New York Cannabis Regulators Approve 109 Adult-Use Licenses

Nearly 15 months after launching, New York’s adult-use cannabis market has 58 dispensaries and 12 delivery-only operators serving the marketplace, but regulators acted Feb. 16 to try and improve those numbers.

The state’s Cannabis Control Board (CCB) approved 109 adult-use business licenses during its regular meeting Friday, including 25 dispensary permits and 13 provisional dispensary permits as well as 24 permits for cultivators, nine for distributors, 26 for microbusinesses and 12 for processors.

This licensing round comes after the state provided a general application window for adult-use cannabis businesses. The application period, which closed Dec. 18, allowed for additional entrepreneurs to vie for their market entrances after a social equity-focused rollout went underfunded and was challenged in court, allowing unlicensed retailers to thrive in the meantime.

With fewer than 30 licensed dispensaries having their doors open for the majority of 2023, New York’s regulated adult-use market accounted for $150.5 million in sales last year, according to the state’s Office of Cannabis Management (OCM). This sales total represents just a fraction of OCM’s projection that New York’s cannabis industry is expected to generate $4.2 billion in revenue annually.

The CCB’s approval of 109 business applications last week came after it abruptly canceled its Jan. 24 board meeting, when many applicants had hoped to receive the thumbs up on their licenses.

While Gov. Kathy Hochul said she didn’t order that meeting to be canceled, she said she berated OCM officials prior to the meeting for only having three license applications ready to approve, Spectrum News 1 reported Jan. 26.

“My team got involved and said, ‘No, go back to the drawing board. Work harder. Get this done.’ And no, I’m not satisfied with the pace,” Hochul said at an event that day in Buffalo, Spectrum reported. “I’ll tell you right now, I’m very fed up with how long it is taking to get these approvals.”

Hochul said she was expecting the board to consider more than 400 licenses at the canceled Jan. 24 meeting.

To lead off the Feb. 16 meeting, CCB Chair Tremaine Wright said “it has been a rocky start to 2024 for cannabis in New York State. We’ve read your letters, and we’ve heard your concerns. Today’s meeting aims to tackle a number of the matters that we hope will help propel our industry forward.”

Although the 109 licenses approved that day still fell short of the governor’s expectation for the first cohort of adult-use awardees from the most-recent general licensing window, OCM Executive Director Chris Alexander, whom Hochul appointed, assured those in attendance that “this is just the beginning.”

“The license review process takes time and requires many different teams with specific skill sets within our office to review and clear an application to get it ready for board consideration,” he said at the Feb. 16 meeting. “There’s ownership review, background checks, municipal consideration, location proximity analysis that needs to be checked on each application. I’m very proud of the licensing team who continues to work very hard to prepare as many applications as possible for consideration.”

Part of the background checks include ensuring that license applicants haven’t been convicted of fraud or employment-related offenses, Alexander said. The office also checks on business activities to ensure applicants aren’t participating in the unregulated cannabis market, he said.

The OCM received 6,934 total applications during the general licensing window that closed Dec. 18, including 4,324 from potential retailers, 1,349 from microbusinesses, 538 from processors, 372 from cultivators and 351 from distributors.

In New York, the adult-use microbusiness license authorizes the cultivation, processing, distribution, retail sale and delivery of the licensee’s own cannabis products. A microbusiness must engage in cannabis cultivation and at least one additional licensed activity.

While the OCM doesn’t have a license cap in place for the adult-use market, the office previously estimated that it would approve 500 to 1,000 retail licenses, 220 microbusiness licenses, 40 indoor cultivation licenses, 155 processor licenses and 30 distributor licenses.

Notably, OCM has not issued any denials yet as its workers continue to go through the application queue, Alexander said.

“The truth of matter is, yes, we want to license as many people as we can, but of course not everybody’s going to be able to receive a license,” he said. “We also, despite not having license caps, are a limited-license market, and so, no, not everybody’s going to get license. We have 7,000 retail applications; the state cannot support 7,000 dispensaries. And I think that dispensary operators would not want to step into a business in which there are 7,000 dispensaries that are not viable. And so, we want to make sure that we’re growing responsibly.”

Editor’s note: While the OCM received roughly 7,000 total applications in the general application period ending Dec. 18, roughly 4,300 of those were for dispensary operations.

CCB Board Member Jennifer Gilbert Jenkins, Ph.D., pushed back on Alexander’s comments during the Feb. 16 meeting.

“I think that we have more than 7,000 liquor stores in this state, and I think that we probably have more than 7,000 illegal [cannabis] stores in this state,” she said. “And if you walk around right now, the issue isn’t that there isn’t enough market for us to have all these legal stores. The issue is that we still haven’t closed down all of the illegal stores. And so, as we are working to close down the illegal stores, there will be space for the legal ones, and this needs to be an open conversation that we continue to work on.”

To Alexander’s point, 7,000 dispensaries would make New York the most saturated adult-use cannabis market in the nation at roughly 36 retail facilities per 100,000 people. Even half that amount would still rank near the top.

Currently one of the most saturated cannabis markets in the U.S., Oregon has roughly 20 dispensaries per 100,000 people, according to the state’s licensing data. And, in April 2022, Oregon cannabis regulators implemented a licensing moratorium in response to a “crowded marketplace.”

But Alexander backed Gilbert Jenkins’ point that much of the concern in New York still revolves around potential licensees who believe their stores would be more viable with greater enforcement against unlicensed stores, he said.

When Hochul announced a plan to crack down on unregulated sales in October 2023, her office reported that “aggressive” enforcement efforts by the OCM and the Department of Taxation and Finance had yielded in the seizure of more than 8,500 pounds of unregulated product with an estimated value of more than $42 million at that time.

However, shutting down unlicensed operators does not necessarily equate to a viable business opportunity for a licensed operator, Alexander said.

“The replacement theory, I mean, obviously the solution to dealing with the illicit shops is more legal shops of course, but that does not mean that we tip the scales to a point where all of this work that we have put in to create this market that does not exist anywhere else is all for naught,” he said, “because again, I’m sure our 270-plus conditional cultivators, the farmers who are given this initial opportunity, also don’t want to see us over-license cultivation to a point where the price point is not viable. So, the same logic applies on the retail tier.”

In addition to approving 109 licenses, CCB approved a resolution for proposed adult-use cannabis home cultivation regulations, kickstarting a 60-day public comment period before finalizing rules to allow those 21 and older to grow their own plants.

Per the proposal, New York residents would be limited to growing six plants per person or 12 plants per household, and only half of those plants could be mature at one time. While New York law allows for those 21 and older to posses up to 3 ounces of cannabis, the home-grow proposal would allow those adults to possess up to 5 pounds of cannabis derived from personal cultivation.

OCM Policy Director John Kagia said that while the idea around home cultivation can “raise fears” of large grows in densely populated residential areas, the experience in other states “tells us that really isn’t the case.”

“Research shows that only a small percentage of cannabis consumers become home growers, making it a fairly specialized hobby, something akin to people who want to brew their own beer,” he said. “Additionally, while growing cannabis might be easy, growing good, high-quality cannabis is actually not that easy. So, you invariably see home growers supplement or complement the cannabis that they’re growing with products from the legal regulated market."