Cannabis Law in New York State and in the United States Noah Potter, Esq. [email protected]

New York State Bar Association, Committee on Law January 23, 2018 Rapid growth in cannabis legalization since 2014 Medical use The Compassionate Care Act passed in 2014 (seventeen years after legislation was first introduced into the legislature); it creates a pharmacy model of access to cannabis. Expanded/modified several times since commencement of program in January 2016.

Full legalization “Marihuana Regulation and Taxation Act” introduced in both houses every legislative year since December 2013; proposes to create an alcohol model of access to cannabis.

Hemp Industrial Program created 2015 Expanded dramatically since creation.

Cannabis Law in New York State and the United States 2 About me Joined drug policy reform movement in 1993 due to interest in psychedelic therapies.

B.A., Columbia College, 1995 – political science; focus on the evolution of the federal substance abuse prevention and treatment bureaucracy.

J.D., Cardozo School of Law, 2000. Commercial and corporate control litigation in New York City since 2000.

Of Counsel to the Hoban Law Group, a Denver-based, nationwide “cannabusiness” boutique law firm.

Former chair and current member of the New York City Bar Association’s Committee on Drugs and the Law.

Member of the New York State Bar Association’s Committee on Cannabis Law.

Author of the Psychedelic Law Blog.

Cannabis Law in New York State and the 3 United States Context of cannabis policy change in New York State

• 1927 – beginning of cannabis prohibition under New York law. • 1937 – beginning of federal cannabis prohibition. • 1944 - LaGuardia Commission Report: rejected the “gateway theory” and other standard prohibitionist arguments. • 1965 – first public demonstration for legalization organized by Allen Ginsberg. • 1967 - Tompkins Sq. Park “smoke-in”; begins nationwide wave of outdoor cannabis gatherings. • 1977 - statutory decriminalization of personal use amounts of cannabis. • 1980 – “Olivieri Statute” (Public Health Law Art. 33-A) - medical cannabis statute, never- implemented. • 1990s – “Medical marijuana” buyers clubs form. • 1996 – People v. Moore 167 Misc.2d 994 (N.Y. Cty. Crim. Ct. 1996) – implicit recognition of medical use of cannabis by Manhattan D.A. Morgenthau. • 1997 - Assembly Member Richard Gottfried begins introducing medical cannabis legislation following passage of Proposition 215 in California in 1996. • 2013 – Senator Liz Krueger and Assembly Member Crystal Peoples-Stokes begin introducing full adult legalization legislation, the “Marihuana Regulation and Taxation Act.” • 2014 – Enactment of “Compassionate Care Act,” current medical cannabis law. • 2014 – creation of Industrial Hemp Program.

Cannabis Law in New York State and the 4 United States Context of cannabis legalization efforts in New York State, cont’d • Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Illinois, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New Hampshire, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and West Virginia, and the District of Columbia have legalized some form of medical use. • Nine states (Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont and Washington) and the District of Columbia have legalized the adult use cannabis market. In January 2018 the NH House of Representatives passed a legalization bill.

Cannabis Law in New York State and the 5 United States What is a “medical cannabis” law?

• Comes from the medical necessity defense, an affirmative defense to criminal prosecution. • First recognized in U.S. v. Randall, 104 Daily Wash. L. Rep. 2249 (Super. Ct. D.C. Nov. 24, 1976). The defendant, a glaucoma patient, argued that his possession of marijuana was medically necessary because he was using it successfully to save his vision in the absence of any other effective treatment. Judge Washington of the District of Columbia Superior Court engaged in an extended examination of the law of medical necessity as a defense to criminal prosecution and the history of marijuana prohibition before acquitting Randall. • Other states followed. See, e.g., State v Diana, 24 Wn. App. 908, 604 P.2d 1312 (Ct Appeals Div. Three 1979); Jenks v Florida, 582 So. 2d 676 (Ct Appeal of Florida, First District 1991). • In 1996 California voters made the affirmative defense a matter of statute via ballot initiative, Proposition 215.

Cannabis Law in New York State and the 6 United States What is a medical cannabis law, cont’d

Originally two sets of actors: (a) the physician who certifies that in his/her professional medical opinion the patient would benefit from cannabis and (b) the patient who acquires cannabis or a caregiver who provides cannabis to the patient. Now usually three sets of actors: (a) physician, (b) patient (possibly with a caregiver) who cultivates or otherwise acquires cannabis and (c) a third-party supply-side entity.

