Cannabis Microbusinesses Potentially a Boon for the Hudson Valley

Among the provisions contained in New York State’s newly-enacted Marihuana Regulation and Taxation Act (the “MRTA”) is the special status given to cannabis microbusinesses, which may open up new opportunities in the Hudson Valley and throughout the state.

The MRTA generally follows the pattern of the state’s liquor license laws by trying to prevent vertical integration; thus, cultivators, processors, distributors, and retailers all need to obtain specialized licenses which are mutually exclusive.

There are two exceptions to this scheme. Existing medical marijuana dispensaries, which already are allowed to cultivate, process, and dispense marijuana, will be allowed to sell their product to retail distributors or to open up to three dispensaries each for adult recreational customers.

The second exception is for “microbusinesses” – a term yet to be defined – which are intended to follow the pattern for microbreweries, and will be allowed to vertically integrate, performing cultivation, processing, distribution, delivery, and dispensing of product.

Licenses for microbusinesses will be exclusive, meaning that holders of other types of licenses, with limited exceptions, will not be allowed to have a direct or indirect economic interest in a microbusiness, and vice versa. Microbusinesses will only be allowed to retail its own products in its own shops, or distribute the products to licensed dispensaries.

Microbusinesses will be exempt from the requirement that retail marijuana establishments have street-level access on a public thoroughfare.

Note that the MRTA aspires to grant 50% of all cannabis-related licenses – including those for microbusinesses – to “social and economic equity” applicants, namely applicants from communities affected by the war on drugs, women-owned and minority-owned businesses, MWBEs, distressed farmers, service-disabled veterans, low-income applicants, and those who have had, or have a close relative who has had, a marijuana-related conviction.

Regulations regarding definitions, applications, number of licenses, license fees, etc., will be issued by the newly-created state Cannabis Control Board at some point in the future.

Cannabis microbusinesses present an opportunity for small, independent business folks. Experience in other states where cannabis is legal has shown that retail establishments, cultivators, processors, etc., are snapped up by large entities. The protections afforded cannabis-related microbusinesses are meant to allow them to mature and thrive and not be subject to the forces of industry consolidation. The Hudson Valley, with its expertise in microbreweries, is well positioned to develop this new source of revenue and commerce.

The foregoing is not intended to constitute legal advice. If you are interested in pursuing cannabis microbusiness opportunities or have any questions regarding the new MRTA, please contact the author or any other attorney at Catania, Mahon & Rider, PLLC.

Jonathan S. Berck is Special Counsel to Catania, Mahon & Rider, PLLC, and is a member of the firm’s Cannabis Practice Group. His practice focuses on business transactions of all sorts and services to companies of all sizes on topics as diverse as employment matters, mergers & acquisitions, and business succession, among others.