Alert: New York’s First Adult-Use Cannabis Sale 

On December 29, 2022, New York State’s first adult-use cannabis sale took place at Housing Works Cannabis Co., located in lower Manhattan. The dispensary is the first legal recreational cannabis store to open in New York. Housing Works, a New York City-based nonprofit dedicated to fighting AIDS and homelessness, known for its entrepreneurial endeavors including a chain of retail thrift shops, whose profits help fund the organization’s philanthropic efforts, was awarded one of New York’s first retail dispensary licenses under the State’s Conditional Adult-Use Retail Dispensary (CAURD) program.

New York’s CAURD program was designed to give the first retail dispensary licenses to individuals who have been negatively affected by the State’s prior prohibition of cannabis as well as to nonprofits committed to serving and creating vocational opportunities for current and formerly incarcerated individuals.

In light of this historic moment, Prince Lobel’s Cannabis attorneys have updated their Retail Dispensary FAQ (see below) based on New York’s proposed draft Adult-Use Cannabis Regulations, which were published in the State Register on December 14, 2022. There is currently an open 60-day public comment period during which individuals can submit recommendations regarding the draft regulations to the Office of Cannabis Management (OCM). The comment period will close on February 13, 2023.

If you are looking to open your business in New York’s emerging cannabis market, or have any questions regarding New York’s licensure process, please contact, Andrew Schriever, James K. Landau, David C. Holland, or any other member of the Prince Lobel Cannabis Team.

 

New York Adult-Use Retail Dispensary FAQ

 

1.  Are there limitations on dispensary hours of operation?

Yes. Municipalities may pass local ordinances governing the time, place, and manner, including the hours of operation, for adult-use retail dispensaries, provided that the municipality does not restrict operations to less than seventy hours per week.

A dispensary cannot operate between the hours of 2:00 AM and 8:00 AM unless it is given express written permission by the municipality, or the municipality passes a local ordinance authorizing operation during such hours.

Dispensaries may allow customers to place orders and accept payment for such orders outside of their hours of operation (e.g., through an online website/app). However, dispensaries can only provide products, in store or by delivery, during the licensee’s permitted hours of operation.

 

2.  Can dispensaries deliver cannabis products to customers?

Yes. In addition to the services offered inside of the brick-and-motor store, dispensaries may deliver cannabis products, paraphernalia, and merchandise to customers during their hours of operation. Dispensaries may deliver cannabis products to any physical address within New York State regardless of whether a municipality might prohibit retail dispensaries.

A licensee may only use ground transport, including, but not limited to, cars, vans, bikes, scooters, foot, and ferry, to deliver cannabis products. A Licensee must own or lease any motorized or unmotorized vehicle that it uses to transport cannabis products. Further, the licensee must provide an OCM-compliant invoice to the customer upon completing the delivery.

No more than twenty-five employees (or the full-time equivalent thereof) may provide delivery services for the licensee per week.

Dispensaries are prohibited from marketing cannabis products through online third-party platforms or fulfilling any orders referred to them by third-party platforms.

 

3.  Can dispensaries operate drive-thru windows or pick-up lanes?

Yes. While all retail dispensaries must be located within a brick-and-motor store that allows customer entry, licensees may operate a drive-thru service window and/or a drive-thru pre-order pick-up lane, upon receiving written approval from the OCM. Customers may be permitted to enter a drive-thru service window or drive-thru pick-up lane in any form of transportation, including on foot, provided that the licensee ensures customer safety in all drive-thru areas.

Moreover, dispensaries can establish express lanes inside the store for customers who place pre-orders for pick-up.

 

4.  Can dispensaries operate cannabis vending machines?

No. Dispensaries cannot dispense or otherwise sell cannabis products from a vending machine nor allow such a vending machine to be installed at the interior or exterior of the licensed premises.

 

5.  Are dispensaries allowed to operate cannabis trucks and/or carts?

No. Licensees cannot solicit or receive an order for, keep or expose for sale, or keep with intent to sell any cannabis products to a customer by means of any vehicle or wheeled frame used for transporting objects, for carrying goods and materials, including, but not limited to carts, cars, vans, trucks, or trailers.

 

6.  Are dispensaries allowed to display cannabis product samples?

Yes. Dispensaries may display cannabis product samples and make these samples available to customers for inspection, including to smell or otherwise inspect them.

Cannabis product samples may be displayed in a case or kept elsewhere on the premises, but must be kept in a secure, locked place when they are not being inspected by customers (e.g., locked behind a counter or other barrier). Cannabis product display samples must be handled in a sanitary and secure manner at all times.

Dispensaries may use product displays or other branded elements to advertise cannabis products within secured displays, even if these elements are provided by another licensee. However, such product displays or other branded elements must comply with all restrictions on marketing and advertising.