Cannabis Law in New York State and the 7 United States Medical use of cannabis in New York

• 1980 – “Olivieri Statute,” PHL Art. 33-A, creates medical cannabis statute (never implemented). • People v. Moore, 167 Misc.2d 994 (N.Y. Cty. Crim. Ct. 1996) – D.A. Robert Morgenthau declines to prosecute Medical Marijuana Buyers Club provider. • Assembly Member Richard Gottfried begins introducing medical use legislation in 1997, i.e., immediately after passage of Proposition 215 in California in 1996.

Cannabis Law in New York State and the 8 United States Evolution of the medical cannabis law, cont’d

Bill started as liberal, like the first generation of statutes; it became progressively more restrictive. For example, the 2010 version provided: • Individual cultivation • Retail dispensaries could be only non-profit organizations • Complete physician discretion in certifying patients See “Growing and selling marijuana in New York under the proposed medical marijuana law,” psychedeliclaw.com, May 27, 2010.

Cannabis Law in New York State and the 9 United States The current system

• Governor Cuomo signed the “Compassionate Care Act” into law in July 2014. The New York system is among the most restrictive in the United States. • Program is administered through the State Department of Health. • Pharmacy model. • Five “Registered Organizations” – complete vertical integration (all stages on the supply side, from cultivation through retail sale); the Department of Health recently announced it is licensing five additional Additional Organizations. • Maximum of 4 “dispensaries” per Registered Organization. • Cannabis is available only in highly-processed forms, e.g. liquid and oils for vaporization or inhalation and capsules. The raw botanical form of the plant and infused edibles are prohibited. (No smoking is permitted so as not to undercut the multi-decade campaign against tobacco.) No personal cultivation is permitted.

Cannabis Law in New York State and the 10 United States Patients

PATIENTS

Participation in the program is limited. A patient can be certified to use cannabis only if s/he has a (a) “serious condition” enumerated in the statute: (a) cancer, (b) HIV+ positive status or AIDS diagnosis, (c) amyotrophic lateral sclerosis (Lou Gehrig’s Disease), (d) Parkinson’s disease, (e) multiple sclerosis, (f) damage to the nervous tissue of the spinal cord with objective neurological indication of intractable spasticity, (g) epilepsy, (f) inflammatory bowel disease, (g) neuropathies, (h) Huntington’s disease, (i) PTSD and (j) chronic pain

AND

(b) any of the following conditions where it is clinically associated with, or a complication of a serious condition or its treatment: cachexia or wasting syndrome, severe or chronic pain, severe nausea, seizures, severe or persistent muscle spasms, or other conditions added by DOH.

Cannabis Law in New York State and the 11 United States

Patients, cont’d

• A patient can be certified by a physician, a nurse practitioner or a physician’s assistant qualified to treat the particular serious condition applicable to the patient. • A patient can obtain only a 30-day supply of cannabis product. • Caregivers can be certified.

Cannabis Law in New York State and the 12 United States The current system, cont’d

Registered Organizations: • Complete vertical integration: cultivation, through processing, through retail sale. • Manufacturing/processing sites of RO’s are spread around the state (distant from their dispensaries). • Pharmacist onsite at dispensary. • Product-testing by independent laboratory. • Must be party to “labor peace agreement.” • DOH pre-approval of pricing, packaging and safety insert. • Electronic-filing requirements.

Cannabis Law in New York State and the 13 United States The current system, cont’d

Protections for actors in the medical cannabis market. PHL 3369 • No criminal or civil penalties for patients, caregivers, practitioners, registered organizations or their employees solely for any action or conduct under the CCA. • Being a certified patient shall be deemed to be having a disability for the purposes of certain sections of the Human Rights Law, the Civil Rights Law, the Penal Law, and Criminal Procedure Law. However, employers are not barred from enforcement of policies prohibiting drug use. • Being a patient or otherwise acting in accordance with the CCA shall not be a consideration in a proceeding pursuant to applicable sections of the Domestic Relations Law, the Social Services Law and the Family Court Act.

