New York Cannabis Licensing, Part 3: The Social and Economic Equity Plan

New York Cannabis Licensing, Part 3: The Social and Economic Equity Plan

With the aim of giving 50% of New York’s cannabis licenses to social and economic justice applicants (applicants for shares), we found it helpful to include a detailed explanation of the Social and Economic Justice Plan of the Marijuana Regulation and Taxation Act (MRTA) how the license application process works against equity applicants and critical differences in the application process for non-equity applicants. At the law Law Blog, we believe the social and economic justice program could do many good for New York State.

Who qualifies as a share applicant?

The overall goal of the Equity Plan is to promote diversity in trade, property and employment and to create opportunities for social and economic justice. The MRTA identifies the following applicants as equity applicants:

  • People from communities disproportionately affected by the enforcement of cannabis laws.
  • Minority owned companies.
  • Women-owned company.
  • Needy peasants.
  • Service-disabled veterans.

What makes a company owned by women or minorities?

For purposes of ownership in a business, at least 51% of the business must be owned by one or more US Citizens or Permanent Residents of the relevant category (ie 51% owned by women).

The company has to qualify as a small business and women’s or minority participation must not be a facade: straw owners are not permitted. Equity applicants must demonstrate that the ownership of women or minorities is real, substantial and persistent, with the equity applicant having and exercising the authority to independently control day-to-day business decisions.

The MRTA defines minorities as U.S. citizens or permanent residents who can provide evidence of belonging to one of the following groups:

  • Black people originating in one of the black African racial groups.
  • Hispanic individuals of Mexican, Puerto Rican, Dominican, Cuban, Central or South American Indian or Hispanic origin, regardless of race.
  • Native Americans or Alaska people who originated in one of the indigenous peoples of North America.
  • Asian or Pacific islanders originating in one of the Far Eastern countries, Southeast Asia, the Indian subcontinent or the Pacific islands.

How many licenses are given to applicants for shares?

The express goal is to give 50% of the licenses to equity applicants. The MRTA gives no indication of whether the target is split across all license types, and we, along with everyone else, are eagerly awaiting the Cannabis Control Board (CCB) to release the rules and regulations for adult licenses.

Are there any differences in the application process for share applicants?

A few. One critical potential difference is that equity applicants only need to come up with a plan in order to have sufficient real estate and equipment to run a proposed cannabis business, while non-equity applicants must have a contract or have a contract in order to operate in a particular location to become. Please note that the CCB must confirm whether the “Plan” exemption applies to equity applicants in retail stores.

Another difference is that certain applicants are given priority in the licensing process. The MRTA provides that an “additional” priority will be granted if the applicant:

  • Is a member of a community disproportionately affected by the enforcement of cannabis laws?
  • Has an income less than 80% of the median income in the county where the applicant resides; and
  • Was convicted of a marijuana-related crime prior to the MRTA Effective Date or had an immediate relative (or guardian) of an individual convicted of a marijuana-related crime prior to the MRTA Effective Date.

What kind of support does New York State provide for stock applicants?

Effective immediately, two major programs will provide specific support to share applicants. The first is a loan program operated by the Office of Cannabis Management and / or Urban Development Corporation that provides low or zero interest loans to equity applicants.

The second is an incubator program created by the CCB. The incubator program is designed to encourage equity applicants to apply for a license and, if licensed, provide direct assistance in the form of advisory services, training, coaching and financial planning for small businesses, and compliance support.

How does the Social and Economic Justice Plan affect non-equity applicants?

One of the enumerated evaluation criteria for applicants in general is that the applicant submit a plan to contribute to communities and people disproportionately harmed by cannabis law enforcement, including the social responsibility framework established by the MRTA. By and large, we expect the ability to demonstrate significant benefit to these communities from both an employment and a community perspective will be an important part of the evaluation of applicants.

Can you transfer a license issued to a share applicant?

Not for the first three years of licensing unless the transfer is to a qualified share applicant and the CCB has approved carriage in writing. In the event of a sale, the transfer agreement must require the new license holder to pay the CCB any outstanding amounts due on loans from the Office of Cannabis Management or Urban Development Corporation, as well as any other fees later determined by the CCB.

To wrap up our three-part series on the MRTA’s licensing terms for adult use, here on the law Law Blog, we believe that the MRTA’s Social and Economic Justice Plan has the potential to correct social and economic injustices created by decades of unequal enforcement caused by the marijuana laws.

With adequate licensing requirements and a sufficient number of initial licenses issued, the implementation of the social and economic justice plan should also leave room for success for non-equity applicants. Stay tuned as we detail other areas of the MRTA and the developing cannabis industry in New York!

In the meantime, check out the previous posts in this series: