The next few years are going to be a marijuana “gold rush” in New York.
On March 10, 2020... Governor Cuomo signed legislation legalizing adult-use cannabis.
As of September 26th, 2022, applications for the first 150 Conditional Adult Use Retail Dispensary licenses were due.
New York’s marijuana market is expected to be one of the largest in the country. During the first year alone, sales are expected to reach $1 billion and by 2025 $3.7 billion. That’s nearly a 4 fold increase in three years.
It’s clear there will be further rounds of licensing. Based on what I’ve read and how the cultivator and processor licenses are being delayed (more on this in a minute)… I’d guess this time next year is when the next round of adult use dispensary licensing will occur.
Right now is the time to get your information in order, especially if you have a business entity with many members.
In this post you’ll learn:
- The criteria that will remain unchanged.
- The criteria that might change and why.
- The details hidden in the license FAQ documentation.
- And my list of links you should start going through now.
The Adult Use Dispensary License Criteria That Will Not Change
Before we get into it, realize this… this license is called conditional for a reason. This is a two step process. Just because you get your conditional license does not mean you’ll get the “official” license.
There were three main requirements for the first round of licensing.
- Prior marijuana conviction
- Profitable business ownership
These requirements are in addition to a license fee of $2,000. I doubt this amount will change going forward. At least for the first few rounds of licenses.
New Your State Residency Is Not Going Anywhere
It’s pretty obvious the residency requirement is not going to change. Here’s what you need to know.
You must have been a resident of New York State:
- For 180 days within the last year.
- For 540 days within the last three years.
How do you prove you’ve been a resident?
You can provide a checking, savings, retirement, or brokerage account showing assets in New York. These will have to have been opened for the time periods mentioned above.
Tax filings showing assets, accounts, or property in New York. I’m assuming the dates on the tax files must match the time periods above.
Any deeds, titles, mortgage documents, or homeowner warranties showing you own the property.
Proof Of Business Ownership
You will need to show 10% ownership of a business that’s achieved a positive net-profit for at least two consecutive years.
You’ll need to provide tax documents to prove profitability. The State also says they will take:
- Audited financial statements
- Business bank account statements
I would not count on these last two requirements. They clearly state in the FAQ any non-tax related proof is subject to further questions and review.
I don’t think either of these requirements will change going forward. But a few requirements might change. Let’s take a look.
The Adult Use Dispensary License Criteria That Might Change
Prior Conviction Criteria
For the first 150 licenses issued in New York, you had to prove you were either:
- Convicted for a prior Marijuana offense.
- You were a dependent of a convicted individual, parent, or legal guardian.
- Or your child, spouse, or dependent was previously convicted.
This was a unique requirement, the first of its kind in the country.
Why require a prior conviction to obtain a license?
It’s technically an admission the “War on Drugs” was a failure. Not only a failure but resulted in long term negative impacts on communities these people lived in.
This is New York saying sorry and trying to reinvest in the people and communities that were impacted by the many decades long "War on Drugs".
I can’t be sure, but I’d wager this requirement will be dropped for the next round of licensing.
Additional Protection For Consumers
As a licensed business you have to have insurance. But it’s likely there will be additional protection for consumers put in place as the industry grows. Especially if it grows as fast as predicted.
What type of protections?
Most states with legal marijuana distribution required dispensaries… cultivators… and processors to obtain a surety bond.
What is a surety bond? A surety bond is similar to insurance except you’re not purchasing the bond to protect yourself like an insurance policy. You’re purchasing a surety bond to protect your customers and the state of New York against any business negligence committed by you or your partners.
Think of a surety bond as a promise you will do what you say you’ll do with a penalty if you fail to perform. Learn more about the difference of surety bonds vs insurance.
What Promises Are You Making With a Surety Bond?
As a dispensary you’ll have guarantees to adhere to based on your license:
- You will comply with the laws and regulations of the cannabis industry laid out by the state of New York.
- The rules regarding the destruction of cannabis goods and materials in the event of a violation of the applicable regulations.
- You will keep and sell quality products.
- Plus other items related to ensuring you’re fulfilling your promise to your customers.
These surety bonds are typically not expensive. California cannabis license bond requires a value of $5,000. This would cost you $100 on the low end, maybe upwards of $750 depending on your credit or business history.
Keep in mind, any claims filed against your surety bond can mean the State will take away your marijuana dispensary license.
Hidden Details In The New Your Adult Use Dispensary FAQ Document
First, go read all of the documentation for getting your Conditional Adult Use Retail Dispensary.
The Department of State states you should not need an attorney or any "outside" help to complete the conditional license. But if you feel you need the assistance, you're encouraged to seek it out.
I am only going to cover a few things I found while reading the application FAQ.
True Parties Of Interest
If you’re applying for a license as a business entity, you need all of the “True Parties of Interest” to fill out aa Interest Disclosure form.
Think of the True Parties of Interest as the individuals that make up the eventual business entity getting licensed. But from what it sounds like, these Parties of Interests can be entities themselves.
Read page 10 of the application FAQ. It’s slightly confusing. Call them if you need clarification.
Use “Expedited Handling Services”
If you’re forming a new business in New York or requesting a certificate for an existing business you have to request a Certificate of Incorporation, Certificate of Status, Certificate of Assumed Name, Certificate of Authority or other relevant certificate for the business applying for a license.
The Department of State is expecting a large number of requests and they state in the FAQ that all Conditional Adult Use Retail Dispensary applicants use Expedited Handling Services when requesting certificates.
Keep that in mind. It sounds like it will come in handy during the next round of license applications. It does cost a little extra money but it also delivers the paperwork fast…
- $25 dollars for within 24 hours
- $75 for same business day
- $150 for within 2 hours
It might be a little money grab by the State but if you need this paperwork I think that’s worth the cost.
Finger Prints… Business Continuity Plans… and Financials
As you read about the licensing requirements and the application process, you’ll see you need to provide fingerprints of all True Parties of Interest. These are not required on the conditional license application.
The same goes with:
- Your business continuity plan
- Financial statements
- And proof of your insurance
Remember this first application is called the CONDITIONAL Adult Use Retail Distribution license.
Conditional because it’s step 1 or 2.The State can deny you during this first process… or approve you and deny you during step 2.
Read Up For The Next Round Now
Things are already changing and I would expect them to change more as licensing and regulations continue to be debated and delayed.
A top cannabis regulator stated the application period for cultivator and processor marijuana businesses will begin in the middle of 2023. These licenses were supposed to be due Summer and Fall of 2022.
Here’s my list of links you need to go read now: