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Promoting Cannabis Equity: New York’s Precision Approach in CAURD Licensing

Posted: 08/31/2022
Industries: Cannabis Law

Background

On August 25, 2022, after weeks of promotion by the New York Office of Cannabis Management (OCM), the application window has finally opened for adult-use cannabis dispensary licenses in the Empire State. These retail privileges, known as Conditional Adult-use Retail Dispensary (CAURD) licenses, are a key component of the state’s Seeding Opportunity Initiative and further the Marijuana Regulation & Taxation Act’s (MRTA) goal of social and economic equity throughout the state’s cannabis industry. Specifically, this first-in-the-nation initiative seeks to position individuals with prior cannabis-related offenses to make the first adult-use cannabis sales with products grown by New York farmers.1  

What You Need to Know:

  • The application window for New York Conditional Adult-use Retail Dispensary (CAURD) licenses is open.
  • CAURD licenses are a component of New York’s broader cannabis social equity program that seeks to direct the benefits of legalization to those harmed by cannabis prohibition.
  • Once selected, CAURD licensees will work with the state’s Office of Cannabis Management to select qualifying property for their retail businesses.

Removing the Barriers to Entry

Promoting an equitable cannabis industry is a major focus of the MRTA. To show it would put its money where its mouth is, the New York Legislature’s 2022-2023 Budget authorized the formation of a public-private limited partnership, known as the Social Equity Cannabis Investment Fund (the Fund), to be comprised of $50 million in licensing fees and revenues from the adult-use cannabis industry, and up to $150 million in private investment. This summer it was announced that Impact Ventures, LLC, an investment group led by NBA Hall of Famer and entrepreneur Chris Webber, was selected to sponsor and manage the Fund. The Fund is specifically earmarked to help successful CAURD applicants meet the challenges of finding suitable properties, completing construction, and starting operations in compliance with OCM regulations.

Often in retail license applications, the prospective licensees must demonstrate to the regulator that it has secured real estate, raised sufficient capital, and possesses the industry know-how and resources to become operational by a date certain. This usually requires, at a minimum, assembling an experienced team; negotiating the sale, lease or option for qualifying property; and retaining experts to prepare plans, schematics and other application materials at significant cost.

To mitigate this barrier, CAURD applicants do not need to identify a specific property, or submit initial product lists/designs, SOPs, or detailed business plans. Rather, OCM instructs that after provisional licensees have been selected, they will be contacted by OCM to determine the placement of their dispensary location. An OCM bulletin provides: “Provisional licensees in each region will be able to share their preferences among the available locations in that region.”

Redefining Eligibility – Qualifying Business Criteria 2

In furtherance of MRTA’s goals, OCM has finely tuned its CAURD eligibility criteria to ensure the first licenses are issued to bona fide New Yorkers who have personally felt the pain of cannabis prohibition, and not mere stand-ins handpicked by sophisticated businesses looking to get an early bite of the Big Apple. This seems appropriate, given that CAURD licensees, unlike established operators, are seeking support from the Fund to get their businesses off the ground.  

Distilling the MRTA and OCM’s criteria to its essence, we can conclude that OCM is looking for:

Applicants that are: (1) majority-owned and solely controlled by a New York resident with (2) a prior cannabis arrest or conviction and (3) who has owned and operated a successful retail business for at least two years.

Certainly there will be successful applicants beyond this definition. As laid out in the application materials, eligibility is subject to a range of factors and defined terms. However, reading the MRTA, OCM regulations, and the application as a whole, this is their ideal CAURD licensee.  

But where does this leave existing cannabis companies? Companies with valuable experience who are ineligible yet available to serve New York’s enormous adult-use market? Out in the cold waiting for the next round of licensing? Not entirely. While OCM’s CAURD criteria is narrowly tailored, it does allow for agreements whereby existing and experienced cannabis operators can contract with CAURD applicants to provide management, licensing and operational expertise. 

For more information regarding New York’s CAURD application process, or if you have any questions regarding an issue raised in this post, please contact the author or the attorney at the Firm with whom you are regularly in contact.


[1] Press Release, Mar. 22, 2022, Governor Hochul Announces The Office of Cannabis Management Seeding Opportunity Initiative, available at: https://www.governor.ny.gov/news/governor-hochul-announces-office-cannab....
[2]  OCM is also accepting applications based on it Qualifying Nonprofit Criteria, which includes being recognized as an entity pursuant to section 501(c)(3) of the Internal Revenue Code.