Key Aspects of New York's Cannabis Law and Draft Regulations

By Charles Alovisetti

May 8, 2023

New York published draft regulations for the Marijuana Regulation and Taxation Act on December 14, 2022, with a 60-day public comment period ending February 12, 2023. A revised set of draft regulations, reflecting comments from the initial period, is expected before this week’s Cannabis Control Board meeting on May 11, 2023. An additional 45-day comment period will likely follow, but significant changes are not anticipated. Additional licensing rounds are expected after the regulations are finalized.

Four critical concerns in the initial rules may impact the growth of New York's cannabis industry:

• Out-of-state ownership restrictions: Initial rules prohibit certain out-of-state investments in dispensaries, limiting available capital

• Materiality thresholds for private companies: Lack of a materiality threshold for disclosing equity holders (and their spouses) makes investments by VC/PE funds difficult. Most states have a 5% threshold

• Registered organizations dispensary moratorium: Registered organizations are allowed to conduct adult-use sales but are prohibited from obtaining authorization for adult-use retail dispensaries until Dec 2025

• True party of interest restrictions: The initial rules' broad definition of true party of interest (TPI) could include lenders, accountants, brands, lawyers, and tech companies, posing potential issues with onerous disclosure requirements

Vicente's New York cannabis experts will host a webinar on May 17 to discuss the revised rules in detail. Tune in for a deep dive and be sure to get ahold of our New York team if you have any questions or would like more information about jumping into New York’s cannabis market.