Further, licensees must ensure that no cannabis products or paraphernalia are displayed in an area that is visible from outside the store. Licensees also must ensure that no advertisement other than permitted outdoor signage can be within or readily observe within 500 feet of any school grounds, childcare center, playground, public park, or library.

 

7.  Can dispensaries offer cannabis product samples to customers?

No. Dispensaries cannot offer customers cannabis product samples for consumption. However, dispensaries may provide customers with non-infused samples of edible and topical cannabis products offered at the retailer.

 

8.  Are dispensaries required to display a “menu”?

No. Dispensaries are not required to make a “menu” available to customers, however, any menus, including those posted online, must include the product price and total cost (including tax) of each item for sale. Further, dispensaries must accompany any item for sale with a price tag, sign, or placard stating the product price and total cost (including tax).

 

9.  Can dispensaries give away or offer discounts on cannabis products

No. Dispensaries cannot give away, including through donation, any cannabis products. Moreover, dispensaries cannot advertise giveaways, discounts, price reductions, points-based rewards systems, or customer loyalty programs, including but not limited to, by using the terms “gift”, “sale,” “free,” “price drop,” or “discount” on a menu, in any communications to customers, or elsewhere.

However, this does not prohibit dispensaries from changing the price of cannabis products or otherwise “discounting” products through methods such as “bundling” or “bulk pricing.”

 

10.  Are there any shelf-space requirements and/or prohibitions?

Yes. Dispensaries must dedicate a minimum of forty percent (40%) of their available shelf-space to cannabis products cultivated or processed by non-ROD licensees, for five years from the first retail cannabis sale in NY.

Further, dispensaries are prohibited from selling their shelf-space to supply tier licensees.

 

11.  Can dispensaries offer promotional give aways of non-cannabis merchandise?

No. Dispensaries cannot give away or distribute promotional items, including branded or unbranded merchandise, to cannabis consumers.

 

12.  Can dispensaries sell non-cannabis accessories or merchandise?

Yes. In addition to being able to sell any authorized cannabis product obtained from a licensed distributor, dispensaries may sell cannabinoid hemp (CBD) products, if licensed to do so, as well as cannabis paraphernalia, stationery, gifts, and other minor incidentals. These products may depict cannabis or otherwise reference cannabis, provided that they do not reference a specific cannabis product or brand.

Dispensaries also may sell branded merchandise and apparel, including jewelry and accessories, in adult sizes only, containing the licensee’s own brand. A dispensary cannot sell apparel or merchandise that references another brand.

 

13.  Can dispensaries sell non-cannabis food, beverage, or personal care products?

No. Dispensaries cannot sell or give away any non-cannabis food, beverage, or personal care products.

 

14.  Can dispensaries sell products that contain alcohol, tobacco, or nicotine?

No. Dispensaries cannot sell products containing alcohol, tobacco, or nicotine.

 

15.  Are dispensaries required to provide customers with exit bags?

No. An exit package is not required. However, if a dispensary does provide an exit package, it may only contain the licensee’s brand name and logo. Any other text or symbols, such as selling messages, mottos, and other brand markers, are not allowed on the exit package.

A customer may provide their own exit package, such as a reusable bag or backpack.

 

16.  Are there any limitations on exterior signage?

Yes. A dispensary cannot display more than two signs outside of the store. Note: this may include signs that are indoors, depending on the nature of the premises (e.g., if the dedicated entrance to the dispensary is within an indoor mall, then signs outside of the store, but within the mall, would count towards this limit, even though the signs would not be outdoors).

Exterior signs must be on the same parcel as the store and affixed to a building or permanent structure (e.g., signpost). Exterior signage cannot be larger than necessary to reasonably display the information on the sign to individuals within or near the licensed premises and cannot be illuminated by neon lights.

Exterior signage may only, at most, include text that is the licensee’s (1) business or trade name; (2) location and contact information; and (3) business type (i.e., “Adult-use Cannabis Dispensary” or similar phrase). Exterior signage cannot include a licensee’s logo, symbol, branded colors or any images, including, but not limited to, depicting cannabis/cannabis products or the imagery or action of smoking/vaping. Exterior signs also cannot include mottos, selling messages, or any other non-essential text.

Note: that interior window signage that is visible from outside of the dispensary may be subject to the content and character restrictions of exterior signage, as well as any additional future restrictions that the OCM may impose.

