Marketing regulations, CAURD locations: ‘Ask me anything’ about NY cannabis with Jeffrey Hoffman

Jeffrey Hoffman is a New York City-based attorney who hosts “Ask Me Anything about Cannabis Legalization in New York” each week on LinkedIn. Hoffman and NY Cannabis Insider have partnered to bring those sessions into print in a Q&A format.

Hoffman’s practice focuses on cannabis industry clients, including licensees in the adult-use market, practitioners in the medical cannabis space, and cannabis adjacent product and service providers. He has a particular interest in social and economic equity cannabis license applicants, and he also informs and assists those convicted of cannabis offenses in getting such convictions expunged from their record. He can be reached at [email protected].

The AMA has been edited for length and clarity.

Where is the best resource to find info about regulations impacting ancillary businesses like marketing?

For marketing, the best place for you to find resources would be the packaging and advertising regulations. They were published today (Dec. 14) in the New York State Register. This is the second publishing, so those regulations went through their 60 day review, and the Office of Cannabis Management, I guess, made changes – I’ve not done a find and compare, if someone has done a find and compare, you can tell me what changes were made. Starting today, we’re going to count 45 days, and then those marketing and packaging regulations become official regulations – right now they’re simply proposed regulations.

Specifically for marketing, you’re going to want to look at all of the rules; some of my least favorite rules that we’ve come up with. Those of you that have been following know that there are some pretty draconian rules for advertising. For example, any of your advertising is going to have to be in a marketplace where you can demonstrate that the audience is 90% are over the age of 21. It’s basically going to be like liquor stores, strip clubs, and casinos. I guess it’s good that they’re getting ready to open a casino – another casino – here.

For those of you who live downstate, here in New York, we’ve got the two racinos, so to speak: the one up in Yonkers, and the one in Queens, not too far from JFK Airport. Those two locations are going to be full casinos – it’s pretty clear they’re already going to get it. There’s going to be a third location here in New York City, and that’s what the fight is going to be about. I think one location they’re talking about is out by the Javits Center. Another location where we’re talking about is Time Square. I mean, that would be great. There’s a nightlife czar here in New York, modeled after the program in Amsterdam, where the city has an idea or has the idea of implementing 24-hour nightlife districts. So I think having one of those located wherever the casino is obviously makes sense. Typically, casinos are open 24 hours, so it makes sense to put the casino in wherever New York City is going to have a 24-hour nightlife district, and they should also put a dispensary there – if not many dispensaries.

I will note that in the regulations, it appears that without permission from the municipality, dispensaries can only be open until 2 a.m. But I absolutely think it would be in the interest of New York City to first create these 24-hour nightlife zones to locate dispensaries there, and then give those dispensaries the permission to be open 24 hours. I think that’d be a game changer. Nowhere in the world would have nightlife districts like this, so let’s do it. I’m meeting with the mayor tomorrow, so maybe I’ll suggest that.

Anyway, that’s where you’re going to get more information about the marketing, or how marketing regulations are going to impact what you called ancillary businesses, what I like to call cannabis-adjacent businesses. But really, it’s just going to depend on what type of cannabis adjacent business you’re referring to. And then simply you’re going to look at the regulations that exist and figure out what piece of those regs is germane to whatever type of business you’re talking about.

How true is the rumor that card applicants can use their own location?

It’s not a rumor. It’s 100% true. That guidance was given last week. There was a document sent around, the delivery guidance document. But the key aspects of that is that the last paragraph in this guidance document that the OCM released on Friday indicated that while they are going to continue to attempt to raise the money for the $200 million cannabis social equity fund, and if they raise it and they’re able to do it, they will continue to notify CAURD applicants that have received their preliminary licensing that spaces are available through the Dormitory Authority of the State of New York (DASNY). It’s very clear that the state had significant challenges in raising the $150 million from private funds, private sources that were supposed to go into the fund. It’s not clear to me that any of that money was raised. They did announce one location in Harlem, not too far from the Apollo Theater, but it is very clear that this DASNY building – everybody’s locations – may end up being a bridge too far.

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In the last paragraph of that guidance, it did make it clear that CAURD applicants that had received their preliminary licensing would be able to start sourcing their own locations. In fact, there was a survey, I guess, just a quick questionnaire that was sent to the CAURD applicants that specifically asked them, ‘are you interested in looking for your own location? Do you in fact, already own your own location? Or do you already have a lease somewhere?’

That was on Friday, and it certainly set off the great race to have the CAURD folks identify their own locations. There is a problem with how all of this went down, and that problem is that we don’t know how many of the 903 CAURD applications were in no way all valid. I’m an 80/20 person: I thought originally that 80% of those 903 would be valid. I’m switching to where closer to 20% of them are valid, and I think it’s more than 20%. I think it’s probably closer to 30% to 40%; but it certainly was not 80%.

I, myself, have clients that sent in multiple applications, and then only paid for one of them – we wanted to keep our options open as far as what we wanted to do there. So we submitted a couple of applications, and it only paid for one of them. I have clients that had an ACD, and I told them point blank, they didn’t qualify, and they told me, ‘I don’t care, I want to apply anyway.’ So we did that for them, but they didn’t qualify. So there were any number of applications submitted of those 903, that clearly did not qualify out of the box. So it was a much lower number.

Again, one of the things I’ve talked with a number of people about is the concern that they were giving licenses without having reviewed all of the applications, and it’s pretty clear, that’s what they did. That is doable, let me explain to you how that’s doable. At some point, you do a review of enough applications and you score enough applications that even if all of the applications that you have that you haven’t reviewed yet won a license, and one contiguously one through however many licenses you still have, there would be a segment of the applications that you’ve reviewed, that couldn’t possibly be displaced by the applications that you have remaining, if all the applications remaining.

So that is basically what the OCM did. They said, ‘look, we’ve reviewed enough applications at this point, that even if everybody left got it, the folks at the very top of the reviewed list would still get it.’ And so, that’s who got it in that initial meeting on Monday, the 21st of November. I still have several CAURD folks that are my clients that haven’t heard anything, so hang tight there’s still a very good chance you’re gonna get a license. We’re trying to give more information and talk about it a little more.