuana businesses may be restricted on a local level. Municipalities and residents can restrict adult-use establishments from operating. Specifically, municipalities can enact zoning regulations or local ordinances prohibiting the establishment of a marijuana establishment. In addition to prohibiting marijuana businesses, local government has the authority to place reasonable restrictions on business hours and signage. Yet, no municipality can restrict deliveries to consumers. The attitudes of local residents can also influence marijuana operations. If a local referendum is received that restricts marijuana establishments from operating and is (1) signed by 10% of the municipality’s voters and (2) is submitted at least 60 days before the date of any regular election, it will be included in the general election. If the referendum is approved by a majority of the voters in the election, marijuana establishments would be prohibited from operating in the municipality.
Connecticut is an exciting market for adult-use cannabis. The state is going to have several licensing opportunities. The DCP still needs to establish regulations for operators and applications, but the DCP expects licenses to be available by the end of 2022.[1]
[1] https://portal.ct.gov/Office-of-the-Governor/News/Press-Releases/2021/06-2021/Governor-Lamont-Signs-Bill-Legalizing-and-Safely-Regulating-Adult-Use-Cannabis
04/23/2021
Vermont Bans Delta-8 THC
BREAKING NEWS: Today, Vermont’s Agency of Agriculture, Foods and Market issued a statement that Delta-8 THC is banned in Vermont. The Agency made clear that anyone who uses, possesses, or distributes Delta-8 THC may violate state criminal laws.
Excerpt for the Agency’s Statment:
Is the Manufacture of Delta-8-THC or its Use in Hemp Products Permitted under the Vermont Hemp Program?
The short answer is “No”.
Manufacturing delta-8-THC from CBD has become a way to create a psychoactive substance under the guise of being derived from legally produced hemp, which by definition does not have high concentrations of psychoactive cannabinoids.
The Vermont Hemp Rules were adopted in May 2020 and ban the “use of synthetic cannabinoids in the production of any hemp product or hemp-infused product.” Vermont Hemp Rules § 6.3. So, while naturally occurring delta-8-THC is not barred from hemp or hemp products, Vermont producers cannot manufacture the delta-8-THC cannabinoid from hemp.
Because the Vermont Hemp Rules expressly prohibit the use of synthetic cannabinoids in hemp products and/or hemp-infused product, Vermont Hemp Program registrants that manufacture and/or label products containing delta-8-THC are violating State law and risk enforcement by the Vermont Agency of Agriculture, Food and Markets. In addition, delta-8-THC manufactured from hemp may be a controlled substance under federal and/or State law. As a result, anyone who uses, possesses, or distributes delta-8-THC may face federal and/or State criminal sanctions.
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