On March 10, 2022, New York Governor Kathy Hochul, the Cannabis Control Board and Office of Cannabis Management (“OCM”) introduced the Seeding Opportunity Initiative (“SOI”). This regulation would provide key opportunities for farmers, entrepreneurs and individuals that have been disproportionately impacted by the War on Drugs. Notably, the proposed regulation would give individuals with previous cannabis convictions and their family members, subject to certain limitations, the first opportunity to apply for a conditional adult-use cannabis licenses.
The SOI is an important step in legalizing the sale of cannabis in New York. It comes a year after the enactment of the Marijuana Regulation and Tax Act (“MRTA”), which legalized the recreational use of cannabis in the state of New York. The MRTA was a historic step in ending the War on Drugs and setting the stage for legal cannabis use in New York. The SOI is largely seen as the next step in creating a legal cannabis industry by making adult use sales in the State possible by the end of 2022.
However, what sets the SOI apart from other previously proposed cannabis legislation is that it prioritizes New York residents, and specifically, those individuals that have been disproportionately affected by the criminalization of cannabis. The SOI is intended to achieve these goals by providing 3 key programs: (1) Equity Owners Lead Program; (2) Farmers First Program; and (3) The New York Social Equity Cannabis Investment Program. With these programs, the SOI represents a significant step towards establishing New York’s cannabis industry and is aimed at balancing a social inequity that has existed in New York for too long.
Equity Owners Lead Program
Under the Equity Owners Lead Program, applicants that satisfy the requisite criteria will be eligible for a conditional adult-use retail dispensary license. While not an exhaustive list of the criteria, of particular note is that an eligible applicant must be a qualified business-owner, individual or entity, or related to an individual (parent, legal guardian, child spouse or dependent) that was convicted of a cannabis-related offense in the state of New York prior to the March 31, 2021 passage of the MRTA.
The application portal will open as early as Summer 2022, and the first set of licenses are expected to be distributed by late Summer or early Fall 2022. Successful applicants will be given access and support to renovated or renovation-ready locations for dispensaries in high traffic areas. The conditional licenses will be valid for 4 years. Licensees will be required to notify the OCM of its intention to continue the licensed activities 120 days prior to the expiration of the conditional period. Upon receipt of such notification, the OCM will review several factors, including the licensee’s history of compliance and service to the community, to determine if the licensee may transition to a standard adult-use retail dispensary license.
Farmers First Program
Under the Farmers First Program, eligible cannabinoid hemp farmers will be eligible for a conditional adult-use cultivator license. In order to be eligible to apply, applicants must have been authorized to grow hemp under the Department of Agriculture and Markets Industrial Hemp Research Pilot Program, be in good standing with the Department of Agricultural Markets to grow cannabinoid or cannabidiol (“CBD”) hemp, have grown and harvested cannabinoid or CBD hemp for 2 of the past 4 years, and hold 51% or more ownership in the entity that has the industrial hemp grower authorization. Other conditions require that the eligible hemp farmers adhere to certain quality, assurance, health, environmental and safety requirements as set forth by the OCM. Additionally, licensees will need to partake in sustainability and equity mentorship programs that will help develop the first generation of cannabis farmers and owners across this newly formed supply chain.
The license portal is open from March 15 through June 30, 2022, and can be accessed on the NYS Government website. In addition to the requisite documentation, applicants will also be required to pay a non-refundable $2,000 fee to the OCM. Successful applicants will be eligible to grow cannabis starting in the 2022 growing season.
The New York Social Equity Cannabis Investment Program
Under the proposed New York Social Equity Cannabis Investment Program, $200 million of the Fiscal Year 2023 Executive Budget would be put towards funding the adult-use cannabis market in the State. The OCM stated that $50 million would be generated through industry licensing fees and $150 million would come from private equity. The $200 million would be put towards the development of dispensary facilities for those with a conditional adult-use retail dispensary license. The Dormitory Authority of the State of New York would provide construction and leasing services to the dispensaries to ensure they comply with all health, safety and security requirements.
This proposal would give New York’s small famers, small business owners, and individuals that were disproportionally targeted by cannabis criminalization access to funding and vital services. These individuals and businesses are typically members of communities that have the least amount of resources and ability to obtain capital and access to such services due to their prior convictions or criminal records. Thus, the SOI is meant to focus on “those who otherwise would have been left behind,” said Chris Alexander, the Executive Director of the state’s OCM.
This prong of the proposed legislation remains subject to final approval by the State Legislature.
 See the announcement from the Governor’s Office here.
Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 83