This state only has the green light for cannabis delivery – this is how it will work

On December 9, 2022, the New York City Office of Cannabis Management (OCM) released Cannabis Delivery Guidance, allowing retail dispensaries, including CAURD (Adult-Use Retail Dispensary) licensees, to deliver cannabis directly to customers with the hope of ” launchable” sale before the end of the year.

We’ve previously written about the possibility of New York state regulators allowing the supply of cannabis to fulfill promises to begin adult-use cannabis sales this year. This announcement means adult cannabis supply is just around the corner. This blog examines how cannabis delivery will work in upstate New York.

The OCM delivery guide enables the following:

• Retail licensees can secure a warehouse from which to fulfill delivery orders while establishing permanent dispensaries for up to a year.
• Customers will only place online/phone orders; no personal sale or collection from warehouse location.
• Customers only make online prepayments; no cash payments from the cannabis user to the delivery worker.
• Deliveries can be made by bicycles, scooters, cars or other similar means of transport.
• Delivery to consumers 21+ in New York, with ID verification at sale and delivery.
• Up to (25) couriers per business as required by the New York Cannabis Act.

Photo by Jose Antonio Luque Olmedo/Getty Images

This temporary approval applies to all retail pharmacies, indicating that both CAURD and unconditional retail pharmacies may allow delivery, at least temporarily, and only if this policy remains in effect at the time retail pharmacy licenses are issued by OCM.

A potentially big stumbling block is that customers have to prepay online and cannot pay cash. While it is reasonable that OCM would want to prevent cannabis delivery drivers from traveling with large amounts of cash, online prepayment will be challenging if not impossible as major credit cards such as Visa, Mastercard and American Express prohibit their cards from being used for den Buying Cannabis. Cannabis companies have consistently attempted to circumvent these restrictions for years, but every time an entrepreneurial business finds a way to accept card payments, they inevitably shut down.

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Perhaps regulators are betting on passing the SAFE Banking Act by the end of this year, which is possible but unlikely at this point. Even if legislation is passed to expand the cannabis industry’s access to financial services, it’s not as if that change will happen immediately. All of this means that cannabis sales may remain impossible given this payment constraint.

To date, OCM has issued 36 CAURD licenses. As noted above, no unconditional retail pharmacy licenses have been issued, but OCM has proposed rules for the operation of retail pharmacies. Under the Marijuana Regulation and Taxation Act, there is a separate license specifically for the supply of cannabis to consumers. The OCM draft regulations indicate that a retail pharmacy license can also obtain a supply license. This guidance allows any retail licensee to supply cannabis without the need for a first-year supply license.

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Although CAURD licensees can now deliver on a temporary basis, under guidance released Friday, they must do so from a location that cannot also double as a retail store, as the guidance indicates retail licensees can only deliver and cannot make personal sales. This can put licensees in a precarious position as they can only supply for one year and have to choose between finding a location that is also designated for retail sales or finding a year-long location that is a more traditional warehouse. Commercial landlords do not seek to offer a one-year lease.

In addition, OCM also announced that CAURD licensees can now submit approval for their own retail location:

The Office of Cannabis Management also informed provisional CAURD licensees that they may submit their own proposed retail store location for approval and may continue to qualify for financial assistance for renovations from the Social Equity Cannabis Investment Fund, which is managed by the Dormitory Authority of the State is operated from New York (DASNY). DASNY will continue to work to secure retail locations and locations will be matched with licensees as they become available.

Previously, CAURD applicants had been instructed not to secure a location as the state indicated that DASNY would provide retail locations for them. Setting up the Social Equity Cannabis Investment Fund has taken longer than expected and now OCM is changing course by allowing CAURD licensees to now submit their own sites for approval.

Photo by Daria Kulkova/Getty Images

While this policy change creates a fast track to legalized sales, it will also inherently favor CAURD applicants who are well funded and able to find a location and rent or buy. It is true that the fund may cover certain renovations at a site proposed by CAURD, maintaining these sites costs money up front, which is a previously unrecognized cost for CAURD applicants.

For now, the reality is that if you are a CAURD licensee or CAURD applicant, it is in your best interest to research potential locations to stock product and coordinate delivery. We’ve written about important lease terms for New York cannabis companies here. You can also contact one of the licensed New York City attorneys for additional help.

Daniel Shortt is a Seattle, Washington-based corporate and regulatory attorney who works extensively with entrepreneurs in the cannabis industry. You can reach him at info@gl-lg.com or (206) 430-1336. This article originally appeared on the Green Light Law Group and has been republished with permission.