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STATE

Legal Marijuana Sales Have Begun in New York; What to Know About the Launch of the New Industry


NYS Office of Cannabis Management ED Chris Alexander, right (photo: @nys_cannabis)


Nearly two years after passage of the Marihuana Legalization and Taxation Act (MRTA), which legalized the once heavily-criminalized drug, the first legal retail sale of marijuana in New York occurred on Thursday, December 29.

"The first legal adult-use cannabis sales mark a historic milestone in New York's cannabis industry," Governor Hochul said in a celebratory press release that day. "Today is only the beginning, and I look forward to continuing our efforts to solidify New York as a national model for the safe, equitable and inclusive industry we are now building."

The dispensary that conducted the first legal sale of cannabis is located in Manhattan’s East Village and is operated by Housing Works, a non-profit supporting formerly incarcerated New Yorkers and one of the first 36 entities awarded an initial license by the state’s Office of Cannabis Management (OCM).

A long line of New Yorkers showed up to make a purchase as elected and appointed government officials celebrated the official legal launch of the new industry. OCM Executive Director Christopher Alexander, a key figure in standing up the legal marijuana industry in New York, made the first official purchase, followed by many others, including local City Council Member Carlina Rivera.

"We set a course just nine months ago to start New York's adult-use cannabis market off on the right foot by prioritizing equity, and now, we're fulfilling that goal," Hochul said in a December 21 press release announcing the impending first sale. "The industry will continue to grow from here, creating inclusive opportunities in every corner of New York State with revenues directed to our schools and revitalizing communities."

Lead legislative sponsors on the MRTA — State Senator Liz Krueger of Manhattan and Assembly Majority Leader Crystal Peoples-Stokes of Buffalo, both Democrats — also celebrated this historic milestone in New York’s cannabis history. 

"I am gratified to see the start of the adult retail cannabis sales, and that Housing Works has opened the first retail store,” said Krueger, who has been working to legalize marijuana for many years, in a December 29 statement. “Their decades of work with marginalized communities make them a perfect partner in the effort to ensure that New York's Cannabis market provides meaningful opportunities to those most impacted by the failed cannabis criminalization policies of the past.”

Peoples-Stokes, who has been particularly focused on racial equity and reparations for past over-criminalization in the legalization process, said, “I am so pleased to see the first legal sales of cannabis in New York occur today by a non-profit that's been dedicated to helping improve people's lives for decades.”

Mayor Eric Adams also applauded the first legal sale of cannabis in New York.

“Today marks a major milestone in our efforts to create the most equitable cannabis industry in the nation,” the Democratic mayor said in a statement. “The opening of the first legal dispensary in our state right here in New York City is more than just a promising step for this budding industry — it represents a new chapter for those most harmed by the failed policies of the past. The legal cannabis market has the potential to be a major boon to New York’s economic recovery — creating new jobs, building wealth in historically underserved communities, and increasing state and local tax revenue.”

The initial sales are the next major step in a process launched by the March 31, 2021 signing of the MRTA into law, which came after decades of advocacy. New York became the 15th state in the nation to legalize recreational use of marijuana for adults, setting up a complicated system of rules around growing, selling, possessing, smoking and otherwise using, and more. The law also included key provisions around racial justice and attempts to make amends for past racially-biased criminalization of marijuana that targeted Black and Latino communities.

There have been a number of bumps in the road to get to this point, and challenges remain — legal marijuana sales were expected to be more ubiquitous by this time, illegal retail sales have popped up all over New York City with limited law enforcement response, and many localities around the state have opted out of allowing legal retail sales at all.

The Office of Cannabis Management (OCM), created in the MRTA under the new Cannabis Control Board, was tasked with “but is not limited to production, licensing, packaging, marketing and the sale of cannabis,” per the OCM website. Additionally, OCM and the Cannabis Control Board took over New York’s previously existing medical marijuana program. 

As 2022 ended, New York State had over 200 cannabis farms that had cultivated $750 million worth of marijuana (nearly 300,000 pounds) just waiting to be sold in retail dispensaries, according to a Bloomberg report

In late November, OCM approved the first 36 Conditional Adult-Use Retail Dispensary (CAURD) licenses for the retail sale of cannabis in various forms, with many more licenses to come in 2023 and beyond.

