8 guidelines that will shape New York’s legal cannabis industry
These are not the final regulations for New York dispensaries. These temporary rules will guide owners on how to plan their operations before final regulations are adopted by the state.
New York released its highly anticipated guidelines for weed dispensaries last month, on October 28. The Office of Cannabis Management (OCM) finally published its “Guidance for Adult-Use Retail Dispensaries” just weeks ahead of the legal market’s launch, which is expected to take place in December of this year. The guidelines are among the last steps leading up to the rollout of legal cannabis in the state.
The new guidance document provides a framework that allows Conditional Adult-Use Retail Dispensaries (CAURD) licensees to open up shop while the state formally adopts final rules for its retail market. With day one of legal recreational sales on the horizon, we dug through the 27-page document to highlight eight key laws that will ultimately define the state’s highly-anticipated retail market.
Without further ado, here are the eight key guidelines that retail dispensaries must follow when dispensary doors open later this year.
Monique Saysana and Dylan Davis contributed to this report.
No overnight shops without special clearance
“(Dispensaries) shall not be allowed to operate from 12:00 AM to 8:00 AM, unless given express written permission by such municipality, or the municipality passes a local ordinance, authorizing it to operate beyond such hours.”
New York’s adult-use dispensary guideline #5
This regulation forbids licensees from taking payment for orders outside of the licensee’s hours of operation but does not prohibit licensees from taking orders through an online website or app. The rule should ultimately protect cashiers, budtenders, and store owners from potentially violent robberies.
But the rule also conflicts with New York’s 24/7, “city-that-never-sleeps” reputation, which itself has shifted as a result of pandemic-related restrictions and changes.
Still, research shows that New Yorkers are up later than any other city dwellers. So Gotham’s night owls can rest assured that while dispensaries are closed until 8 am, local dealers and bodegas will still be serving. But what about early risers and immunocompromised users who can’t afford the risk of smoking untested products?
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No designs that may attract those under 21
The “Attractive to Individuals Under 21” section of the OCM’s retail cannabis guidelines also forbids labeling, packaging, advertising, and marketing that could be pleasing or appealing to persons under the age of 21.
New York’s new guidelines forbid cartoons, bubble-type or other cartoon-like fonts, as well as bright colors that are “neon” in appearance, or similarities to products commonly associated with or marketed to “be attractive to individuals under 21,” including imitations of “food, candy, soda, drinks, cookies, or cereal, in labeling, packaging, advertising, or marketing,” according to the OCM.
An exception to this rule exists for cultivar, licensee, and business entities. Still, brands like Cookies seem to float comfortably in the gray area. The new Cookies clothing store in Manhattan doesn’t sell adult-use cannabis, yet, only merchandise and CBD. Still, critics have complained that the five-story Cookies blue mural painted on the building directly violates this regulation.
Others argue that banning symbols, images, characters, toys, and games will do little to stop kids from using cannabis before they turn 21. In fact, studies show that youth in legal states partake in underage cannabis use far less than those in prohibition states.
No gifting, no deceptive pricing
“Licensees must clearly designate the price of all items for sale. Licensees are required to clearly communicate the price of all items to customers, whether provided in-person, online or over the phone. Any items that are displayed for sale in the interior of the dispensary must have a price tag, sign, or placard stating the item’s price and total cost (including tax).”
The OCM wants stores to clearly communicate the price of all items, in-person, online, and over the phone. This means any menus—even those online, or containing unavailable products— must include the price and total cost (including tax) of each item.
This rule should snuff out much of the gray market that’s thriving in Manhattan and Brooklyn, in which stores and clubs are selling NFTs, art, and memberships for the price of certain cannabis products, then “gifting” or giving away the bud to customers. The gifting economy was a brilliant answer to the state’s slow legal rollout, but it’s no longer tenable thanks to this restriction.
No giveaways, discounts, or loyalty programs
“Licensees cannot advertise giveaways, discounts, price reductions, points-based reward systems, or customer loyalty programs including, but not limited to, by using the words ‘sale’, ‘free’, ‘price drop’, or ‘discount’ on a menu, in any communications to customers, or elsewhere. This does not prohibit licensees from changing the price of cannabis products or otherwise ‘discounting’ products.”
