New York is unique among state-regulated cannabis markets for a host of different nuances and complexities, but among them is the Type 3 – Processor Branding License, which provides, among other things, that third-party brands cannot enter into white labeling and/or branding agreements with licensed Cultivators and/or Processors without first obtaining this license.

Just as problematic was the fact that the licensing window for applying for a Type 3 Processor license previously closed in December of 2023, with promises from the Office of Cannabis Management (“OCM”) that licensing would be reopened in “early 2024,” yet that process lingered without opening through early 2024, mid-2024, and has now bled into late 2024.

However, the good news is that OCM recently re-opened an application round for “Adult Use Processor Type 3 – Branding” licenses, allowing brands to become licensed – as is required in New York – and enter into white labeling/branding agreements with other licensed operators.

Type 3 Processor Licenses authorize non-plant touching companies to market their brands of cannabis products in New York State’s adult-use cannabis market. Section 123.5 of Title 9 of the New York Code Rules and Regulations specifies that a Type 1 or Type 2 Processor may only enter into a branding or white labeling agreement with its true parties of interest or another licensee, including a Type 3 Processor License. Notably, a Type 3 Processor License allows those entities to white label with other licensees, meaning it authorizes these licensees to provide intellectual property (logos, product quality plans, etc.), non-cannabis ingredients (rolling papers, flavoring agents), equipment, and other materials (vaporizers) to another New York State licensed processor authorized for plant-touching activities to be controlled by the terms of the underlying white labeling agreement. These agreements may contain and set certain standards that the plant-touching processor must meet related to the quality of finished cannabis products or the manufacturing processes used to make the cannabis products. However, a Type 3 Processor License does not authorize any plant-touching activity, including as it relates to extracting, blending, infusing, packaging, labeling, and otherwise making or preparing cannabis products.

To apply for this type of license, applicants must:

• Be 21 years of age or older;
• Be a U.S. citizen or permanent resident;
• Not hold an Adult-Use Retail Dispensary, Adult-Use On-Site Consumption, or Adult-Use Delivery license;
• Provide a federal employee identification number;
• Provide names and contact information for all True Parties or Interest;
• Provide ownership, management, and financial information, including any proposed or existing sources of capital;
• Pay a non-refundable application fee of $1,000, though the fee varies if the applicant is a qualified Social and Economic Equity (“SEE”) applicant or if the applicant is applying as a Tier 1 or Tier 2 Cultivator Licensee; and

By way of reminder as to the opportunities of the New York-regulated cannabis marketplace:

• New York has sold $692.20 million in legal cannabis.
• Weekly sales have increased by $10 million since May.
• Quarter 3 sales reached a quarter billion dollars, bringing the 2024 year-to-date total to $535.4 million.
• Non-flower products account for slightly over half of all sales.
• There are 476 brands now available in New York adult-use cannabis dispensaries.
• The medical producers (registered organizations or ROs) account for 12% of all sales, with flower sales leading that segment.
• There are currently 210 dispensaries open for business across New York state.

There is no formal deadline established for this licensing application round, though brands are cautioned to be expeditious in filing, lest OCM provide further guidance that the application round is again closing, leaving otherwise safe, reputable, and entrepreneurial brands on the sideline of this new and emerging New York market.