Cannabis Law in New York State and the 14 United States Timeline 2015 April 15 – DOH promulgates regulations June 5 – deadline for applications July 31 - licenses awarded Certification courses for practitioners become available online

2016 January - ROs begin dispensing DOH 2-year report recommendations Nurse practitioners and physicians’ assistants authorized to certify patients

Cannabis Law in New York State and the 15 United States Timeline, cont’d

2017 Medmen buys out Bloomfield DOH announces intention to license five additional RO’s Lawsuit to stop issuance of those licenses. Medical Cannabis Association of New York v. Dept of Health, Index Number 284817.2 (Sup. Ct. Albany Cty. 2017) Chronic pain and PTSD added to list of serious conditions List of certified practitioners available to the public Home delivery authorized Arrangement to visit nursing home to certify residents as patients and provide cannabis products to them. Additional forms of products authorized (ointments, lotions, patches, chewable and effervescent tablets and lozenges).

2018 Current number of registrants as of 1/9/18: registered practitioners 1/9/18; certified patients 40,934 MA Gottfried introduces legislation eliminating list of serious conditions, i.e. a return to earlier versions of the legislation he introduced prior to 2014.

Cannabis Law in New York State and the 16 United States Criticisms of CCA

None of the RO’s are making any money. Low patient recruitment. Lack of access: very few dispensaries; many counties have none; very limited hours. Continuing limitation of “serious conditions”

Cannabis Law in New York State and the 17 United States New York attorneys and the medical cannabis law NYSBA Opinion 1024 (9/29/14):

…federal criminal law forbids the possession, distribution, sale or use of marijuana, and the federal law provides no exception for medical uses. The U.S. Department of Justice takes the position that the federal law is valid and enforceable even against individuals and entities engaged in the cultivation, transportation, delivery, prescription or use of medical marijuana in accordance with state regulatory law; however, the U.S. Department of Justice has adopted and published formal guidance restricting federal enforcement of the federal marijuana prohibition when individuals and entities act in accordance with state regulation of medical marijuana. QUESTION Under these unusual circumstances, do the New York Rules of Professional Conduct (“Rules”) permit a lawyer to provide legal advice and assistance to doctors, patients, public officials, hospital administrators and others engaged in the cultivation, distribution, prescribing, dispensing, regulation, possession or use of marijuana for medical purposes to help them act in compliance with state regulation regarding medical marijuana and consistently with federal enforcement policy?

Cannabis Law in New York State and the 18 United States NYSBA Ethics Opinion, cont’d

“We conclude that the New York Rules of Professional Conduct permit lawyers to give legal assistance regarding the CCA that goes beyond a mere discussion of the legality of the client’s proposed conduct. In general, state professional conduct rules should be interpreted to promote state law, not to impede its effective implementation. As the Arizona and King County opinions recognized, a state medical-marijuana law establishing a complex regulatory scheme depends on lawyers for its success. Implicitly, the state law authorizes lawyers to provide traditional legal services to clients seeking to act in accordance with the state law.”

Cannabis Law in New York State and the 19 United States NYSBA Ethics Opinion, cont’d

“Further, and crucially, in this situation the federal enforcement policy also depends on the availability of lawyers to establish and promote compliance with the “strong and effective regulatory and enforcement systems” that are said to justify federal forbearance from enforcement of narcotics laws that are technically applicable. The contemplated legal work is not designed to escape law enforcement by avoiding detection. Cf. Rule 1.2 cmt. [9] ("There is a critical distinction between presenting an analysis of the legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity."); N.Y. State 529 (1981) (“[T]he Code distinguishes between giving legal advice and giving advice which would aid the client in escaping punishment for past crimes. EC 7-5 warns that ‘a lawyer should never encourage or aid his client to commit criminal acts or counsel his client on how to violate the law and avoid punishment’”).”

Cannabis Law in New York State and the 20 United States NYSBA Ethics Opinion, cont’d

“Lawyers would assist clients who participate openly and subject to a state regulatory structure that the federal government allows to function as a matter of discretion. Nothing in the history and tradition of the profession, in court opinions, or elsewhere, suggests that Rule 1.2(d) was intended to prevent lawyers in a situation like this from providing assistance that is necessary to implement state law and to effectuate current federal policy. If federal enforcement were to change materially, this Opinion might need to be reconsidered.”

