Start Spreading the News: Adult-Use Cannabis May Come to New York
- New York Gov. Andrew M. Cuomo announced a proposal on Jan. 6, 2021, to legalize and create a comprehensive system to oversee and regulate cannabis in New York state.
- The plan includes a new Office of Cannabis Management, which would oversee a new adult-use program as well as New York's existing medical and cannabinoid hemp programs.
- The program also would create an "equitable structure" for adult use that encourages licensing opportunities and assistance to entrepreneurs in minority communities that have been disproportionately impacted by the war on drugs.
- Cuomo estimates that once fully implemented, legalization would generate more than $300 million in new tax revenue.
New York Gov. Andrew M. Cuomo announced during his Jan. 6, 2021, State of the State Address a proposal to legalize and create a comprehensive system to oversee and regulate cannabis in New York state. The plan would establish a new Office of Cannabis Management, which would oversee a new adult-use program as well as New York's existing medical and cannabinoid hemp programs. The proposal also would create an "equitable structure" for adult use that encourages licensing opportunities and assistance to entrepreneurs in minority communities that have been disproportionately impacted by the war on drugs. Gov. Cuomo estimates that once fully implemented, legalization would generate more than $300 million in new tax revenue.
Gov. Cuomo's announcement is the latest development in New York state's cautiously progressive approach to embracing the cannabis industry. In July 2018, Gov. Cuomo directed the New York State Department of Financial Services (NYSDFS) to issue guidance encouraging New York state-chartered banks and credit unions to provide banking services to regulated medical marijuana and industrial hemp business in New York. Despite the continuing illegality under federal law, Gov. Cuomo noted: "New York has made significant progress in creating a supportive economic development and regulatory landscape for these companies."1 In the NYSDFS guidance, issued that same day, New York's financial regulator noted that it encourages New York state-chartered banks and credit unions "to consider establishing banking relationships with medical marijuana-related businesses that are operating in New York in full compliance with all applicable New York state laws and regulations, including the New York Compassionate Care Act, and the applicable regulations and requirements of the New York State Department of Health."2
In 2019, Gov. Cuomo went further and signed legislation reducing the penalties for unlawful possession of marijuana in New York state. That law also automatically expunged many low-level marijuana convictions across the state, but stopped short of fully decriminalizing marijuana statewide.3
Gov. Cuomo's proposal would bring New York in line with other heavily-populated states, including California and Illinois, that have fully legalized adult-use marijuana. Moreover, it would make New York competitive with other Northeast states, including Vermont, Massachusetts and most recently Manhattan's next-door neighbor, New Jersey.
As of January 2021, adult-use marijuana is legal in the Garden State, which will pose serious interstate law enforcement and compliance issues for New York residents and their businesses. New Jersey, like other states that have legalized adult-use marijuana, has not only removed criminal penalties for adult-use marijuana, but also enacted comprehensive workplace protections for New Jersey workers. New Jersey employers are already working to review and revise their drug and alcohol policies to consider adult-use medical marijuana, including onboarding policies, possession in the workplace, working while impaired, and allowances for certified medical users, among other issues.
While New York has arguably lagged behind other leading states in its efforts to fully decriminalize adult-use cannabis, its delay will give it the benefits of hindsight as it has been able to observe and learn from the experiences of other jurisdictions. As Gov. Cuomo's proposal starts to work its way through the State Legislature, domestic and out-of-state businesses that employ New York residents should monitor these developments to anticipate how legislative and eventual regulatory developments might impact their operations.
Marijuana remains illegal under federal law despite a relaxed enforcement posture by the U.S. Department of Justice and explicit guidance from the U.S. Department of the Treasury that facilitates banking marijuana businesses. This difference in federal and state legality is an issue that businesses and all Americans will be watching in the coming year as we anticipate new law enforcement and legislative approaches to dealing with what is becoming a widespread and widely accepted industry across the country.
For more information or questions about the cannabis proposal, contact the author or a member of Holland & Knight's Financial Services Regulatory Team.
Travis P. Nelson is a partner in Holland & Knight's Business Section and is based in the firm's New York and Philadelphia offices. Mr. Nelson previously served as an enforcement attorney for the U.S. Department of the Treasury and regularly advises financial institutions, private equity investors and others on cannabis-related compliance issues.
1 "Governor Cuomo Announces Further Action to Support Development of Medical Marijuana and Industrial Hemp Businesses in New York," last visited Jan. 7, 2021, originally published July 3, 2018.
2 "Guidance on Provision of Financial Services to Medical Marijuana & Industrial Hemp-Related Businesses in New York State," last visited Jan. 7, 2021, originally published July 3, 2018.
3 See S. 6579A, 2019-2020 Legislative Session. See also, "Governor Cuomo Signs Legislation Decriminalizing Marijuana Use," last visited: Jan. 7, 2021, originally published July 29, 2019.
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