On December 9, 2022, the New York Office of Cannabis Management (OCM) released Cannabis Delivery Guidance allowing retail dispensaries, including Adult-Use Retail Dispensary (CAURD) licensees, the ability to deliver cannabis to customers directly in hopes to “jumpstart” cannabis sales before the end of the year.
We previously wrote about the possibility of New York state regulators allowing for the delivery of cannabis to make good on promises to start adult-use cannabis sales this year. This announcement means that adult-use cannabis delivery is just around the corner. This blog will examine how cannabis delivery will work in New York state.
OCM delivery guidance allows the following:
- Retail licensees may secure a warehouse from which to fulfill delivery orders while building permanent dispensary locations for up to one year.
- Customers will place online/phone orders only; no in-person sales or pick-up from the warehouse location.
- Customers will make online pre-payments only; no cash payments from cannabis consumer to delivery employee.
- Deliveries can be made on bicycles, scooters, cars, or other similar methods of transportation.
- Delivery to consumers 21+ in New York, with ID verification upon sale and delivery.
- Up to (25) delivery staff per business, per requirements in the New York Cannabis law.
This temporary authorization will apply to all retail dispensaries, which indicates that both CAURD and non-conditional retail dispensaries will both be able to allow delivery, at least temporarily and only if this policy remains in place at the time that OCM issues retail dispensary licenses.
One potentially major stumbling block is that customers must pre-pay online and cannot pay in cash. While it’s reasonable that OCM would want to avoid cannabis delivery drivers from traveling with large amounts of cash, online pre-payment will be challenging if not impossible because major credit cards such as Visa, Mastercard, and American Express prohibit the use of their cards for the purchase of cannabis. Cannabis businesses have consistently tried to work around these restrictions for years but each time some enterprising business figures out a way to take payment by card, they are inevitably eventually shut down.
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Perhaps, the regulators are betting on the passage of the SAFE Banking Act by the end of this year, which is possible but unlikely at this point. Even if legislation is passed to expand the cannabis industry’s access to financial services, it’s not as if that change will happen immediately. All this means that cannabis sales may remain impossible in light of this payment restriction.
So far, OCM has issued 36 CAURD licenses. As indicated above, no non-conditional retail dispensary licenses have been issued, but OCM has proposed rules on how retail dispensaries will operate. Under the Marijuana Regulation and Taxation Act, there is a separate license specifically for cannabis delivery to consumers. The OCM draft regulations indicate that a retail dispensary license will be able to obtain a delivery license as well. This guidance allows any retail licensee to deliver cannabis without the need for a delivery license for the first year.
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Although CAURD licensees can now temporarily deliver under the guidance released Friday, they will have to do so from a location that cannot also serve as a retail storefront because guidance indicates that retail licensees can only deliver and not make in-person sales. This can put licensees in precarious place because they will only be able to deliver for a year and must choose between finding a location that is also zoned for retail sale or find a one-year location that is a more traditional warehouse. Commercial landlords are not eager to provide a lease for a term of one year.
In addition, OCM also announced that CAURD licensees can now submit approval for their own retail store location:
The Office of Cannabis Management additionally informed qualifying business CAURD provisional licensees that they can submit for approval their own proposed location for their retail store and may still qualify for financial support for renovations from the Social Equity Cannabis Investment Fund operated by the Dormitory Authority of the State of New York (DASNY). DASNY will continue the work of securing retail locations and locations will be matched with licensees as they become available.
Previously, CAURD applicants had been instructed not to secure a location as the state indicated that DASNY would provide retail locations for them. Setting up the Social Equity Cannabis Investment Fund has taken longer than anticipated and now OCM is changing course by allowing CAURD licensees that they now can submit their own locations for approval.
While this policy change creates a fast track to legalized sales, it also will inherently favor CAURD applicants who are well-funded and can find and lease or buy a location. It’s true that the fund may cover certain renovations at a CAURD proposed location, obtaining those locations will cost money up front, which for CAURD applicants, represents a previously unaccounted for cost.
For now, the reality is that if you are CAURD licensee or CAURD applicant it is in your best interest to start searching for potential locations to store products and coordinate delivery. We have written about key lease terms for New York cannabis businesses here. You can also reach out to one of licensed New York attorneys for additional help.
Daniel Shortt is a corporate and regulatory attorney based in Seattle, Washington who works extensively with entrepreneurs in the cannabis industry. You can contact him at firstname.lastname@example.org or (206) 430-1336. This article originally appeared on Green Light Law Group and has been reposted with permission.