Cannabis Law in New York State and the 21 United States NYSBA Ethics Opinion, cont’d

“In light of current federal enforcement policy, the New York Rules of Professional Conduct permit a lawyer to assist a client in conduct designed to comply with state medical marijuana law, notwithstanding that federal narcotics law prohibits the delivery, sale, possession and use of marijuana and makes no exception for medical marijuana.”

Cannabis Law in New York State and the 22 United States (The U.S. government doesn’t recognize a medical use for cannabis because…)

• By the way, the federal government does not recognize any “currently accepted medical use in treatment in the United States,” 21 U.S.C. 811(b), for cannabis because there are no randomized double-blind clinical trials of the type necessary to obtain FDA approval to market a drug in interstate commerce that establish “efficacy.” • Therefore the DEA will hold not an evidentiary hearing as to whether there is a “currently accepted medical use in treatment in the United States.” • The DEA’s construction of the Controlled Substances Act has no basis in the statute: there is no requirement to show efficacy before holding an evidentiary hearing. • It also violates the Tenth Amendment to the U.S. Constitution: regulation of the practice of medicine is reserved to the states and the DEA should defer to what is actually happening in the states. • For more, see “The Meaning of the DEA’s Recent Victory in ASA v. DEA,” psychedeliclaw.com, January 28, 2013.

Cannabis Law in New York State and the 23 United States Full legalization effort begins in 2013

Each year beginning in 2013 State Senator Liz Krueger (Manhattan) and Assembly Member Crystal People-Stokes (Buffalo) have introduced full legalization legislation, the “Marihuana Regulation and Taxation Act” (the “MRTA”) into the New York State legislature.

Cannabis Law in New York State and the 24 United States New York City cannabis arrests

Impetus: huge number of arrests for possession in New York City • Arrests for small amounts of cannabis began climbing through the Giuliani and Bloomberg mayoral administrations. • Reached 50,000 in 2000, declined slightly and then reached 50,000 again in 2013 and 2014. • The vast majority of arrestees have been people of color. Arrest rate remains high despite reform attempts under Mayor De Blasio. - “Marijuana arrests in city increased in 2016, with large racial disparities,” Politico, Feb. 6, 2017 (http://www.politico.com/states/new-york/city-hall/story/2017/02/marijuana-arrests-in-nyc- increase-in-2016-still-large-racial-disparities-109306 [accessed May 30, 2017])

Cannabis Law in New York State and the 25 United States

The Marihuana Regulation and Taxation Act Latest version (introduced June 2017): S. 3040/A. 03506 Amends multiple parts of the Laws of New York: • Public Health Law (including the Clean Indoor Air Act) • Vehicle Traffic Law • Penal Law • Alcoholic Beverages Control Law • Tax Law • Criminal Procedure Law • Civil Practice Law & Rules • General Business Law • State Finance Law • Executive Law

Cannabis Law in New York State and the 26 United States Support for legalization in the New York City Council

“The New York City Council supports the Marijuana Regulation and Taxation Act, which would legalize marijuana possession and limited personal cultivation for adults 21 years of age or older and place an excise tax on all marijuana sales. This legislation would regulate, control, and tax marijuana in a manner similar to alcohol, generating millions of dollars in new revenue and saving millions of dollars in criminal justice resources each year. Passing this legislation would reduce the racially disparate impact of existing marijuana laws and end the cycle of branding nonviolent New Yorkers as criminals.”

“New York State Legislative Agenda,” New York City Council, March 2015, p.25.

Cannabis Law in New York State and the 27 United States Projection of revenue from legalization by a former Comptroller Former New York City Comptroller John Liu in 2013 estimated the New York City cannabis market to be worth $1.65 billion annually and projected tax revenue of $400 million annually (3-5 years after legalization), with $331 million going to the City. - “Regulating and Taxing Marijuana: The Fiscal Impact on NYC,” New York City Comptroller’s Office, August 2013, pages 2-3.

Cannabis Law in New York State and the 28 United States Legislative findings

Legislative findings and intent: …The intent of this act is to regulate, control and tax marihuana in a manner similar to alcohol, generate millions of dollars in new revenue, prevent access to marihuana by those under the age of twenty-one years, reduce the illegal drug market and reduce violent crime, reduce participation of otherwise law- abiding citizens in the illicit market, end the racially disparate impact of existing marihuana laws, and create new industries and increase employment.

