From Brooklyn to the Catskills, New Yorkers are now free to enjoy cannabis recreationally. Thanks to the Marijuana Regulation and Taxation Act (MRTA), the latest in America’s successful wave of state cannabis legalization initiatives, marijuana is now legal to use and consume throughout America’s largest city and fourth-most populous state.
Yet many questions remain about how New York will regulate marijuana, particularly in regards to the state’s nascent commercial cannabis market. While cannabis became legal on March 31st, 2021, commercial sales of recreational pot likely won't begin until 2022. State regulators are currently writing the laws and designing the institutions that will regulate the new legal marijuana market, and the final shape of these regulations is currently uncertain.
For entrepreneurs planning to open New York cannabis businesses, following the evolving laws will help you stay on the inside track for the cannabis license application process. Beyond that, a solid knowledge of the state’s new regulations is important for any New Yorker who wants to understand their rights and responsibilities regarding marijuana. In this guide, we’ll cover the key questions you might have about New York cannabis legalization.
The Status of Legal Cannabis in New York
Since March 31st, it’s been legal for people 21 and over to consume or possess cannabis in the state of New York. A person can smoke it, vape it, eat it, or otherwise consume it, and they can do so in any public space where tobacco smoking is allowed. You may carry up to three ounces of cannabis with you and store up to five pounds at your home. It’s still not legal to sell cannabis in New York, and the only legal sellers will be state-licensed dispensaries, not scheduled to open their doors until sometime in 2022. Bringing cannabis in from another state is not legal, either, which means that New Yorkers still don’t technically have a legal way to purchase cannabis.
Law enforcement will no longer be allowed to use the smell of marijuana as a pretext for stopping a car or searching someone. However, it’s illegal to drive under the influence of any form of cannabis or to have a cannabis product open in the passenger area of your car, and law enforcement can still use the smell of marijuana to establish suspicion of impaired driving.
Can I Grow Marijuana in New York?
Growing your own cannabis will eventually be legal for both medical and recreational consumers, but it’s not yet allowed. Under the law, people with a medical marijuana prescription must wait at least six months after legalization to start growing cannabis. For recreational growers, growing your own will become legal 18 months after recreational dispensaries open their doors.
Eventually, any adult will be able to grow up to six plants in their home or 12 plants in a household with multiple adults. However, the marijuana you grow must be for personal use, as dispensaries are still the only businesses licensed to sell it. People who want to start a business growing marijuana in New York will need a commercial cannabis growing license. The state isn’t issuing these yet, but they will likely do so around the same time they begin issuing licenses for dispensaries.
Who Will Regulate Commercial Cannabis in New York?
We still know only a little about how New York will regulate its legalized marijuana market. Right now, a limited basic framework is in place for commercial marijuana regulation, and aspiring cannabis entrepreneurs are waiting for the state to provide more details as regulators fill in the details on relevant laws.
New York has established the Office of Cannabis Management to manage and regulate legal cannabis sales. The agency is still in the process of staffing up and creating its regulations. At the head of the agency will be a five-member board, with one member appointed by each chamber of the New York state legislature and three members appointed by the governor.
We do have some information about the rates at which the state will tax cannabis products. The state has set a 13 percent tax rate, with 9 percent going to the state government and 4 percent to county and local governments. New York will collect another wholesale tax on top of that based on the THC content of the cannabis product sold. Based on the type of cannabis product, the wholesale tax breaks down as follows:
- Flower: Half a cent per milligram of THC
- Concentrates: Eight-tenths of a cent per milligram of THC
- Edibles: Three cents per milligram of THC
How Will Dispensaries Work in New York?
Dispensaries, the retail stores where consumers can purchase cannabis legally, are not yet permitted to begin operation. Most news organizations have reported that it will take at least a year for New York to get the commercial cannabis license process up and running.
Like other legal states, New York will have a tiered cannabis licensure system with separate license types for growers, dispensaries, distributors, and other types of marijuana businesses. To prevent vertical integration and monopolies, New York will issue only one type of license to each recreational cannabis business. The state will also likely limit the number of licenses issued.
Cities and towns will be allowed to prohibit cannabis dispensaries from opening within their jurisdiction, but they aren’t allowed to prohibit the use of possession of marijuana. Any municipality that wants to prohibit dispensaries has until the end of 2021 to pass a local law to do so.
What About On-Premises Consumption and Delivery?
You won’t be able to use any cannabis product at a dispensary, and bars cannot sell both alcohol and cannabis. However, licensed cannabis consumption sites, where New Yorkers can partake in public together, will be allowed. Municipalities will also have the power to ban consumption sites if they wish.
In a final bit of good news for both business owners and cannabis enthusiasts, we also know that home delivery of marijuana products will be allowed. Cannabis delivery services will bring cannabis to a customer’s home or business, and municipalities will not be able to block these businesses from delivering to customers in their jurisdictions.
How Will Medical Marijuana Change in New York?