In New York City, the Adams administration has launched Cannabis NYC within the Department of Small Business Services to help launch, boost, and regulate the industry.

As the name suggests, the Marihuana Legalization and Taxation Act was also focused on revenue for the state, and expectations are in the hundreds of millions of dollars per year of cannabis-generated tax revenue for the state and localities combined.  

As retail sales begin — delivery is also launching — timelines have been muddled and there are outstanding questions regarding licenses, enforcement, and more. Here’s what to know as this new legal industry gets going in New York:

Administration of the MRTA
In March 2021, the New York State Legislature passed and then-Governor Andrew Cuomo signed the MRTA into law. 

That immediately set in motion the process of establishing the state’s Cannabis Control Board and Office of Cannabis Management, though there were delays in getting them up and running, and then farming and sales. Amid all of the decision-making was the major focus in the law on racial equity and attempts to address past wrongs of the punitive War on Drugs by “ensuring the greatest possible participation by communities historically impacted by prohibition,” as stated on the OCM website. That includes requiring CAURD license applicants to have some ties to a past marijuana-related arrest. 

“You, or your parent, spouse, or child must have a conviction for a marijuana-related offense to be eligible for a CAURD license,” according to the CAURD application information page on the OCM’s website, though nonprofits working with the formerly incarcerated, like Housing Works, were also eligible for a small number of initial licenses.

The MRTA legalizes recreational adult use of cannabis in various forms (smoking, gummies, etc.), the cultivation of the needed plants, and commercial sale of marijuana in licensed small businesses as well as delivery. Along with generating tax revenue for the state and its localities from a new commodity in the economy, the law also seeks to decriminalize marijuana, help individuals and communities impacted by the criminalization of marijuana, and shrink the illegal drug market while providing safe, tested legal products.

But there have been many challenges in the overall effort to launch a new state agency and industry, crafting the details of the legalization process, issuing licenses, the overall societal adjustment, how localities have reacted, and more.

One of the bigger challenges we've faced this past year in moving the MRTA into action is not only starting from scratch to launch a regulatory structure from the MRTA for cannabis but simultaneously building an entirely new State agency as well,” said Aaron Ghitelman, a spokesperson for OCM, in a late December email in response to a Gotham Gazette inquiry with a series of questions.

“In the last 12 months, the Office of Cannabis Management has grown from 30 employees to around 150, and we expect to be fully staffed when we reach about 300 employees,” Ghitelman continued. “That means OCM staffers are wearing multiple hats, working nights, attending weekend events, and traveling across the State, educating New Yorkers about cannabis legalization and licensing opportunities. We're excited for next year because as our team grows, so does our capacity. OCM will be able to increase these efforts in 2023 and beyond.”

According to a spokesperson for the New York City Department of Small Business Services, home to the new Cannabis NYC office, “The biggest obstacle is the required mindset shift regarding cannabis, from government to business to community. This is a new legal industry, but we must overcome entrenched stigmas from past prohibition. Meanwhile, New York also has the largest, previously existing “legacy” industry which includes both entrepreneurs, consumers and their communities, many of which have been damaged from disproportionate criminalization and disinvestment.”

The spokesperson reiterated that this is why the MRTA was written to help previously convicted individuals with low-level marjuana charges on their records.

“There is a major gap in cannabis education, community resources, and government regulations available to support that immediate transition,” the spokesperson said by email. “Cannabis NYC, in collaboration with many NYC agencies, has been working rapidly to build a programmatic framework to support education and resource allocation for all New Yorkers interested in participating in the legal cannabis industry.”

Municipalities (cities, towns, and villages) in New York had the option to opt-out of retail marijuana dispensaries up until Dec. 21, 2021. Via local votes, a total of 759 out of 1,520 municipalities opted out of allowing dispensaries in their localities, according to an online tracker by the Rockefeller Institute of Government. That includes most of Long Island opting out of retail sales.

