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New York's On-Site Consumption License & The Ability to Innovate

This is a previous edition of Taproot Cannabis Newsletter, which is delivered to your inbox on a weekly basis. You can sign up here.

One of the more exciting features of New York’s Marijuana Regulation and Taxation Act is that it provides for the licensure of adult-use cannabis on-site consumption spaces – similar to a bar or cigar club but for cannabis. The Empire state is unique in this regard in that its cannabis law clearly provides for on-site consumption as its own category of license. While other states, such as Massachusetts, California, Colorado, New Jersey, Illinois, Nevada, have permitted on-site consumption to varying degrees, their cannabis laws are not as explicit and generally do not allow for both the sale and consumption of cannabis and cannabis products in such spaces.

New York’s on-site consumption license permits the sale of board-approved cannabis products and their consumption in a lounge-like environment. While such licensee may not hold a retail or have an interest in another adult-use license type, the language of the MRTA appears to allow such licensee to deliver to consumers. Licenses will be valid for a period of two years. Licensees cannot have an interest in more than three location-dependent consumption licenses at one time.

As with any retail canna-business in New York, opening a cannabis consumption lounge first requires that the respective municipality did not opt-out of full implementation of Article IV of the MRTA, thus allowing retail and on-site consumption licensing in its jurisdiction. Further, an applicant for an on-site consumption license is subject to a municipal opinion for or against the granting of such license which becomes part of the official application record.

But what about New York’s strong anti-smoking laws?

New York, like all the other states in this Tap Root, bans smoking inside businesses, restaurants, bars, hotels, convention halls, and the like through the Clean Indoor Air Act. (As a caveat, the Empire State specifically allows smoking and vaping no more than two calendar days a year, for when “enclosed areas" are used solely to “invite the public to sample tobacco products or electronic cigarettes and serving food and drink is incidental to such purpose.”) One can get a “waiver” of any provision in this Act, if the business owner can convince a County Board of Health enforcement officer that complying with that specific provision “would cause ‘undue financial hardship’ … [or that] other factors exist which make compliance unreasonable for that person.” But if a business owner tried to use this workaround to somehow establish a cannabis consumption area without a license to do so, why would the County Board not immediately revoke the waiver, and possibly their business license?

Luckily, there is no need to risk that. The MRTA carves out an exception by stating that provisions of the Clean Indoor Air Act (A.K.A. Article Thirteen E of New York Public Health Law) do not apply.


Other States and On-Site Consumption


Illinois’ Cannabis Regulation and Tax Act (CRTA) is very hands off with consumption lounges, giving local governments (rather than The Illinois Department of Financial and Professional Regulation, which controls all other cannabis licensing) the power to authorize and license on-site consumption lounges as they please, within the framework of the CRTA.

Lounges must be in an already licensed cannabis dispensary or a retail tobacco store and can decide whether lounges themselves are licensed to sell marijuana. In that way, lounges that are not licensed to sell marijuana merely often safe places to consume it—this is in contrast to New York’s MRTA which allows both for the sale of board-approved products and their consumption in licensed lounges.

Illinois’ Department of Financial and Professional Regulation also does not track where lounges operate, so beyond the two known lounges (Luna Lounge of Sesser and Aroma’s Hookah Bar, neither of which are licensed to actually sell cannabis), it is unknown how many are in Illinois.

Illinois has similar clean air legislation to New York’s, the Smoke Free Illinois Act, which for the purposes of consumption lounges, the CRTA overrides this in a similar manner that the MRTA overrides the Clean Indoor Air Act. CRTA alters the act to allow consumption in a privately owned facility, which must be “separated from the rest of the premises by walls and a secure door, and have a separate ventilation system that directs air from the cannabis consumption area to the outside of the building through a filtration system sufficient to remove visible smoke.”


California’s consumption lounge market is fairly developed, having opened the first legal lounges in the past couple years. California also defers a lot of control to municipalities. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) does not override or limit local authority to adopt and enforce laws regarding cannabis, which cover, but are not limited to, local zoning and land use requirements, business license requirements, and requirements related to reducing exposure to secondhand smoke, or the power to completely prohibit the establishment or operation of one or more types of canna-businesses.

There is no specific license for on-site consumption, like in Illinois or New York. A retailer, microbusiness, or “Event Organizer” licensee must get permission from their respective municipality to have consumption on premises.

California Bureau of Cannabis Control (now the Department of Cannabis Control) regulations Section 15025, “Premises,” note that consumption is not prohibited “on the premises of a licensed retailer or licensed microbusiness authorized to engage in retail sales,” if they are locally licensed and approved in accordance with Business and Professions Code section 26200(g), which requires restricted area access to those 21 and older, it's not visible to the public, and the sale or consumption of alcohol and tobacco are not allowed on the same premises.

Once it gets to the municipal level, there are many directions things can go. For instance, in the City of Santa Rosa, city ordinances prohibit smoking and vaping, and only allow ingestible to be consumed on premises, while in San Francisco smoking and other forms of consumption are expressly allowed.

One other example of the California social consumption market’s progress is Assembly Bill A1034, which currently sits in the state Senate, and would allow non-marijuana food and drinks to be sold at consumption spots. Prior to this, the city of West Hollywood municipality allowed by ordinance the combination of non-marijuana foods and drinks, a major grey area which this bill seeks to remediate. The bill would allow consumption in retailers and microbusinesses so long as they adhere to 26200(g), laid out above.

Regarding indoor smoking and clean air regulations, California is known as one of the strictest states in the nation. The only related provisions in California regulations specify that according to the state Health and Safety Code, smoking cannabis is prohibited anywhere where smoking cigarettes is also prohibited.

New Jersey

Having just recently legalized cannabis, New Jersey decided that only licensed cannabis retailers and medical dispensaries may pursue opening a cannabis consumption area (CCA), which also require endorsements from both state and local government. The New Jersey Cannabis Regulation Commission will set fees and regulations pertaining to applications. New Jersey’s Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act specifically writes in provisions to align regulation with the New Jersey Smoke-Free Air Act.

It also defines CCA’s as an “enclosed area... separate from the area in which retail sales of cannabis occurs” or “an exterior structure on the same premises as the cannabis retailer or permit holder, at which cannabis items or medical cannabis either obtained from the retailer or permit holder, or brought by a person to the consumption area, may be consumed,” connecting through a door from the main dispensary area. Retailers may only hold one license per.


New York’s New Opportunity

As indicated by the above examination of other states’ on-site consumption handling, New York has a unique opportunity to innovate—especially in its metropolitan areas. This is because New York is the only state that specifically licenses on-site consumptions lounges as their own category of license, permitting both the sale of cannabis and cannabis products on the licensed premises, in addition to their consumption. While the state’s regulatory structure its still being developed and the forthcoming regulations such structure produces will surely shed more light on the possibilities of such license, one thing certain: the MRTA provides New York with the opportunity to lead the way when it comes to the social consumption of cannabis—let’s leverage it.

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