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Cannabis Licenses and Liquor Licensees

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New York State, and its Office of Cannabis Management (“OCM”) and Cannabis Control Board (“CCB”) are quickly working to implement a licensing system and develop regulations based on the Marijuana Regulation and Taxation Act (“MRTA”) for the production, distribution, transportation and sale of cannabis.  However, more than one year since the passage of MRTA, the extent to which members of the beverage alcohol industry may participate in this new, burgeoning cannabis industry remains unclear. 

            MRTA provides a pathway for consumers to purchase cannabis for on-premises consumption, via the much-anticipated on-site consumption licenses, and for off-premises purchases from retail dispensaries. MRTA makes clear that these licenses may not be held on the same premises that is licensed to sell beverage alcohol.  We can therefore conclude that package stores, grocery stores, convenience stores and other beverage alcohol off-premises licensees will not be permitted to sell products containing THC from their licensed premise.  We further conclude that on-site consumption licensees will not be permitted to sell alcohol from its premises nor will beverage alcohol on-premises retailers be eligible for on-site consumption licenses at the same locations. 

            Though this physical distinction between the retail sale of alcohol and the sale of cannabis is clear-cut, questions remain about other avenues of overlap.  For example, MRTA permits the holder of a retail dispensary license to sell and deliver cannabis to consumers.  It also establishes a delivery license, independent from other cannabis licenses, permitting delivery to consumers (i.e., delivery service company).  Similarly, New York’s Alcohol Beverage Control Law (“ABCL”) permits delivery of alcoholic beverages by off-premise licensees and has now expanded these privileges for on-premise licensees.  This raises the question: May a delivery company deliver alcohol and cannabis to consumers at the same time, so long as the orders are delivered from the seller’s licensed premises?  If a retail dispensary licensee also holds a beverage alcohol off-premises or on-premises license (at separate premises), may it deliver cannabis and beverage alcohol to consumers at the same time? 

            MRTA also creates a warehouse permit, allowing for the storage of cannabis, cannabis products, or medical cannabis at a location not otherwise licensed by the OCM as well a trucking permit with similar permissions.  Since the alcohol industry is well suited to store and transport controlled commodities, will its know-how be put to use when it comes to the transportation and storage of cannabis? Or will the OCM separate the two commodities from being handled on the same premises or by the same license holders?   

Indeed, there are many reasons to permit warehousing and trucking companies to operate within both industries. For example, use of well-established fulfillment operations and facilities, already trained in safety procedures and the storage of products fit for human consumption, reduces the carbon footprint of these operators by preventing the need for multiple premises and trucks. 

            Similar arguments can be made in support of the beverage alcohol wholesale tier’s participation in the distribution of cannabis.  To that end, there are no prohibitions in the MRTA for cannabis distributors to also have a license to distribute alcoholic beverages.  Conversely, the ABCL prohibits liquor and wine wholesalers from conducting any other business on its licensed premises or selling products other than liquor and wine from its licensed premises. 

            Critically, the ABCL does not carry the same restrictions for wholesalers of beer.  In fact, wholesalers of beer may sell a number of other items, such as non-carbonated soft drinks, mineral waters, spring waters, drinking water, juice drinks, fruit or vegetable juices, liquid beverage mixes and dry or frozen beverages from their licensed premises.  Does this mean a beer wholesaler will be permitted to sell non-alcoholic beverages that contain cannabis?  We note non-alcoholic, cannabis beverages are neither specifically prohibited nor permitted under MRTA, which only defines “cannabis product” or “adult-use cannabis product” as “cannabis, concentrated cannabis, and cannabis-infused products for use by a cannabis consumer” without specifically identifying permissible form factors.  It will be up to the regulators to determine the permissibility of non-alcoholic cannabis beverages.    

            Relatedly, the New York State Liquor Authority (“SLA”) has sought to regulate third-party technology platforms and applications through its advisories and declaratory rulings, specifying what roles the non-licensees may play in the beverage-alcohol industry.  Will the ability of these non-licensees to participate in both industries be addressed in the OCM regulations, or will the CCB seek to regulate these activities through advisories and declaratory rulings, much like the SLA?  Further, will the SLA amend or issue new position papers to guide third-party providers on their level of participation in both industries?

            The answers to these questions are unclear and may remain unclear until the regulations are in place or thereafter through advisories, bulletins and declaratory rulings. There are strong arguments in favor of beverage-alcohol industry members participating in the cannabis industry, notwithstanding the fact the MRTA makes it clear that the “use or integration of alcoholic beverages or nicotine in cannabis products is strictly prohibited.”  However, it remains in the hands of the regulating authorities to determine whether the know-how and industry experience of those handling alcohol will be utilized in the cannabis industry or whether it will articulate a sufficient reason for keeping these businesses out of the cannabis markets.

This article is not intended to give specific legal advice.  Before taking any action, the reader should consult with an attorney familiar with the relevant facts and circumstances.

Written by

Keven Danow

Founding and Senior Partner
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