Cannabis Law in New York State and the United States New York State Bar Association Annual Meeting, January 23, 2018 29 Regulation like alcohol

• Most extensive change is in the Alcoholic Beverages Control Law (the “ABCL”): adds cannabis to the ABCL, makes the State Liquor Authority the lead regulatory body, and creates a new “Bureau of Marihuana Policy” within the SLA to administer the MRTA. • New ABCL Article 11 creates the supply side of a legal cannabis market for general adult use. • Instead of vertical integration, as the CCA structures the “medical marijuana” market, the MRTA expands on the classic “three-tier” alcohol control model and creates a “multi-tier” system.

Cannabis Law in New York State and the 30 United States Licenses

(1) marihuana nursery (2) marihuana producer (3) marihuana processor (4) marihuana distributor (5) marihuana retailer (6) marihuana microbusiness (7) marihuana on-site consumption (8) marihuana delivery (9) marihuana testing (10) “any other type of license allowed by the Bureau”

Cannabis Law in New York State and the 31 United States Individual cultivation of up to 6 plants

The MRTA permits an individual 21 years of age or older to cultivate no more than six cannabis plants provided that the plants are grown within a single private residence or on its grounds, in a locked space and are not visible from a public place. A local government can enact regulations governing individual cultivation but cannot prohibit.

Cannabis Law in New York State and the 32 United States Bureau of Marihuana Policy

• Members appointed by the Governor with advice and consent of the Senate. • Shall have the exclusive authority to issue, renew, suspend, revoke, etc., licenses. • May limit the total amount of cannabis produced in New York based on demand and in an effort to reduce the illicit market. • Shall promulgate regulations (that shall not prohibit operation of marihuana establishments either expressly or by making their operation unreasonably impracticable).

Cannabis Law in New York State and the 33 United States

Certain Licenses Producer Basically a grower: “A licensee that plants, grows, harvests, dries, cures, grades or trims marihuana.” May also distribute [a defined term] marihuana [but not “marihuana products”*] to other licensed marihuana businesses. A person can only hold one producer license but can also hold a processor license, and both production and processing can take place at the same premises. * “Marihuana products” includes “marihuana” [all parts of the plant], concentrated cannabis, and marihuana-infused products.

Cannabis Law in New York State and the 34 United States Licenses, cont’d Processor “A licensee that compounds, blends, extracts, infuses or otherwise makes or prepares marihuana products, but not the marihuana contained in the marihuana product.” A processor can distribute marihuana products to other marihuana businesses. The same person can hold a producer license and a processor license. No other business can be conducted on the processor’s premises except “production” of marihuana.

Cannabis Law in New York State and the 35 United States Licenses, cont’d Distributor “A licensee for the distribution of marihuana and marihuana products between entities licensed pursuant to this Article.” (“Distribution” – procurement, sale, and transport of marihuana between licensed entities.) Producers, processors and microbusinesses can distribute without a separate distributor license.

Cannabis Law in New York State and the 36 United States Licenses, cont’d Retailer A retail business that can sell directly to consumers, including by delivery. - must be a “store,” i.e. a fixed location. (No indication of a “pop-up” e.g. at a greenmarket.)

A retailer can be licensed for on-site consumption.

No retail licensee can operate in a location in which it would not be eligible for a alcohol license.

No sale of alcohol is permitted on premises in which cannabis is sold at retail.

A retail licensee cannot hold any other type of license and can hold no more than three retail licenses.

A retail licensee can deliver marihuana products to consumers without a separate license.

Cannabis Law in New York State and the 37 United States Licenses, cont’d Microbusiness “A licensee that may act as a marihuana producer for the cultivation of marihuana on an area less than ten thousand square feet, a marihuana processor and a marihuana retailer.” A microbusiness can be licensed for on-site consumption and can deliver to customers.