Asked for OCM’s reaction to the large number of opt-outs among localities, Ghitelman said the hope is that they will see the positives of implementation and eventually opt in.

Unlike other states that provided the option and a large majority opted out, New York will have widely accessible sales,” he wrote. “90% of cities in New York State will have cannabis sales, including New York City, Albany, and Buffalo, meaning an overwhelming majority of New York residents will have access to local dispensaries. As our consumer-oriented industry comes to life, the availability of safe, tested cannabis products will reduce harms currently threatening public safety allowing local economies to grow equitably; we believe localities will opt back in.”

On public education efforts, he said: “We're launching our next public health campaign that focuses on educating New Yorkers about all things legal for cannabis and hope those efforts will clear up confusion some New Yorkers may still have around legalization and help them understand their rights around the use of cannabis products throughout the State.”

Adult Use and ‘Personal Cultivation’
Upon being signed into law, the MRTA immediately allowed adults 21 years and older to partake in the recreational use of marijuana in places where smoking tobacco is allowed, which includes city sidewalks and designated smoking areas, but excludes restaurants, parks, and schools.

When moving about in the state, people 21 and older “may possess up to 3 ounces of cannabis and 24 grams of concentrated cannabis (like vaporization oil or an edible),” according to OCM’s Penal Law fact sheet about the MRTA. It is illegal to resell any marijuana products that an individual purchases legally.

The MRTA also permits adults to “have three mature and three [immature] cannabis plants within their private residence, with a limit of six mature and six immature plants per private residence,” according to the New York State Association of Counties’ April 2021 MRTA summary.

Adults are allowed to have up to five pounds of marijuana in their private home. In public, adults can carry up to three ounces of marijuana and up to 24 grams of concentrated cannabis, according to the New York State Courts website.

Retail Sales
Although the MRTA was signed into law on March 31, 2021, the first retail dispensary in New York did not open for 20 months after signing. Eventually, officials barely made their deadline of opening the first retail dispensary by the end of 2022, with only two days to spare, and with far fewer dispensaries in operation by that time than previously planned.

After some delay, OCM announced on November 21, 2022 the issuance of the first 36 Conditional Adult-Use Retail Dispensary (CAURD) licenses, with more to come in 2023. Governor Hochul subsequently announced that retail sales would begin at the one Manhattan location on December 29.

“Not only have we ended the prohibition in New York, but we're showing the nation, and the world, how to build a market that's truly equitable and inclusive, and works to undo the harms caused by the disproportionate enforcement of cannabis prohibition,” said OCM Executive Director Chris Alexander in a December 21 press release. “Every dollar spent in this growing industry will help support independent businesses, our schools, and our communities."

The 36 initial CAURDs approved by the Cannabis Control Board and issued by OCM include “28 licenses for business owners with a cannabis conviction or a family member with a cannabis conviction, [and] 8 approved for nonprofit organizations,” according to an OCM press release on November 21. “At least one CAURD license was granted in each available region of the state,” the release said. Licenses were allocated in regions that have allowed retail sales and are not currently embroiled in legal battles preventing cannabis licensing. There is ongoing litigation  preventing such licenses in, for example, the Bronx, Queens, and Long Island. 

The application windows for CAURD licenses closed in September of last year, and OCM received “over 900 applications” in the first application round.  

“I’m thrilled that we’ve approved the first adult-use retail licenses as part of the Seeding Opportunity Initiative, which sets our industry off on the right foot- with equity, justice, and sustainability at the forefront,” said Jen Metzger, Cannabis Control Board Member, in the November press release. “These entrepreneurs will be selling sun-grown cannabis cultivated with a minimal carbon footprint, and we must continue to ensure that New York’s industry remains on an equitable and climate-conscious path well into the future.” 

One unique aspect of the CAURD license is its qualifying business criteria, including: “at least thirty percent (30%) of the applicant must be owned by an individual who is/has: Justice involved, Qualifying business experience, Sole control of the applicant, and [a] Significant presence in New York State,” per OCM.

