ALBANY — Under draft rules for the marijuana industry released Sunday by New York regulators, the state’s ten existing medical marijuana companies will likely spend more than $5 million to sell to the recreational market and wait at least three years before they can open any which retail stores.
The full 282-page regulations also include descriptions of a number of new licensing categories, as well as details on how conditional permit holders willing to grow, process and sell the state’s first legal recreational weed will be able to apply for a permanent stake in the industry. .
The Cannabis Control Board will consider the draft rules on Monday. If adopted, the regulations will be open for public comment for 60 days.
Interest in the rules has swirled for more than a year, and the state’s atypical regulatory structure that will separate most growers and processors from store owners stems from a 2021 law that created a framework for the industry. But spokespeople and lobbyists for the 10 multi-state operators that serve the state’s medical cannabis patients have been in constant discussions with regulators, who have sought to prevent those big seed companies from driving New York’s recreational industry the way many other states have.
In addition to requiring medical companies to pay a one-time fee of $5 million for sales to the recreational industry, the draft rule would also require them to pay additional licensing fees and a percentage of revenue over five years that could reach up to $1 million a year. In addition, they will have to wait three years before opening their own recreational retail stores, and each store co-located with a medical retailer will cost them an additional $3 million.
The state has nearly 124,000 medical cannabis patients who can be certified for any ailment and has close to 40 locations in the state where they can purchase cannabis, including multiple stores in the Capital Region. Prescription holders are also now allowed by the state to grow their own plants at home, while recreational users are still prohibited from doing so.
However, the number of patients is expected to be smaller than the number of recreational users who purchase recreational marijuana and who may soon be able to purchase from licensed sellers when they become operational. The draft industry rules require medical marijuana companies interested in selling recreational marijuana to develop a “medical patient prioritization plan,” which includes “sufficient medical cannabis product in each localized retail dispensary.”
Despite the restrictions, which are likely to cost New York’s 10 licensed medical companies significantly more than fees for industry newcomers, the companies may still be in a good position to sell cannabis to third-party retail stores. They had the opportunity to build their facilities in anticipation of an expanding market, while many investors were waiting in the wings due to licensing uncertainty. And while many licensed conditional cultivators chose outdoor crops during the summer, medical companies boast indoor cultivation, which offers a more controlled environment.