Cannabis Law in New York State and the 38 United States Licenses, cont’d Retail Licensee for On-Site Consumption

Essentially a cannabis bar/café: “A person licensed by the Bureau to purchase marihuana, concentrated cannabis, and marihuana infused products from marihuana producers, marihuana retailers and marihuana processors and sell marihuana products for a customer to consume while customer is within a facility.” Only a retailer or a microbusiness can be licensed on on-site consumption. This is a cutting-edge form of licensee: other states, including Colorado, are only now dealing with the regulation of onsite consumption.

Cannabis Law in New York State and the 39 United States Licenses, cont’d Delivery “A licensee that delivers retail marihuana and marihuana products to customers.” Only a retailer, a microbusiness or delivery licensee can deliver to customers. A delivery licensee (appears to be a licensee that only delivers, as opposed to a retailer or microbusiness) can hold only one delivery license.

Cannabis Law in New York State and the 40 United States Miscellaneous Retail licensee for On-Site Consumption • Same distance requirements from schools and houses of worship as alcohol. • In reviewing a license application, the Bureau may consider an open-ended list of factors, including the number, classes and character of licenses in proximity to the proposed location.

Cannabis Law in New York State and the 41 United States Miscellaneous, cont’d License for On-Site Consumption

• No gambling on premises unless specifically licensed. • No ‘sex shows’ on the premises. • Boxing, sparring, wrestling and martial arts are permitted on the premises but not “combat sports.”

Cannabis Law in New York State and the 42 United States Authority of local governments to regulate • Local Opt-out option – the ABCL allows municipalities to opt out of retail sales of alcohol and on-premises consumption of alcohol through voter referendum. • The MRTA makes the voter referendum applicable to retail sales of marihuana and on- premises consumption of marihuana products.

Cannabis Law in New York State and the 43 United States Authority of local governments to regulate, cont’d • New ABCL Section 184: Notification to municipalities: all applicants for producer, processor, microbusiness, retailer, on-site consumption, delivery and testing licenses must notify the municipality in which the premises are located of the applicant’s intention to file the application. • In New York City, the community board in which the premises are located is the public body to which notice shall be given. Parallels liquor license applications. • The municipality may express an opinion for or against issuance of the license, which shall become part of the record upon which the Bureau makes its determination.

Cannabis Law in New York State and the 44 United States Authority of local governments to regulate, cont’d However: the MRTA also creates a new ABCL Section 177 stating that no on-site consumption license shall be issued unless the local legislative body adopts a resolution expressly authorizing such licenses and, in New York City, if the Council does adopt such a resolution, no individual license shall be issued unless the relevant community board authorizes the license.

Cannabis Law in New York State and the 45 United States Authority of local governments to regulate, cont’d A municipality can specify within it an entity that will process license applications in the event that (a) the Bureau fails to promulgate regulations timely or, having promulgated regulations, (b) fails to respond timely to a license application.

The municipality can adopt regulations governing the time, place, manner and number of “marihuana establishments.” In addition a municipality can prohibit entirely production and processing facilities, retail stores, microbusinesses, and testing facilities (apparently, again, in the scenario in which the Bureau does not promulgate regulations).

Cannabis Law in New York State and the 46 United States Authority of local governments to regulate, cont’d The MRTA expressly permits local governments to impose an excise tax on sales to consumers. (Discussed below….)

Cannabis Law in New York State and the 47 United States State “preemption” of local laws

…[S]ince the fount of the police power is the sovereign State, such power can be exercised by a local governmental unit only when and to the degree it has been delegated such lawmaking authority. As pertinent here, in the spirit of this broad principle, article IX … of the New York State Constitution specifies that any local law be ‘not inconsistent with any general law" and that the legislative power of local government is limited "to the extent that the legislature shall restrict the adoption of such a local law’.

People v. De Jesus, 54 N.Y.2d 465, 468 (1981).

Cannabis Law in New York State and the 48 United States Preemption of local law: alcohol

People v De Jesus, 54 NY2d 465, 469 (1981)(charges of patronizing after-hours club that sells alcohol beyond 2:00 a.m. set by Rochester ordnance dismissed as preempted by ABCL cutoff time for sales of 4:00 a.m.).

Lansdown Entertainment Corp. v. New York City Dept. of Consumer Affairs, 74 N.Y.2d 761 (1989)(provision of NYC Cabaret Law requiring licensee for on-premises consumption to close between 4:00 a.m. and 8:00 a.m. preempted by ABCL provision allowing patrons to remain on premises under 4:30 a.m.)