Justice-involved means someone who “was convicted of a marihuana - related offense in New York State before March 31, 2021.” The marijuana-related offenses that the MRTA aims to expunge or correct are lower-level offenses, such as possession of smaller amounts of marijuana or the criminal sale of smaller amounts of marijuana. Other offenses such as “possession of up to 16 ounces of marijuana, sale of up to 25 grams of marijuana,” etc. can also be expunged, but only within a two-year time frame starting from when the MRTA was passed. 

These licensing requirements were part of the MRTA’s goal of righting past wrongs related to the criminalization of marijuana, particularly for low-level offenses in communities of color. The law also expanded eligibility for record expungements regarding certain marijuana charges.

The announcement of the first adult-use retail dispensary licenses was a historic moment for New York, establishing an equity-centered backbone of the legal market’s seed-to-sale supply chain in just over a year from the appointment of the OCM’s Executive Director, Chris Alexander,” said the spokesperson for the New York City Department of Small Business Services (SBS), which houses the city’s new Cannabis NYC program.

Mayor Adams, who has repeatedly championed the legalization of marijuana, appointed Dasheeda Dawson, also known as TheWeedHead, as the founding director of Cannabis NYC when he launched it in August 2022.

“Leading Cannabis NYC is an incredible full circle moment,” Dawson said in a statement accompanying the mayor’s announcement of her hiring. “Growing up in East New York, I survived the height of cannabis prohibition and witnessed targeted enforcement derail the lives of my friends and family. I was stopped, searched, and treated like a criminal before I ever touched the plant, which shaped my initial perceptions.” 

“Now, as a cannabis patient, educator, and regulator, I get to support other consumers, small businesses, and local stakeholders in the growing industry so that cannabis — once used to suppress communities like mine — can be tapped as a tool for transformation,” Dawson continued. “I’m thrilled to be back home, helping to craft an equity-centered approach to the city’s cannabis industry framework that welcomes all New Yorkers to the table.”

Dawson has “hit the ground running,” according to the SBS spokesperson. “Since taking the reins she has focused on creating a plan forclosing the gap in cannabis competency and understanding, from policy to health equity, for City agencies, media, and community-at-large. One of her main goals is to avoid the pitfalls other jurisdictions have fallen into while dispelling myths and stereotypes. She has also worked to advance Mayor Adams’ equity-centered agenda in the public representing the administration at several key cannabis industry events in this city.”

“Since launch, we have worked closely with the State’s Office of Cannabis Management (OCM) to support the initial Conditional Adult-Use Retail Dispensary (CAURD) license application,” the spokesperson continued. “During the 30-day CAURD application window, Cannabis NYC engaged with over 1,000 New Yorkers across the suite of services made available through SBS, including a hotline, webinars and providing direct services to applicants through our Business Solution Centers.”

CAURDs are just one of several marijuana licenses the Control Board and OCM are establishing.

Although we are very excited about the nearly 300 conditional licenses that have been State-approved across cultivation, processing, and retail, we understand that there are 9 license types within the MRTA that will represent most of the licensed cannabis business in the New York market,” said the spokesperson from NYC SBS. “To that end, on 11/21/22 OCM also released their proposed adult-use regulations which covered 7 of the 9 license types included in the MRTA.”

The MRTA outlines nine marijuana licenses: Cultivator License, Processor License, Cooperative License, Distributor License, Retail Dispensary License, Microbusiness License, Delivery License, Nursery License, and On-site Consumption License. 

The SBS spokesperson continued, “Now the real work begins! There will be a 60-day public comment period followed by amendments to the regulations. Cannabis NYC will be hosting a regulatory policy review workshop series for external stakeholders to discuss the regulations, aggregate feedback and submit comments to the State in coalition. Whether you are interested in entrepreneurship, economic development or enforcement, we want to be an advocate on behalf of the City’s needs as the State continues to develop an equitable, inclusive and safe industry.”

Taxation of and Revenue from Legal Cannabis in New York  
“New York State expects to receive $20 million in revenue from licensing fees,” within the first year of legalization, according to the New York State Counties Association MRTA summary. When legal retail dispensaries start to generate sales, “the State projects $360 million in annual state revenue and $75 million for local governments” to proceed via what is expected to be a multi-billion-dollar industry. 

