New York issues first adult-use marijuana retail permits, OKs delivery to expedite sales

New York regulators on Monday issued the first 36 marijuana retail licenses for an adult-use market that officials insist will open by year’s end.

That timeline took a positive turn when the state’s Office of Cannabis Management (OCM) announced it would allow qualifying businesses to launch delivery services before opening their retail stores, a significant change from other recreational markets.

“This will help jumpstart sales and enable these small business owners to generate capital and scale their operations,” the regulatory agency tweeted Monday.

New York adult-use retailers are projected to generate $1 billion-$1.2 billion in sales next year, growing to $2.2 billion-$2.7 billion by 2026, according to the 2022 MJBiz Factbook.

Regulators said 28 of the retail license winners went to individuals with marijuana convictions or family members who’d been arrested for cannabis.

The other eight licenses went to nonprofits.

The first group of Conditional Adult-Use Retail Dispensary (CAURD) license winners include:

• Capital District Cannabis & Wellness.
• Essential Flowers.
• Kush and Kemet.
• Gotham CUARD.
• NYCCABUDS.

The agency is reviewing 903 CAURD applicants, the state’s version of social equity, to issue the first 150 adult-use licenses, as well as helping them lease and fund operations through a proposed $200 million social equity cannabis fund.

A ‘bold move’

New York cannabis attorney David Feder applauded the developments, calling the issuance of licenses a “bold move” for the OCM, considering the state is facing a federal lawsuit challenging a requirement that marijuana operators must have a “significant presence” in the state.

The lawsuit has disrupted the rollout of the adult-use market in parts of the state.

Earlier this month, a federal judge ruled that New York regulators were prohibited from issuing several adult-use marijuana licenses in five areas.

The New York Times reported that 63 of the 150 planned licenses earmarked for Brooklyn, Central New York, the Finger Lakes, the mid-Hudson area and Western New York were impacted by the decision.

“This is a momentous day,” said Feder,  who represents a CUARD license winner in Queens, one of 11 New York jurisdictions that are not yet affected by the ruling.

Others regions unaffected by the ruling include Manhattan and the Bronx.

The lawsuit, filed by Michigan-based Variscite NY One, is seeking an injunction against the state, the OCM and the agency’s executive officer, Christopher Alexander.

Variscite, which applied for licenses in the five regions, is not significantly connected to New York.

The lawsuit has fueled more uncertainty in the market’s initial rollout.

Several regulatory policies and operational procedures have yet to be finalized.

But some pending requirements released Sunday for existing medical marijuana companies transitioning into the recreational market are generating buzz among the state’s multistate operators.

The MSOs account for nearly all of the existing MMJ companies, and the pending regulations targeting them include:

• A one-time licensing fee of $5 million.
• An additional $3 million fee per store for medical marijuana providers to enter the adult-use market.
• A three-year moratorium to open any retail store for recreational sales.

“Wow- MSO’s got Housed (sic) in NY new regs,” tweeted Cresco Labs co-founder Joe Caltabiano, who stepped down as president of the marijuana multistate operator in 2020 and subsequently resigned as a director.

The Chicago-based MSO was among 10 companies originally selected to serve the state’s MMJ market, which is expected to bring in $220 million to $270 million this year, increasing to $320 million-$390 million by 2026, according to the 2022 MJBiz Factbook

Transition from MMJ will be difficult

While the state’s medical market is considered “vertical,” with each license holder able to grow, process, manufacture and sell cannabis, regulators took a much different tack in the adult-use sector, establishing high and expensive barriers to entry for existing MMJ providers.

“They are preliminary and have a long comment period so I would expect some change,” Caltabiano told MJBizDaily.

“I feel that this level of over-regulation, and trying to negatively impact MSOs will be bad for the legal market and will only enhance the already gigantic illicit market in the state.”

Private investment commitments for the social equity fund haven’t been disclosed, either.

The fund, managed by Social Equity Impact Ventures, plans to pool $50 million from adult-use licensing fees and revenue as well as “up to $150 million from the private sector,” according to a June announcement.

Despite all the uncertainty, one of New York’s top regulators reiterated the state will open adult-use sales this year.

“That is our intention and we are on course to meet that goal,” Tremaine Wright, chair at New York State Cannabis Control Board, said during a panel discussion last week at MJBizCon.

“There will be a place for people to sell.”

Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.