Cannabis Law in New York State and the 49 United States HOWEVER

Even where a statute preempts a field it does not preempt all local laws: “…all this is not to say that establishments selling alcoholic beverages are exempt from local laws of general application such as, to take several examples, one requiring smoke alarms in all business premises, or one forbidding dumping of refuse on city sidewalks, or one prohibiting disorderliness at any place of public resort.” De Jesus, 54 N.Y.2d at 471.

Cannabis Law in New York State and the 50 United States Zoning

Core local power is land use - • Can be used to control state-licensed businesses under certain circumstances even when state law ordinarily preempts local laws governing the licensee. In DJL Restaurant Corp., supra, New York City amended its Zoning Resolution to confine “adult establishments” to manufacturing and high density zoning districts. Plaintiff adult entertainment venues sought declaratory judgment that the amendment was preempted by the ABCL. The Court of Appeals affirmed dismissal.

Cannabis Law in New York State and the 51 United States Zoning, cont’d

The zoning amendment applied to all adult establishments, not just those serving alcohol. One of the most significant functions of a local government is to foster productive land use within its borders by enacting zoning ordinances….State statutes do not necessarily preempt local laws having only tangential impact on the State’s interests. Local laws of general application—which are aimed at legitimate concerns of a local government—will not be preempted if their enforcement only incidentally infringes on a preempted field….[The Zoning Resolution amendment] applies not to the regulation of alcohol but to the locales of adult establishments irrespective of whether they dispense alcoholic beverages. 96 N.Y.2d at 97.

Cannabis Law in New York State and the 52 United States TAKEAWAY

The MRTA legalizes the supply side of the legal cannabis market primarily through the extensive provisions of a new Article 11 in the ABCL. Since the provisions of Article 11 are comprehensive and detailed in a manner similar to the alcohol-control part of the ABCL, it is reasonable to assume that Article 11 will preempt local laws that attempt to regulate marihuana businesses licensed by the Bureau. However, the City may still try to control the location of such licensees through zoning.

Cannabis Law in New York State and the 53 United States Taxation: state and local

The MRTA adds a new Article 18-A to the Tax Law. Administered by State Department of Taxation and Finance. (A)“cultivation tax” on all harvested marihuana upon all persons required to be licensed to cultivate (B) “nursery tax” on each immature plant sold (appears to refer to producers)

Cannabis Law in New York State and the 54 United States Taxation: state and local, cont’d

(C) Sales tax on all marihuana products sold by a producer to a processor or retailer. (D) Sales tax on all marihuana products sold by a retailer or microbusiness to a consumer. Tax rates will be adjusted every two years according to the cost-of-living adjustment.

Cannabis Law in New York State and the 55 United States Taxation: state and local, cont’d

Local sales tax Article 18-A authorizes a local sales tax of two percent on sales to consumers.

Expenses deductible Licensees can deduct from net income all ordinary and necessary expenses paid or incurred in carrying on any trade or business, including salaries and other compensation.

Cannabis Law in New York State and the 56 United States Taxation: state and local, cont’d

Allocation of revenue: • Expenses incurred by the state in administering statute and carrying out various research and efficacy assessments, then • Fifteen percent divided equally between (a) re-entry services for persons released from prison, (b) drug abuse prevention and treatment programs, and (c) apprenticeship and job training, then • The balance divided between the Department of Education, various substance abuse prevention and treatment programs, and the Community Grants Reinvestment Fund.

Cannabis Law in New York State and the 57 United States Taxation: state and local, cont’d

The purposes of the tax: (a) maximize net revenue (b) minimize the illegal market (c) discourage the use marihuana by minors under 21

Cannabis Law in New York State and the 58 United States Cannabis legalization runs into tobacco prohibition Political orientation against tobacco – State and City

The New York State Department of Health envisions a tobacco-free society for all New Yorkers. The Bureau of Tobacco Control administers the state's Tobacco Control Program (TCP) to reduce illness, disability and death related to tobacco use and secondhand smoke exposure, and to alleviate the social and economic burdens caused by tobacco use. TCP uses an evidence-based, policy-driven and cost-effective approach to decrease tobacco initiation by youth, motivate adult smokers to quit and eliminate exposure to secondhand smoke.