Per the Counties Association summary, details of some of the sales taxes include: “cannabis flower is taxed at a rate of $0.005 per milligram, cannabis concentrate is taxed at $0.008 per milligram, and edible cannabis products are taxed at $0.03 per milligram. There is also a 9% tax on retail sales that goes to the State and an additional 4% tax that goes to the localities where the dispensary is located.”

The tax revenue will go to numerous state drug treatment programs as well as disproportionately affected communities: 20% of tax revenue will go to drug treatment programs and the public education fund; 40% will be allocated to the community grants reinvestment fund which will be used for job placements, adult education, mental health treatment, etc., according to OCM’s website

In the ongoing process of implementing the MRTA, over the last several months, the Cannabis Control Board has also approved new “home-grow regulations for medical patients and designated caregivers,” the OCM “previewed new adult-use cannabis regulations,” and the New York Social Equity Cannabis Investment Fund announced that it has selected firms to oversee the design and construction of New York’s first retail cannabis dispensaries. 

“This is just the very beginning stages of implementation, and we are not likely to see applications open for the MRTA licenses until April 2023,” said the spokesperson from the city’s Small Business Services and Cannabis NYC. “In the meantime, we must continue working diligently to build the infrastructure to support this anticipated multibillion-dollar industry.”

Illegal Sales, MRTA Obstacles
Essential to the state and localities achieving tax revenue goals and the success of the new legal cannabis industry in New York will be some significant degree of elimination of illegal marijuana sales.

A recent boom of smoke shops illegally selling marijuana after legalization, and the lack of enforcement to close them down or ensure they stop selling marijuana itself, has created significant headaches and obstacles.

“More recently, we are seeing a proliferation of new players exploiting the intentions of New York’s landmark bill, opening unlicensed smoke shops, and putting public health and equity at risk,” said the spokesperson for the city’s Department of Small Business Services and its Cannabis NYC. 

Of illegal sales, Ghitelman from OCM said, “The illicit market directly undercuts the hard work of entrepreneurs reinvesting in their communities. Across New York, OCM works alongside law enforcement to remove illicit cannabis trucks, shut down illegal stores, seize these untested products, and coordinate efforts to protect the legal market. New York's legal, regulated cannabis market will continue to thrive as we remain committed to ceasing operations in the illicit market and working toward closing unsanctioned stores across the State.”   

Amid major uproar and just ahead of the launch of legal marijuana sales, Mayor Adams announced in mid-December “the results of a two-week interagency pilot conducting enforcement against unlicensed establishments selling cannabis, cannabis-infused edibles, illegal vaping products, illegal cigarettes, and other illegal tobacco products. The pilot program…resulted in the seizure of more than $4 million worth of products being sold illegally and the issuance of 566 civil and criminal summonses.”

At the same time, we will continue our efforts to educate unlicensed operators about the law and hold bad actors accountable,” Mayor Adams said at the time.

Meanwhile, on Wednesday January 18, the New York City Council is set to hold an oversight hearing on “the proliferation of unlicensed smoke shops in New York City.” The hearing will be held jointly by three Council committees on health, consumer protection, and oversight and investigations.

Legislation to fight illegal cannabis sales has also been drafted by State Assembly Member Amy Paulin. Her bill, announced in December, would make any business selling cannabis without a license subject to a penalty of at least $2,500 for the first violation, $5,000 for a second, and potential seizure of the business on a third. The current fine for a business is just $250, according to Paulin’s office.

The bill would also “add language to New York State penal law to clarify that unlicensed cannabis retailers are subject to current laws relating to the unlawful sale of cannabis. Current ambiguity in the law has in some instances impeded police crackdowns on illegal sales at shops, which has allowed them to continue illicitly selling,” the Assembly Member’s press release states.

“Individuals applying for the appropriate licensure and complying with the law are at an immense disadvantage when other individuals are evading licensing fees, product regulations, and rules set out by the OCM,” Paulin said in announcing the legislation. “To ensure the legitimacy of the adult-use cannabis industry, we must penalize bad actors in the same manner as we do for other legitimate industries in our state who operate without a required license.”



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