Navigating the Emerging Regulation of Cannabis: A Comparison of New York, Massachusetts and California

8.22.2022

By Craig Gold

 

In the 80s, there was the largely unsuccessful “war on drugs.” Fast-forward 30 to 40 years, and we’re dealing with an about face, at least when it comes to the cultivation, sales, and consumption of cannabis. It is still illegal on the federal level and in many states.

With that said, there are a handful of states that have made cannabis legal for not only medical purposes but adult recreational use. California, Massachusetts and most recently New York are among them. Attorneys in those three states participated in a webinar earlier this summer in coordination with the New York State Bar Association’s Young Lawyers Section. The webinar’s main focus: highlighting the differences between each state pertaining to the emerging field of cannabis regulation.

Massachusetts

“We’re building the bike as we ride it.” Lesley Delaney Hawkins, attorney at Prince Lobel Tye in the Boston metro area, told participants at  the webinar, using the analogy to describe the newly-emerging cannabis regulation in Massachusetts. For now, Delaney Hawkins says Massachusetts, which made cannabis legal in 2016, has one governing body at the state level regulating the industry.

However, any sort of venture — be it from a cultivating or manufacturing capacity —  must get approval at the local level first before a state license is even considered.

“Each municipality, their rules and regulations are different — which is why it’s so important to actually dig into the municipality in which your client is looking to site,” says Delaney Hawkins.

A potential cannabis licensee has to enter into what’s called a “host community agreement” at the local level. This agreement, which involves at a minimum, a community impact meeting, must be present for each proposed site and type of operation.

But, do municipalities have too much control in the licensing process? Delaney Hawkins says the State House of Representatives is leaning in that direction and will likely attempt to put some of that power back in the hands of the state.

California

Since 1996, cannabis has been legal for medicinal purposes with the passage of the state’s “compassionate use act.” Exactly 20 years later, adult recreational use was made legal. Much like Massachusetts, approval must come from each municipality before obtaining a license from the state.

Initially, there were 3 governing agencies at the state level: The Department of Agriculture oversaw cultivation, The Bureau of Cannabis Control oversaw retail/distribution and The Department of Public Health oversaw manufacturing.

Within the past few years, all three merged into one entity — The Department of Cannabis Control. According to Kelly Hayes, a cannabis attorney with Murchison & Cumming based in San Diego, 68% of municipalities don’t even offer licensing, which is similar to what’s happening in Massachusetts and New York. Those who are fortunate enough to gain approval at the local level will then have to apply for a “provisional” license with the state.

“We are issuing provisional licenses because we do not have the manpower or ability to review the licenses early enough to issue the annual licenses, but hopefully that is anticipated to be changing at the end of this year” says Hayes.

New York

While medical marijuana has been around in New York since 2014, it’s considered the new kid on the block when it comes to recreational cannabis. As of March 2021, adults aged 21 and over are allowed to possess up to 3 ounces of cannabis or 0.85 ounces of concentrated cannabis.

To give the industry a jump start, around 100 hemp growers were grandfathered in, allowing them to attain licenses to grow cannabis. This was also done in the hopes of meeting the goal of 50% of licensees being given to minorities and social equity beneficiaries, according to Neil Kaufman of Kaufman & Associates based in Hauppauge. This would, according to Kaufman, help to create a cannabis inventory as traditionally states struggle with supply early on in legalization.

The latest incentive, which also ties into social equity, allows those with previous criminal charges linked to cannabis to be eligible for licensing if they’ve participated in a business that’s been profitable in the last two of three years.

As is the case with both California and Massachusetts, approval at the local level is also required before a state license is considered.

Kaufman believes there’s one major flaw in New York’s cannabis regulation laws, and that is that “vertical integration” is not allowed. This means that a business can be a grower, a seller or a manufacturer but not more than one.

“That creates severe structural problems. It’s the exact opposite of the California structure, which is more of a market-driven structure,” says Kaufman.