MRTA Implementation: New York’s Cannabis Regulatory Development at a Standstill
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The fire lit by the passage of New York’s Marihuana Regulation and Taxation Act (MRTA) earlier this spring is dimming—at least from a regulatory perspective. While this legislative victory for the cannabis industry is nothing short of a gargantuan achievement, its occurrence has not coincided with the establishment of thriving legal cannabis marketplace. In short: weed is now legal but you can’t buy it legally.
This is largely due to the fact that the state still lacks a fully appointed Cannabis Control Board (CCB), the governing regulatory body responsible for establishing the criteria and procedures of adult-use cannabis licensing, as well the regulatory framework in which licensees must operate after obtaining licensure. With licenses, registrations, or permits required to operate in nearly all capacities the newly legal adult-use cannabis space, CCB appointments are merely the first step in a lengthy rulemaking process to establish the regulatory framework of the market. Furthermore, as neighboring (and competing) states like Connecticut are on the precipice of legalizing or have recently legalized but have yet to finalize taxation and regulatory systems (think New Jersey and Vermont), the pressure to beat other states to the implementation punch has only increased the stakes and urgency of making such appointments.
The CCB is an appointed regulatory board consisting of five members, including a chairperson nominated by the governor with the advice and consent of the Senate, in addition to direct appointments made by the governor. State legislators also have the ability to shape the composition of this rulemaking body with two direct board appointments: one belonging to the Temporary President of the Senate, and the other to the Speaker of the Assembly. Responsible for everything from preparing licensing application forms and requirements and issuing or refusing said licenses to establishing criteria for cannabis employees and consulting with the Department of Agriculture and Markets and the Department of Environmental Conservation to form rules and regulations connected to energy standards and conservation, among many other duties, it is clear that the board plays in indispensable role in the development of the Empire State’s legal cannabis market.
With the MRTA signed into law by Governor Cuomo on March 31, 2021, cannabis industry stakeholders expected appointments to occur prior to the culmination of New York’s legislative session on June 10. Sadly, session wrapped with exactly zero appointments or nominations made to the CCB or its related new entities, the Office of Cannabis Management (OCM) and the State Cannabis Advisory Board (SCAB). With rumors of political infighting and power plays circling around this failure to act, prospective licensees are at a loss when it comes to strategizing on next steps needed to prepare for licensure and its associated application process—a process that will likely be extremely competitive and require tedious and thorough preparation on the part of the applicant.
Uncertainty is generally bad for investment, no matter the market sector. Lacking a fully appointed CCB and a firmly established OCM fosters a marketplace dynamic of immense uncertainty and means that the licensing application process and its related preparation can’t even get started.
Regulatory Development in Other States
New Jersey
New Jersey voted to legalize cannabis last November, with A21, “The New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act” signed into law by Gov. Phil Murphy Feb 22, 2021. This called for the creation of the New Jersey Cannabis Regulations Commission (CRC), a body in but not of the Department of Treasury of New Jersey. Initial hiring of members is done by the Governor (with two members recommended by the Senate President and Speaker of the General Assembly, respectively) done without the advice and consent of the Senate, and then subsequent appointments and reappointments require the consent of the Senate. Gov. Murphy had a clear path towards appointments, which allowed a speedy hiring process. Appointments were made days after signing A21, and the CRC had its first meeting Monday April 12st, 2021.
The Commission aligns with the state’s social equity goals, boasting a diverse roster of seasoned policy experts.
Vermont
Vermont Governor Phil Scott signed a recreational cannabis bill in October 2020, and organized a three person Cannabis Control Board by March, 2021.
The Board is technically an independent commission within the Executive Branch, but the General Assembly has input in its makeup and operations. According to S.54, the relevant cannabis regulation, the Governor appoints, “with the advice and consent of the Senate, a chair and two members of the Board from the list of well-qualified candidates sent to the Governor by the Committee,” … and “when a vacancy occurs on the Cannabis Control Board, the Governor shall make a public announcement about the vacancy. The Governor shall submit at least five names of potential candidates per vacancy to the Cannabis Control Board Nominating Committee for review.” The Cannabis Control Board Nominating Committee is where real legislative power comes into play, as it consists of seven members, three of which are appointed by the Governor and taken from the Executive Branch, two of which are appointed by the Speaker of the House of Representatives and are members of the House of Representatives, and two of which are members of the Senate, appointed by the Senate Committee on Committees, all serving a term of two years. S54 calls for the board to begin rulemaking on or before June 1, 2021 and needed to provide recommendations to the General Assembly on several factors, so the board had to be organized before this date.
Concurrently, Gov. Scott signed legislation aiming “to help people of color and others harmed by past marijuana laws to open businesses in the new marijuana market,” and the Board will consult with Xusana Davis, Vermont’s executive director of racial equity, to develop social equity criteria for use next year.
Massachusetts
On November 8, 2016, Massachusetts voted to legalize recreational cannabis by ballot initiative. The Statehouse (the Legislature) reworked the state’s marijuana laws to hand the process of hiring for the Massachusetts Cannabis Control Board to the Governor and other officials. The Massachusetts Cannabis Control Commission’s five members are either chosen by the Governor, the Attorney General, the Treasurer and Receiver General, or a vote between these four. No more than three commissioners shall be from the same political party, serving a term of five years. According to General Laws, Title II, Chapter 10, Section 76. (a), the CCC is “subject to the laws applicable to agencies under the control of the governor.” [List of leadership team here]
After Massachusetts voted to legalize recreational cannabis in November of 2016, it took until July 17, 2017 to appoint the Commission, which only met for the first time in September of 2017. The Commission only began accepting applications for retail, manufacturing, and transport licenses on June 1, 2018. It took almost a full year from the day of the vote for the Commission to start working, and almost a year and a half for the licensing process to begin.
Nevada
Although Nevada legalized recreational cannabis by ballot vote in November of 2016, Nevada did not have a Cannabis Compliance Board (CCB) until the 2019 legislative session, where Assembly Bill 533 was signed into law by Nevada Governor Steve Sisolak. The CCB has five board members appointed by the Governor. Similar to Massachusetts, the State Legislature basically gave tacit consent to the Governor’s Board choices, in that they pushed the Bill through Assembly themselves. The Board itself was finally completed when Governor Sisolak appointed the last members in October of 2020. Interestingly, the CCB took the reins of regulation from the Department of Taxation in July 2020, before the Board had been filled a year and a half after Assembly Bill 533 called for its creation.
What's Next for New York?
Establishing the regulatory body enshrined in the Marihuana Regulation and Taxation Act is one of the named purposed of the law and clearly a primary next step for the mere commencement of cannabis market development. While it is no doubt important for policymakers to deliberate thoroughly and seriously on their appointments to such a consequential bureaucratic entity, the longer decisionmakers delay because of political wrangling, the more they imperil the success of this monumental legislation. The risk of such delay include the opportunity cost of lost tax revenues New Yorkers’ hard-earned discretionary income is diverted to neighboring states that are able to set up regulatory and taxation systems and thus make legal cannabis products available to consumers more quickly. If lawmakers truly want to see a thriving and equitable cannabis marketplace that benefits state itself, its businesses, and, most importantly, its citizens, the time to act is now.