New York: An Analysis of Governor Cuomo’s Legalization Proposal

Governor Andrew Cuomo has included a plan to “regulate, restrict, and control” the responsible adult use of cannabis in New York, known as the Cannabis Regulation and Taxation Act (“CRTA”). A complex and comprehensive plan laid out in over 200 pages of legislative text, the CRTA would implement one of the most tightly regulated, highly taxed and heavily controlled legal cannabis markets in the world.

Under the CRTA, adults possessing any amount of untaxed “illicit cannabis” are guilty of an automatic misdemeanor. Adults patronizing the adult-use market will be able to buy (per day) and possess (at any time) up to one ounce of flower and five grams of concentrated cannabis. Possession of over 2oz and 10 grams will still be a misdemeanor criminal offense.

The plan would create an Office of Cannabis Management (“OCM”) that would be composed of a 5 member board and an executive director, all of whom are Governor appointees without any legislative oversight. The office is given a vast amount of power and leeway to dictate what this industry will look like in practice, from what forms will be available to the consumer, to what license will be available to applicants and what the potency of products can be.

The CRTA transfers authority over the Medical Cannabis Program from the Department of Health to the OCM, and in process overhauls some aspects of the program. The explicit language barring patients from “smoking” would be removed. Patients and their caregivers could also apply for a permit to cultivate and process their own cannabis for their own personal medicinal use, with undetermined restrictions to be left to regulations put forth by the OCM. Medical home cultivation patients would be subject to registration requirements as well as warrantless searches by the authorities.

This new OCM also would assume authority of the Hemp & CBD industry in New York while making big changes in this sector of the cannabis industry as well. It will put a stop to the proliferation of so-called “gas station CBD stores” by requiring all CBD vendors to apply for retail licensing and subject themselves to the lengthy application process and undetermined regulations/restrictions to be promulgated by the OCM.

One of the better aspects of this legislation is the explicit ban on vertical integration of the “adult-use” industry for all market participants, aside from those businesses licensed as a cooperative and currently vertically integrated registered organizations. It also creates on-site consumption licenses for retail facilities to apply for. A framework for an ambitious social and economic equity program aimed to right the wrongs of the war on drugs is partially laid out in the CRTA. Those who would qualify would be eligible for some or all of the following benefits: Prioritized and expedited license approval; Deferred of Reduced application fees; Among the first licences to operate; Priority market access in certain areas affected by the war on drugs; Access to low and 0% interest loans; Access to the “Incubator program”; and for those who aren’t applicants, they’ll be eligible for workforce development and hiring programs.

The CRTA also proposes one of the highest tax rates in the country on cannabis, with the product being taxed during each step of the manufacturing process, combined with the local, sales and excise taxes, the overall rate is well in excess of 40%; in some cases it could be as high as 60%. This weight based multi-tiered tax is not only detrimental to enticing the consumer into buying the product, but it also stands to ruin the industry completely in the event of a massive price drop as seen in other states.

The Executive and Legislative chambers now must deliberate the proposal over the coming months, with multiple revisions expected to be published between now and April 1st when the budget is due. There is still a chance that sensible and responsible recommendations can improve this plan.

Send a message to the Governor and your lawmakers asking them to support amending this piece of legislation and urge them to make a market that isn’t built to fail.