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New York Cannabis Law Prioritizes Social, Economic Equity

April 29, 2021, 8:00 AM

New York’s new law legalizing cannabis for adult use is arguably the most progressive in the nation.

Every year since 2013, the Marijuana Regulation and Taxation Act (MRTA) was submitted to the New York Legislature by its prime sponsors, Assembly Majority Leader Crystal D. Peoples-Stokes (D) and Sen. Liz Krueger (D), with the primary objective of ensuring that members of minority communities who have been negatively and disproportionately impacted by cannabis prohibition would benefit from legalization.

The amended MRTA accomplishes that goal, creating a social and economic equity program to encourage those individuals to participate in the adult-use market. The primary social equity components of the new law include: expanding eligibility of social equity applicants; creation of a community reinvestment fund supported by cannabis tax revenue; and automatic expungement of past criminal cannabis convictions.

The law also expands New York’s existing medical cannabis program, permits home growing, and establishes an Office of Cannabis Management that is charged with creating and implementing regulations for the adult-use program.

Social Equity Applicants

Unlike other adult-use states with social equity programs, New York’s law expands the qualifications for a social equity applicant to include minorities, women-owned business enterprises, distressed farmers, and service-disabled veterans.

It also includes a social and economic equity program to facilitate and encourage participation by individuals disproportionately impacted by cannabis enforcement with a goal of awarding 50% of licenses to social equity applicants. In addition, the MRTA will incorporate geographically targeted licenses to help the neighborhoods and communities most impacted.

Previously, Illinois had been considered the gold standard for social equity adult-use cannabis provisions. State lawmakers there were very vocal about ensuring that people of color would be able to gain a foothold in the legal cannabis industry. However, nearly 15 months after the Illinois law went into effect, no cannabis dispensaries in the state were owned by people of color.

Though many states account for social equity in their cannabis programs, regulations generally do not assist social equity applicants with the education and financial support necessary to succeed in the fast-paced cannabis market. Those with a record of cannabis-related convictions face barriers to obtaining financing, finding it impossible to get small business loans—a situation complicated by the fact that the drug remains illegal at the federal level.

The equity component of New York’s new law attempts to solve this issue by administering a combination of grants, low interest loans, and business incubator programs from the state’s Reinvestment Fund.

Community Reinvestment Fund

The MRTA is forecasted to accelerate economic recovery by generating approximately $3.5 billion a year in revenue, while also helping to mitigate the long-standing social and economic wrongs of cannabis prohibition. New York will soon become a leader in the U.S. cannabis industry and potentially will generate the most revenue of any state to legalize adult use thus far.

Perhaps the most unique component of New York’s legislation is where and how the tax revenue generated from the sale of cannabis is distributed. The Cannabis Fund will first use revenue from adult-use cannabis to pay operating expenses for the Office of Cannabis Management and public safety training for law enforcement agencies.

The remaining funds are split, with 40% directed to a Community Reinvestment Fund, which goes back to communities that have been disproportionately impacted by the prohibition; another 40% is directed to Public Education; and the remaining 20% is targeted for drug treatment. The significant focus on communities that have been disproportionately impacted by the prohibition is a case of first impression, no other state has done anything even close.

Expungement

The final social justice component in New York’s new law is the priority given to expungement of past cannabis-related criminal convictions. Automatic expungement of criminal records, with a window of up to two years for that process to be complete, will be accomplished through the Office of Cannabis Management.

This offers individuals a fresh start and provides them with a more level playing field for employment and personal economic growth. Anyone convicted of possession of three ounces of cannabis or less, which is now legal under the MRTA, would be eligible to have their record expunged.

According to Peoples-Stokes, there are 4,000 people in the city of Buffalo alone who could benefit from having their records expunged. New Yorkers of color—the majority being Black and Latin—comprised 94% of cannabis-related arrests and summonses in 2020, according to an analysis of the NYPD data by the Legal Aid Society.

New York is the 15th state to legalize cannabis for recreational adult use and the fourth to do so via passage of a statute by the Legislature. The resulting MRTA will set the standard for all incoming adult-use cannabis states to prioritize social and economic incentives. New York’s social equity program, community reinvestment fund and expungement will create a genuine impact on individuals who have been harmed by prohibition for years to come.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

Aleece Burgio, chair of the New York State Bar Association Committee on Cannabis Law, is special counsel at Barclay Damon and the firm’s Cannabis Team leader. She focuses on the complex process of structuring, licensing, and maintaining compliant cannabis businesses at the federal, state, and local levels.

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