In the spring of 2021, New Yorkers celebrated the legalization of recreational cannabis use. While many cannabis users rejoiced over the news, A great deal of confusion remained around the selling of marijuana. State regulators have unveiled new guidance for adult-use marijuana retailers that will alleviate some uncertainty. Conditional Adult-Use Retail Dispensary (CARD) license holders now have a framework to follow, thanks to the updates from the state’s Cannabis Control Board.
As the market approaches launch, the updated rules provide operators with a little more clarity. The new regulations include a wide range of requirements covering inventory management, employee training, and operating hours. However, one of the key takeaways from the new guidelines is the ban on vertical integration for retailers in what is anticipated to be a competitive market.
If vertical integration is prohibited, a company cannot hold licenses for every step of the cannabis sales process, from cultivation to production to retail sales. According to the Marijuana Regulation and Taxation Act of New York, “No adult-use cannabis cultivator shall have a direct or indirect interest in any premises licensed as an adult-use cannabis retail dispensary,” and “A person holding an adult-use cultivator’s license may not also hold a retail dispensary license pursuant to this article.”
Rules And Regulations
Vertical integration isn’t the only area within the cannabis industry that’s taken a hit. There are a few other noteworthy rules within the 27-page guidelines.
- Inventory tracking is necessary, including batch/lot numbers, transaction adjustments, product weight and volume, and worker identification for those handling inventory.
- The distance between a store and a school or place of worship must be at least 200 feet and 500 feet, respectively. Stores must also have a street-level entrance.
- No advertising is allowed to be seen from school, child care, playground, public park, or library grounds, with the exception of outdoor signage that is allowed.
- Except where a municipality has granted written permission, business hours are 8 a.m. until midnight ET.
- Licensees are not permitted to market clothing or products that are unrelated to their brand.
- OCM reserves the right to look into any cash payments made by a dispensary to a distributor, and distributors are required to sell cannabis products to any retailer who is willing to pay cash.
- Retailers may not have more than two signs outside of their establishment.
- Cannabis cannot be displayed in stores that can be seen from the street.
- OCM reserves the right “to issue changes, corrections, and amendments to this guidance.”
In addition to the rules that need to be followed, employees are required to undergo extensive training that covers the following topics:
- Cannabis use, prohibition, and legalization history.
- Risks associated with using cannabis and driving while intoxicated.
- Detecting false identification.
- Storing goods securely.
- Security and monitoring.
- Emergency action plans.
The Downside
As thrilling as it is to know that by the end of the year, cannabis sales will be legal, calling the guidelines restrictive is an understatement. Despite marijuana now being legal, these new guidelines seem to villainize cannabis sales as opposed to liberating the industry.
The limitations of vertical integration are meant to promote competition and prevent established, sizable cannabis businesses from controlling the market. However, companies’ ability to grow and sell their own product adds a certain level of quality control that cannot be maintained without vertical integration. While the reasoning behind the ban is understandable, the Cannabis Control Board’s plan to make it easier for entrepreneurs to enter the market doesn’t make sense considering out of 900 CARD applications, only 150 licenses were issued.
A cannabis company may vertically integrate if it holds a microbusiness license and is conducting business there. Microbusiness license holders will be able to vertically integrate fully, but can only sell their own goods. The Cannabis Control Board will be in charge of determining the size of microbusinesses under the MRTA, but it is anticipated that a cannabis microbusiness will have very strict size and operational restrictions. Microbusiness license holders are unlikely to be able to compete with businesses that have standard cultivation, manufacturing, or retail licenses.
Another hope that New York has for the cannabis industry is that it will operate similarly to the liquor stores and, more specifically, the craft beer industry. The issue with that is cannabis retailers aren’t permitted to advertise, which further adds to the negative connotation that already comes with marijuana consumption. If these guidelines were legitimately put in place with the cannabis industry’s best interest in mind, retailers would be allowed to advertise as much as alcohol companies do.
Finally, the regulations regarding branded merchandise once again contradict the proposed goals for the cannabis industry. If regulators want to increase competition, would it not make sense for retailers to be allowed to stock merchandise from multiple brands instead of only their own? Not to mention, cannabis merchandise isn’t a new thing, and wearing it isn’t the same as consuming cannabis, so why the strict regulations regarding merchandise?
The Cannabis Control Board may be preaching prosperity for the industry, but the contradictions and nonsensical guidelines hardly promote faith in their 27-page document.
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