 

17.  Are there any interior signage requirements?

Yes. Dispensaries must post inside the store, in a manner that is plainly visible to all customers, the following information: (1) licensee’s retail dispensary license; (2) hours of operation; and (3) notification that: (i) “Consuming cannabis is not allowed on this premises.”; (ii) “Cannabis can impair concentration, coordination and judgment. Do not operate a vehicle or machinery under the influence of cannabis.”; (iii) “Using cannabis, in any form, while you are pregnant or chest/breastfeeding passes THC to your baby and may be harmful to your baby. There is no known safe amount of cannabis use during pregnancy or while chest/breastfeeding.”; and (iv) “Adult-use cannabis products are for use only by persons 21 years and older. KEEP OUT OF REACH OF CHILDREN AND PETS.

 

18.  Are there any limitations on branding?

Yes. Dispensaries cannot appeal to individuals under twenty-one years of age in their marketing or advertising, including their branding.

Brand/Branding refers to the name, entity name, or d/b/a name, registered trademark, logo, symbol, motto, selling message, recognizable pattern of colors, or any other identifiable marker that identifies one adult-use cannabis licensee or adult-use cannabis licensee’s products as distinct from those products of other adult-use cannabis licensees and is used in, among other things, any packaging, labeling, marketing, or advertising. Branding cannot use images, fonts, colors, or messages that are attractive to individuals under twenty-one years of age.

Attractive to individuals under twenty-one years of age means any labeling, packaging, advertising, and marketing that make use of, including, but not limited to: (i) cartoons; (ii) bubble-type or other cartoon-like font; (iii) bright colors that are “neon” in appearance; (iv) similarities to products or words that refer to products that are commonly associated with or marketed in a manner so as to be attractive to individuals under twenty-one years of age, including, but not limited to, any imitation of food, candy, soda, drinks, cookies, or cereal, in labeling, packaging, advertising, or marketing (with the exception of cultivar or licensee names, entity name, or doing business as (d/b/a) name; this does not preclude retail dispensaries from offering permissible forms of cannabis products with compliant packaging); (v) terms “candy” or “candies” or variants of such, in spelling like “kandy” or “kandeez” (with the exception of cultivar names or licensee names, entity name, or d/b/a name); (vi) symbols, images, characters, public figures, phrases, toys, or games that are commonly used to market products to individuals under twenty-one years of age; and (vii) images of individuals who could reasonably appear to be under twenty-one years of age.

Further, a licensee cannot represent its business as producing/selling “organic” or “craft” product until OCM authorizes such designations.

More information on Packaging, Labeling, Marketing, and Advertising Guidance can be found here.

 

19.  What constitutes a craft cannabis product?

A craft product means a flower or pre-roll cannabis product that:

  • is hand-trimmed, hand-dried, and hand-packaged;
  • is processed and manufactured exclusively by either:
    1. a Tier I indoor, mixed-light, or outdoor cultivator licensee; or
    2. a microbusiness licensee; and
  • has received “craft designation” from such licensee.

 

20.  Are dispensaries allowed to make health claims?

No. A dispensary, its employees, and all individuals or entities with a direct or indirect interest in the licensee cannot create the impression that the dispensary, or any adult-use cannabis products sold by the dispensary, will cure or prevent specific illnesses or diseases, treat any specific symptoms, or otherwise provide specific medical advice to customers.

While dispensary employees may provide general information to customers about the effects of cannabis consumption on the human body or make specific recommendations about safer storage or consumption of cannabis products, employees cannot give specific medical advice to customers based on factors unique to that individual’s health. Medical advice should be referred to customer’s health care practitioners.

Further, licensees cannot misrepresent their business as a medical cannabis dispensary. Adult-use dispensaries cannot use words in its branding such as drug, drug store, medicine, apothecary, doctor, or pharmacy, including any similar terms like “pharma-,” or “medi-”. This prohibition is applicable to medical cannabis dispensaries authorized to sell adult-use cannabis, with the exception for branding that appears solely on medical cannabis products at such premises and is only intended to be seen by patients in patient-only areas of the premises.

If a medical cannabis patient happens to present their patient certification to an adult-use dispensary employee and the dosing recommendation is “Per Pharmacist’s Consultation,” then the employee must notify the patient that they are not a pharmacist before they can make any recommendations/suggestions. Dispensary employees must also provide a list of the nearest registered organization dispensing facilities to any patient who present a medical patient certification.

 

21.  Can dispensaries purchase cannabis products on credit?

Yes. Dispensaries may purchase cannabis products on credit from licensed distributors, provided that all agreements to purchase cannabis on credit are reported to the OCM with the terms of payment and credit. The OCM may invalidate agreements that it deems commercially unreasonable or where it suspects discriminatory pricing practices.

Licensees that purchase cannabis products on credit must complete payment for such purchase within 90 days. Distributors must report any delinquent licensees to the OCM, which will maintain a list of delinquent licensees. Distributors are prohibited from selling cannabis products on credit to any licensee on the OCM’s delinquent payment list.