“The New York State Tobacco Control Program,” New York State Department of Health https://www.health.ny.gov/prevention/tobacco_control/program_componen ts.htm [accessed June 12, 2017]

Cannabis Law in New York State and the 59 United States Smoking in New York State

The New York State Clean Indoor Air Act (“CIAA”), Public Health Law 1399-a et seq. bans all indoor smoking of tobacco in the State of New York with certain exceptions, including among others, a private residence, a hotel room and, as possibly relevant here:

• “retail tobacco businesses” • “membership associations” • “cigar bars” that were in existence as of 12/31/02

Public Health Law Section 1399-q

Cannabis Law in New York State and the 60 United States One little change to the CIAA

The MRTA makes one little change to the CIAA: The definition of ”smoking" means “the burning of a lighted cigar, cigarette, pipe or any other matter or substance which contains tobacco or marihuana.”

As a result the CIAA will apply to cannabis, and will restrict to the indoor locations that the CIAA excepts from the ban.

Cannabis Law in New York State and the 61 United States The smoking prevention message even affected the “medical marijuana” law

The memorandum in support of the Comprehensive Care Act says:

Notably, this bill prohibits smoking medical marihuana. The negative health consequences of smoking of marihuana are well-established. As the National Institute for Drug Abuse notes, "The smoke of marihuana, like that of tobacco, consists of a toxic mixture of gases and particulates, many of which are known to be harmful to the lungs."

In addition to its direct negative effects on users' health, the widespread smoking of medical marihuana has the potential to undermine New York State's decades-long and successful effort to decrease smoking more broadly. However well-intentioned, any effort that reduces the stigma associated with smoking, and that has the potential to lead to an increase in smoking rates among New Yorkers, especially young New Yorkers, presents an unwarranted public health risk. This legislation would avoid that risk.

Cannabis Law in New York State and the 62 United States Question:

How can there be a “retailer for on-site consumption” in light of the limitations under the CIAA? The “retail tobacco business”* seems to be the only category that could serve as the “retailer licensee for on-site consumption” of marihuana.

*Defined as: “a sole proprietorship, limited liability company, corporation, partnership or other enterprise in which the primary activity is the retail sale of tobacco products and accessories, and in which the sale of other products is merely incidental.”

But on-site consumption of cannabis would then be limited to places in which tobacco can be consumed and is sold.

Cannabis Law in New York State and the 63 United States A vapor exception?

The CIAA does not (yet) include vaporization in its prohibition on “smoking” tobacco (which will include “marihuana” under the MRTA.

Cannabis Law in New York State and the 64 United States A vapor exception?, cont’d

The MRTA also excepts “vaporization” from the definition of “smoke” (the verb) for the purposes of ABCL 65-E: “Smoke” does not include the use of an electronic smoking device that creates an aerosol or vapor, unless local or state statutes extend prohibitions on smoking to electronic smoking devices.

Therefore, it is up to a local government to determine whether to restrict indoor vaporization under its smoking rules.

Cannabis Law in New York State and the 65 United States Industrial Hemp Program

Hemp, even though not psychoactive, is classified in Schedule I of the Controlled Substances and cultivation is prohibited. Uses of hemp include textiles, fuel, food, animal feed, building materials and paper, among others. 2014 US Farm Bill authorized states to license cultivation of industrial hemp in the context of research. Legislation sponsored by Senator Thomas O’Mara and Assembly Member Donna Lupardo resulted in New York’s Industrial Hemp Program. Agriculture and Markets Law, Article 29. Focus is revitalizing upstate agriculture.

Cannabis Law in New York State and the 66 United States Industrial Hemp Program, cont’d

• Strong support from Governor Cuomo. • Cap of 10 cultivation sites lifted. • Unlike the highly-restrictive, capital-intensive medical cannabis program, New York is giving money away to develop the hemp market: (a) $5 million in grants to research hemp production and (b) $5 million in grants to study processing of hemp into commercial products. • Expansion of cultivation of hemp on 300 acres in 2016 to 2,000 acres in 2017. • Research is being conducted under the auspices of Cornell University and SUNY; licenses for research are also available to applicants other than academic institutions.

Cannabis Law in New York State and the 67 United States