What will New York do if pharmacies don’t open on time?

According to a recent article from Upstate New York, the state of New York faces a problem that the state-legal cannabis industry often faces: a lack of banking options. New York regulators require an account for the $200 million Seeding Opportunity Initiative fund to be used for renovation and expansion work for the first conditional retail pharmacy waiver for adult use (CAURD). If New York can’t find a bank, it will surely slow the adoption of legal cannabis sales.

New York, like many other states, will have a closed-loop cannabis system. This means that only licensee-grown and processed cannabis can be sold by a licensed company. In order for the market envisioned by the Marijuana Regulation and Tax Act (MRTA) to take shape, there must be a legal way for consumers to purchase cannabis.

Up to this point, the focus has been on establishing growers, processors and dispensaries for conditional adult use. The conditional cultivators and processors are up and running, according to all reports. So what happens when conditional pharmacies are unavailable at short notice? Licensed conditional growers and processors have to sell their produce somewhere, and if there isn’t a legal way, those plants go to waste or may find their way into unregulated markets.

I have no doubt that the Office of Cannabis Management (OCM) will do everything possible to ensure CAURD licenses are up and running as soon as possible. However, rumor has it that regulators are considering other options if the CAURD licenses don’t go live soon.

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delivery

The passage of the MRTA in New York last year created a temporarily comfortable environment for old market participants. Although these companies operate outside the purview of the law, they do so without much risk of prosecution. Many of these legacy companies supply cannabis.

MRTA is establishing a class of delivery licenses, but OCM has yet to open the application process for potential delivery licensees. We’ve heard rumors that the OCM could expedite delivery licenses to deliver cannabis from conditional growers and processors to customers by partnering with legacy cannabis delivery services. This would relieve the CAURD licensing process somewhat. However, for this to happen, OCM must set up an application process, review applications and issue licenses.

Vineyard Model

Another solution floating around would be to implement some sort of winery model where customers can buy cannabis directly from growers. This would allow producers licensed for minimal processing of cannabis to sell directly to consumers. However, for a winery model to work, it may require a change in the MRTA. Section 68 of the MRTA grants farmers the ability to sell to processors, not to the public. The MRTA founded the OCM and the power of the OCM derives solely from the MRTA. While the MRTA granted the OCM and the Cannabis Control Board broad regulatory powers over the New York cannabis industry, that does not mean that regulators can change the content of the MRTA. OCM may not be able to establish a winery model for cannabis growers without changing the law.

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bottom line

OCM and New York lawmakers want MRTA to succeed. When conditional growers and processors are unable to sell their produce to the public, the risk of diversion into the legacy market increases significantly. Though New York has eased penalties for cannabis crimes, the state certainly doesn’t want to bolster the unregulated legacy market. Hopefully the CAURD licenses can be operated in the near future. If not, OCM can open up other avenues for cannabis distribution. We’ll keep you posted on the Green Light Law Blog.

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.