New York is now allowing hemp farmers and processors to apply for conditional licenses to cultivate, manufacture, and distribute cannabis for the state’s adult-use market.
Former Gov. Andrew Cuomo signed New York’s adult-use cannabis legalization bill into law in March 2021, but throughout the rest of his time in office, he made little headway to help shape the state’s adult-use market.
In August 2021, New York elected Kathy Hochul as governor. When Hochul was appointed, she noted that getting the state’s cannabis program up and running was a main priority, Cannabis Business Times reported. And she’s been actively working toward that goal.
To help jumpstart New York’s adult-use cannabis market, Hochul signed Senate Bill S8084 into law Feb. 22.
The legislation allows hemp farmers to apply for a conditional adult-use cannabis cultivator license to grow cannabis this year to help supply the state’s adult-use market. As previously reported by Hemp Grower, “the conditional licenses will allow hemp farmers to grow cannabis outdoors, or in a greenhouse, for up to two years from the date the license is issued.”
Conditional adult-use processor licenses will also be available for hemp processors to “manufacture and distribute cannabis flower products without holding an adult-use processor or distributor license until June 1, 2023,” HG reported.
So, how will these conditional licenses impact New York’s cannabis and hemp industries? Two legal experts weigh in on the issue.
“It is a potentially great solution for both the state and hemp farmers, in the sense that, with hemp prices dropping over the last couple years, it’s an opportunity to produce a more lucrative crop, while also jump-starting the supply for the recreational or adult-use market, whenever that comes online for New York,” says Douglas Sargent, partner at the Cannabis Law practice group at Greenspoon Marder LLP.
While Sargent says he thinks it’s a good opportunity for hemp farmers, he doesn’t believe it will be an easy transition, and Irina Dashevsky, a partner at the Cannabis Law practice group at Greenspoon Marder, agrees.
“It’s a good opportunity … but also hard opportunity to capitalize on,” she says. “It’s a difficult industry to be in. But the question will be how to balance the difficulty of this industry with taking advantage of this opportunity to be one of the first sorts of wholesalers to that New York market. And all the transitional things these folks will need to do, and the capital requirements that come with those to really maximize opportunity.”
Making the Transition
One of the biggest challenges hemp growers and processors may face is their ability to bring product to the market, Dashevsky says.
As previously reported by HG, under S.B. S8084, “Cultivation space will be limited to one acre of flowering canopy outdoors or 25,000 square feet in a greenhouse with up to 20 artificial lights. Growers may also split cultivation space between outdoor and greenhouse operations with a maximum total canopy of 30,000 square feet, but the greenhouse flowering canopy must remain under 20,000 square feet.”
Due to the regulations written in the legislation, Dashevsky voiced her concerns about farmers being able to grow high-quality flower products.
“It’s my understanding that because they grow outside or even in a minimal lighting greenhouse capacity, what they’re really going to be able to produce is not necessarily a large quantity of premium flower, smokable flower. Rather, it’s going to be biomass that needs to be processed into concentrate,” she says.
“Now that’s fine, especially in a market that has no product whatsoever. But what it really means is these folks are not going to be able to get a lot of crop rotations, like maybe one to two a year, which is very different from what cannabis cultivators are able to do, especially in a highly technical, indoor growing environment with max lighting,” she says.
She also notes that hemp farmers might have a difficult time complying with the rigorous testing methods and requirements under the adult-use market, especially if they weren’t previously growing hemp for human consumption.
Sargent adds that there’s still a lot of uncertainty surrounding the requirements for hemp farmers to obtain a conditional license.
“There’s references in the bill to environmental standards and environmental sustainability programs that the office is going to determine, which could impose difficult regulations on hemp farmers for what types of equipment and what sort of restraints they might have based on these environmental standards,” he says.
Sargent says he thinks proper testing methods will have to be in place both on the cannabis and hemp side to limit the amount of “hot hemp” produced.
“I think there should also be a seed-to-sale tracking program that would at least theoretically prevent unauthorized marijuana from entering into the system and at least being sold through the authorized channels,” he says.
Dashevsky says she thinks the real issue will be unlicensed individuals.
“I think New York is deeply, deeply thinking about how to [entice legacy operators] to come in from the [gray] market to a regulated market and break down some of those barriers so that they consider making that move, and instead of punishing them for having been in the legacy market, finding a way to entice them to legalize their operations. And that’s one way I think New York is going to try to mitigate all the products from the gray market,” she says.
A Work in Progress
Dashevsky says she appreciates that New York is trying to come up with solutions to provide products for the state’s forthcoming adult-use market; however, she says there is a social equity component the state has to think through.
“What [New York has] done is essentially escorted folks into this industry by virtue of them being hemp licensed,” she says. “So, they haven’t thought through their diversity component and their social equity component on these farmers who qualify [for] anything like that.”
“New York has lofty social equity objectives, [and] whoever they license from an adult-use cultivation perspective at that point will be, from a market perspective, behind these groups of folks, the [MSO’s (multistate operators)] and the hemp farmers,” she says, adding that the state will have to determine who is going to be cultivating first from a diversity and social equity perspective.