New York Cannabis: State of the State 2023

A lot has happened in New York since the Canna Law Blog’s first New York State of the State. Last year was action-packed for the cannabis industry in New York. With licenses issued and sales starting in 2022, New York got the ball rolling on an actual and legal cannabis industry. We expect 2023 will see even more progress as we push towards New York having a fully functioning cannabis industry. Let’s take a look at the noteworthy developments of 2022 and what we expect to see in 2023.

Three big developments in 2022

1.  New York issued (conditional) adult-use cannabis licenses

A legal adult-use cannabis industry requires licenses to be issued. New York took that significant first step by issuing conditional cultivation, processing and retail dispensary licenses. While we encourage you to read our detailed breakdowns of the three license types, here’s a brief refresher on the specifics.

On April 14, 2022, the Cannabis Control Board (CCB) and Office of Cannabis Management (OCM) issued 52 conditional adult-use cultivation licenses. These licenses were limited to existing licensed (or almost licensed) hemp cultivators. The OCM continued to issue more conditional cultivation licenses after the first batch was announced, beginning the tangible development of the production “tier” of New York’s cannabis industry. On August 17, 2022, New York approved 15 adult-use conditional processor licenses, with the requirements for licensure generally tracking those for the conditional cultivator licenses. More conditional cultivation and processing licenses have been issued since.

On November 21, 2022, the CCB and OCM announced the first Conditional Adult-Use Retail Dispensary (CAURD) licenses that would be issued, with the announced goal of beginning sales by the end of 2022.

2. New York opens its first licensed cannabis dispensary

A cannabis industry doesn’t mean much until consumers can begin purchasing legal cannabis. New York’s momentous step into the legal cannabis sale took place on December 29, 2022, when Housing Works (one of the CAURD licensees) opened its adult-use retail dispensary.

Housing Works’ opening was met with much fanfare and has continued to attract customers and media attention. More legal dispensaries are on the horizon, but 2022 was notable if only for the fact that actual legal sales started in New York!

3.  New York released adult-use cannabis rules and regulations

On the same day the CCB announced the first CAURD license awardees, it also released its full set of adult-use cannabis rules and regulations. We have covered it here; the rules and regulations will be part of our ongoing series.

We cannot overstate the significance of these rules and regulations. They set the overall framework of the licensing process and the industry as a whole, establishing the baseline analysis for anyone who considers applying for an adult-use cannabis license in New York.

Three big things we expect to see in 2023

1.  Shutdown of illegal retail dispensaries

The hottest topic in New York’s cannabis industry (particularly in New York City) is the prevalence of illegal cannabis dispensaries. The New York City Council has identified at least 1,200 illicit dispensaries. Multiple government officials and agencies have discussed clamping down on illegal activities since the MRTA was passed in April of 2021.

The prevalence of easily accessible unlicensed cannabis products is, in our opinion, the single biggest threat to New York’s nascent legal cannabis industry. The MRTA  established a two-tier system that is intended to create a competitive industry with lots of room for small businesses. Illegal dispensaries, which are not subject to taxes, testing or the myriad costly compliance obligations that legal business must pay for, will undercut the legal market if allowed to run rampant. See: California.

The New York City Council has announced plans to significantly increase enforcement to crack down on illegal dispensaries, but it remains to be seen what steps will actually be taken, and if those efforts will actually work.

2.  More dispensaries will open

The first batch of CAURD licenses included 36 licensees. Since the first licensees were announced in November, only Housing Works has opened its doors. That’s going to change soon.

Smacked LLC, the first CAURD licensing owned by an individual, will be opening the second licensed cannabis dispensary in Greenwich Village (Manhattan). More dispensaries are expected to open over the next few months, a development which was likely made possible by the CCB and OCM easing the real estate selection regulations for CAURD licensees.

3.  Non-conditional license applications will open (we hope)

New York’s release of the adult-use rules and regulations was the necessary precursor to New York opening its application portal for all of the MRTA’s enumerated license types (cultivation, processing, distributions, microbusiness, dispensary, etc.). But with no application portal date announced, the public comment period still being open and the possibility of material changes to the current version of the rules and regulations, our hopeful target of spring 2023 for applications being accepted is looking overly optimistic.

The good thing is that the OCM and CCB appear to be taking the public comment process seriously, soliciting as much input from the cannabis industry as possible to have a final set of rules and regulations that creates an adult-use cannabis framework that actually works. The downside to that collaboration is the time it takes to receive and process public input. We hope that public comment will be received an processed efficiently, so that New York is able to continue building out a fully functioning cannabis industry in 2023.

The big picture

We have been and continue to be extremely optimistic about where New York’s cannabis industry is going. Starting licensing and sales was a big deal. Having actual adult-use rules and regulations to review and comment on was a big deal. The industry having an open dialogue with the OCM and CCB about what New York’s cannabis industry should look like is a big deal. Here’s to hoping that New York continues to progress in successfully expanding its cannabis industry in 2023!