Marijuana grown in Riverhead by Columbia Care, a company licensed to sell medical...

Marijuana grown in Riverhead by Columbia Care, a company licensed to sell medical marijuana in New York. Credit: James Carbone

Medical marijuana companies would have to pay more than $5 million to enter the recreational market and wait 3 years to sell directly to consumers under rules proposed by state regulators.

The Cannabis Control Board released the regulations Monday, when the board approved the state's first licenses for pot shops. The rules are designed to keep large multistate medical cannabis companies from crowding out local entrepreneurs. 

The first retail licenses, including seven for Long Island, went to New Yorkers impacted by the inequitable enforcement of old marijuana laws. The state will continue to give this group preference when issuing business credentials, as well as minority- and women-owned businesses, distressed farmers and veterans who were disabled while serving in the military. 

"Equity is not a thing in this program, it is the thing," said Chris Alexander, executive director of the state Office of Cannabis Management, which oversees industry regulations. 

Under the proposed rules, medical marijuana firms already operating in the state would need to wait 3 years to welcome recreational consumers into their medical dispensaries and pay millions in application and licensing fees. 

Others seeking licenses would be able to get started earlier and would be charged $1,000 per application plus varying licensing costs.

The New York Medical Cannabis Industry Association said the proposed rules raise concerns. The trade group declined to detail what posed problems in the draft regulations, which can be read online at tinyurl.com/yc7htsvs

"The draft adult use regulations that were approved for public comment ... present a number of serious concerns," the group's statement said. "In the coming weeks, MCIA will continue its vocal advocacy for reforms that both protect patients, who have for too long struggled due to the restrictive nature of the state’s medical program, and ensure a successful, equitable adult-use program that takes into account the experience and investment of existing operators."

Regulators want feedback on these proposed license types:

Nursery — Businesses would be able to cultivate and collect immature plants and seeds, which could be sold to other firms, but not to consumers. Licensing fees would range from $750 to $2,000, depending on whether the nursery is outside or inside and how much it relies on natural and artificial light.

Cultivator — Entrepreneurs would choose from several tiers of licenses that allow them to grow, cut and dry the plant. Licensing fees would range from $1,000 plus $150 for every 500 square feet of cultivation space to $100,000 plus $2,000 for every 500 square feet of cultivation space. Rates would generally be lower for plants grown outside and with less artificial light.

Processor — Licensees would be allowed to package and label the plant, as well as extract the compound that produces a high and infuse products with it. Licensing fees would run from $500 to $7,000 per processing facility.

Distributor — Firms would pay $7,000 for each distribution facility used to deliver products to retailers.

Retail dispensary — Unlike the conditional retail licenses the state has begun to issue to individuals impacted by old marijuana laws, this credential would be available to most entrepreneurs. Businesses would pay $7,000 in licensing fees, and $4,500 to set up a delivery service. They may later launch consumption lounges. Dispensaries would initially need to reserve 40% of their shelf space for products that were not grown or manufactured by medical marijuana firms.

Microbusiness — Those wishing to operate on a smaller scale would be able to grow, process, distribute and sell cannabis. Microbusinesses and medical marijuana companies would be the only firms allowed to supply businesses as well as sell directly to customers. Others would need to stick to nursery, cultivator, processor and distributor licenses — or to retail dispensary, delivery and consumption lounge licenses. The microbusiness licensing fee would be $4,500.

Registered organizations — The state refers to the medical marijuana companies as registered organizations. To move into the recreational market, these firms would need to pay a one-time fee of $5 million. During their first 5 years, they would be charged 2% of their gross revenue from recreational sales or $1 million — whichever is less. They’d have $10,000 application fees and the same cultivation licensing fees as others, but pay $75,000 to process and $100,000 to distribute pot. After recreational dispensaries have been open for 3 years, medical marijuana firms could “co-locate” recreational marijuana retail operations at their medical dispensaries by paying $3.1 million per co-location. 

The proposed regulations will be filed for a 60-day public comment period. Comments can be filed by emailing regulations@ocm.ny.gov. 

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