 

22.  Can dispensaries receive discounts on cannabis products from cultivators, processors, or distributors?

In most cases, no. The Cannabis Law prohibits a licensee authorized to cultivate, process, or distribute cannabis from giving anything of value to a dispensary to induce it to buy products. Generally, the OCM presumes that anything a cultivator, processor, or distributor gives to a retail licensee is meant to induce the licensee to buy product, including, but not limited to: (1) gifts; (2) discounts, except not in excess of one per centum for payment on or before ten days from date of shipment of such cannabis; (3) customer loyalty programs; (4) loans of money; (5) premiums; (6) rebates; (7) free product of any kind, except as permitted in regulations or guidance; (8) treats or services; or (9) property.

 

23.  Are dispensaries allowed to receive samples from cultivators, processors, or distributors?

Yes. Licensees authorized to distribute cannabis products may provide free samples of cannabis products to negotiate a sale to a dispensary that does not currently carry the brand, type, or form of the cannabis product. The sample may only be used by the retailer and employees of the retailer.

 

24.  Are there any setback requirements for dispensary locations?

Yes. A dispensary cannot be on the same road and within five hundred feet of school grounds or on the same road and within two hundred feet of a house of worship.

The school grounds setback is to be measured along a straight line from the nearest point of the school grounds to the center of the nearest entrance of the proposed licensed premises. The house of worship setback is to be measured along a straight line from the center of the nearest entrance to the house of worship to the center of the nearest entrance of proposed licensed premises.

Only entrances that are regularly used to give ingress to patrons of the establishment will be used to measure setback requirements. “Entrance” does not mean a door which has no exterior hardware, or which is used solely as an emergency or fire exit, for maintenance purposes, or which leads directly to a part of a building not regularly used by the general public or patrons.

Further, a dispensary within a city, town, or village having a population of 20,000 or more cannot be located within a 1,000 ft. radius of another retail dispensary licensee and a dispensary within a city, town, or village having a population of 20,000 or less cannot be located with a 2,000 ft. radius of another retail dispensary licensee.

Finally, municipalities may enact local setback requirements, not greater than five hundred feet, between a dispensary and a community facility. A community facility includes, but is not limited to, a facility that provides day care to children, a public park, a public swimming pool, a library, or a center or facility where the primary purpose of which is to provide recreational opportunities or services to children or adolescents

Note: that in addition to the above setback requirements imposed by the OCM, dispensaries must comply with any local ordinances not preempted by the OCM or determined to be unreasonably impracticable by the Cannabis Control Board (CCB).

 

25.  Are dispensaries required to have armed security?

No. However, licensees are permitted to hire armed service providers as part of the retailer’s security measures, if they wish.

Further, licensees are required to implement and maintain sufficient security measures to deter diversion, theft or loss of cannabis products, theft or loss of cash, prevent unauthorized entrance into areas containing cannabis products, and to ensure the safety of the licensee’s employees and the general public.

 

26.  Can dispensaries hire employees who are under twenty-one years of age?

Yes. A licensee may hire any employee who is at least eighteen years of age. However, only employees who are at least twenty-one years of age can have direct interactions with customers inside of the store, transport cannabis products in any way, or be involved in any delivery operations.

 

27.  Can dispensary employees refuse to sell cannabis products to a customer?

Yes. Dispensary employees may refuse to sell cannabis products to a customer if they believe the sale would endanger the health or safety of the customer. However, employees must refuse a sale if, based on the information available to them at the time, the sale would (1) be to an individual who is under twenty-one years of age or visibly intoxicated; (2) result in the customer exceeding the legal possession limit; or (3) create a risk of diversion.

 

28.  Can dispensary employees or customers consume cannabis products on the licensed premises?

In some cases, yes. While licensees must maintain and comply with a written alcohol-, drug-, and smoke-free workplace policy, the consumption of cannabis products by employees, individuals or cannabis consumers inside the premises of the retail dispensary may be permitted with approval from the OCM.

 

29.  Are there limitations on dispensaries’ retention of customer data?

Yes. A dispensary cannot retain customers’ personal information for marketing and/or advertising purposes unless the customer consents to the information being retained for such purposes.

 

30.  Can municipalities impose additional fees on and/or require in-kind contributions of dispensaries?

In most cases, no. Municipalities cannot adopt local laws imposing any fees on retail dispensaries, except where the fees are also applicable to off-premises liquor establishments licensed under the State Liquor Authority prior to March 31, 2021, and do not conflict with the Cannabis Law.

Further, municipalities are prohibited from adopting or executing any agreement where the municipality, community organization or association affiliated with such municipality, otherwise receives any additional benefit outside of general operation from or imposes any duty or obligation on any applicant, registrant, licensee or permittee.

 

With thanks to Dalton Battin for his work on this Alert.

Primary Sponsor

Top Marijuana Blog