To stamp out any further gray market innovations, the OCM will also forbid giveaways, discounts, and loyalty programs run by cannabis companies. As a result, licensees cannot give away cannabis, including through donation, or any other cannabis products. This rule does not prohibit licensees from changing the price of cannabis products at any given time, or otherwise “discounting” products to market to more customers.
Express lanes, drive-thru, and pick-up are allowed
Much to Harold and Kumar’s delight, New York will allow drive-thrus at dispensaries, as well as pick-ups. New Jersey and other states have already made the call to allow drive-up service. New York dispensaries can also establish express lanes inside the store for customers who have placed orders for pickup. These mechanics will be a huge deal for New Yorkers and visitors who need to shop on-the-go or in highly-trafficked areas.
No third parties, according to these two guidelines
“All customer transactions, regardless of whether they occur in-store, at a drive-thru window or area, or through delivery, must be completed by the licensee’s employees or a person authorized to complete such transactions as approved by the Board…Licensees cannot allow individuals not employed by the licensee, or any entity that is not the licensee, to fulfill customer orders. Licensees cannot fill pre-orders that are placed on websites that are not registered to the licensee.”
These guidelines also prohibit third-party entities to “solicit, accept, or deliver customer orders. All customer transactions, regardless of whether they occur in-store, at a drive-thru window or area, or through delivery, must result in an entry in the licensee’s inventory tracking system.”
Basically, customers have to pay for delivery orders directly to the store they’re buying from. So a retail employee is not allowed to buy for a friend or customer and then be reimbursed for the cost. Another common industry practice that will be forbidden in New York: Delivery businesses and websites will not be able to create third-party services that are not included in the retail licensee’s business.
No cannabis business owners from out of state
The most dramatic new element of New York’s legal industry is this: No vertically-integrated multi-state operators will be licensed for business as a cannabis retailer in New York. This guideline aims to ensure that legacy sellers, local farmers, and sovereign Native-owned cannabis businesses my have a foothold in the retail market.
The guideline titled “Restrictions on Interests and Ownership” says that “licensees must comply with all requirements… pertaining to ownership and contracting with landlords, financiers, financial institutions, or management services entities.” The OCM expects to know about every single party of interest with a stake in each retailer. If any party also owns parts of a cannabis business in New York or another state, they will be disqualified from owning a retail store.
That guideline (#33), along with the Undue Influence section of the guidelines (#34), aims to “prevent suppliers from exerting inappropriate control over retail dispensaries.” The goal is to isolate the tiers of the industry, so that no one owns the process from seed-to-sale. Without guidelines like these, big cannabis and corporate interests could exploit social equity licensees.
Majority owners, passive investors, and service providers cannot hold an interest in any licensed cannabis businesses—in or outside of New York—if they already cultivate, process, or distribute weed. That rule effectively bars vertically-integrated multi-state operators (MSOs) from owning a New York retail shop.
“I see what they’re trying to do, but it’s a very protectionist approach,” Kaelan Castetter, managing director of consulting firm Castetter Cannabis Group, told Syracuse.com’s cannabis insiders. He added that this regulation could cause serious problems down the road.
“What it basically says is: if you are in business in any other state—unless you only own a dispensary in another state—you can’t be part, in any way shape or form, a retailer here.” Castetter concluded that the guideline is “very anti-MSO,” and it may be the most dramatic action any state has taken to ensure legacy operators, customers, and patients aren’t bullied by wealthy companies that are already operating at a high level.
When will New York cannabis regulations become final?
It is extremely uncommon for Guidance to be released before publication of Regulations, but this is a unique situation. Final regulations would require a 60-day public comment period before being set in stone. The release date for final regulations is not clear, but could be as soon as the OCM’s next meeting at the end of this month.
Guidelines, unlike final regulations, do not need to go through the same public comment period before adoption. State agencies can only issue such guidance if it is supported by existing laws, so there isn’t anything groundbreaking in these guidelines. These temporary guide rails don’t appear to be based on New York’s Marihuana Regulation and Taxation Act (MRTA), but they are likely a good prediction of what the OCM plans to publish in the upcoming final regulations.