In the state of New York, some cannabis products have been legal for medical purposes since July 2014. Medical dispensaries currently operate all around the state, but the law places relatively strict limits on their numbers. Currently, dispensaries also can’t sell certain forms of cannabis, such as whole flowers.
2021 will bring big changes to medical cannabis laws in New York. The state is preparing to expand the list of conditions for which doctors can prescribe cannabis products, such as autism, muscular dystrophy, Alzheimer’s disease, and others that advocates have long pushed to include. In addition, providers will be able to prescribe marijuana at their discretion for conditions that the law doesn’t specifically list. The expansion will also introduce revamped rules for medical dispensaries. We know that currently operating medical dispensaries will be able to pay a one-time fee for a license to sell recreational cannabis. Whole flowers will also finally be legal for sale.
Unlike other cannabis businesses, existing medical marijuana businesses will be able to hold multiple types of licenses. As with recreational dispensaries, however, many details remain to be revealed about new regulations for medical dispensaries.
What Might New York’s Cannabis Licensing Process Look Like?
We can look at how other states regulate and issue cannabis licenses to find clues on how New York might craft its licensing process. California, which legalized recreational marijuana products in 2016, is a great example of how this might work.
California issues over ten different types of cannabis licenses. These licenses cover everything from dispensaries to growers to distributors to testing labs. The Bureau of Cannabis Control issues retailer and distributor licenses, while CalCannabis issues cultivator licenses. A third agency, the Manufactured Cannabis Safety Branch, issues licenses for businesses that make edibles and other derivative products. The licensing process varies by agency, but it always involves submitting an application packet that includes:
- Basic information about your business
- Detailed financial statements
- Location and lease information
- Safety and inventory control plans
- Criminal background checks and fingerprinting for both owners and employees
- A cannabis surety bond with the required coverage amount
- License and application fees
Cannabis license applicants must prepare well in advance to provide any materials required by the state. For more information on California’s cannabis regulatory system, see our guide to California marijuana licenses.
How Will Social Equity Rules Affect New York’s Cannabis Market?
MRTA’s legislative sponsor, State Sen. Liz Krueger (D), stated that one of the bill’s primary purposes is “to end the racially disparate enforcement of marijuana prohibition that has taken such a toll on communities of color … and to use the economic windfall of legalization to help heal and repair those same communities.” To this end, the bill includes three major racial justice provisions: a community reinvestment fund, a social equity provision for licensing, and an automatic expungement program.
Forty percent of the tax revenues from cannabis sales will go to a community reinvestment fund. The fund is earmarked to finance improvements in communities historically impacted by unequal enforcement of marijuana laws. Funded projects could include anything from healthcare to education to job programs. The social equity provision mandates that at least 50 percent of cannabis business licenses must be issued to people from communities harmed by cannabis criminalization. Eligible groups include:
- People of color
- People with past cannabis convictions
- Disabled veterans
- Some farmers
New York will also expunge certain marijuana-related offenses from the criminal records of people convicted of them. Those eligible for expungement won’t have to apply; instead, the charges will be automatically removed from their records. However, the law allows a period of up to two years in which to expunge the charges in the state’s record systems.
Will New York Require Cannabis Surety Bonds?
There’s a strong possibility that New York’s cannabis licensing process will include a surety bond requirement. Many other states that have legalized cannabis, including California, Nevada, Colorado, Michigan, and Illinois, require cannabis businesses to obtain surety bonds.
A surety bond, to sum it up quickly, is a three-party contract that guarantees a person or business’s financial and/or legal obligations. If the bonded party breaches the agreements established in the bond, that party can be held financially responsible. The surety financially backs up the covered party’s guarantee, up to a limit known as the coverage amount or penalty sum.
States require cannabis surety bonds because they need to ensure that dispensaries and other marijuana businesses operate responsibly. Most dispensaries follow the rules, but surety bonds help ensure that any businesses violating them are held accountable. This will help discourage poorly run or unscrupulous businesses from entering the market, as well as provide a legally binding method for resolving disputes and guaranteeing obligations.
To purchase a surety bond, the business will pay a small percentage of the coverage amount as a premium. The percentage varies according to several factors that the surety assesses in the surety bond underwriting process, including the business owner’s credit score and financial history. Thus, the easiest and most accurate way to find out the cost of a surety bond is to get a free surety bond quote from a reliable surety bond producer.
Cannabis distributors, growers, and dispensaries across America use Surety Bonds Direct to get their businesses bonded quickly and easily. We work directly with dozens of U.S. sureties to provide highly competitive wholesale bond premiums to our customers. Investopedia named us the best surety bond company of 2021, thanks to our fast, friendly service and comprehensive selection.
So, while it’s still uncertain whether a New York cannabis license will require a surety bond, Surety Bonds Direct will always be ready to supply business owners with a smarter and faster way to get bonded. To learn more about cannabis surety bonds now, call our bond experts at 1-800-608-9950 or get your free surety bond quote online.