On October 4, 2023, New York Governor Kathy Hochul announced the largest expansion of the State’s legal marijuana market to date. As our readers are aware, the Marihuana Regulation & Taxation Act (“MRTA”) was enacted in 2021, legalizing adult-use cannabis in New York State. The Office of Cannabis Management (“OCM”) was established under the MRTA to implement a regulatory framework for marijuana use and marketing in the State of New York. On September 12, 2023, the New York State Cannabis Control Board (“CCB”) voted to finalize the OCM’s proposed additions to existing marijuana regulations. A few updated sections govern the categories of licenses that will be approved by the CCB, while others apply specifically to marijuana marketing alone. Beginning on October 4, and ending on December 4, 2023, eligible entrepreneurs will be able to apply for licenses to cultivate, process, distribute, and/or sell marijuana. This is surely to result in a significant increase in marijuana marketing opportunities as well.
How Do the New Regulations Impact Marijuana Marketing?
To date, New York State has a total of 23 licensed dispensaries. The State estimates that cumulative marijuana sales from these dispensaries have eclipsed $70 million. The State expects that “hundreds” of new licenses will be granted during this period. Correspondingly, we can expect marijuana industry revenue to skyrocket. This exponential growth in the marijuana industry will also create tremendous opportunities for marijuana marketers. However, while the OCM eased access to marijuana cultivation and sale licensure, it tightened restrictions on the advertising of marijuana-based products.
As part of the State’s new marijuana initiative, the OCM adopted Parts 118 through 121, 123 through 125, and 131 of Chapter II of Subtitle B of Title 9 of the Official Compilation of Codes, Rules and Regulations of the State of New York (“N.Y.C.R.R.”). These regulations were so restrictive on third party marijuana marketing companies, that one company even filed a lawsuit against the State. The N.Y.C.R.R. prevents licensed retail dispensaries from paying for any kind of “promotion” on a third-party website. In addition, the regulations prohibit retailers from entering into any contract with third-party platforms that do not “list all licensees authorized for the retail sale of such cannabis products” when “advertising or listing a cannabis product.” Essentially, third party marijuana marketers would not be able receive payment from legal marijuana dispensaries in exchange for placement on their websites or in their apps. The N.Y.C.R.R. also prohibits retailers from entering into any contract with third-party platforms that do not redirect to the authorized retailer’s website before displaying the price of marijuana. This “pricing ban” prevents marijuana marketing companies from displaying the price of their clients’ cannabis-related products. Clearly, licensed dispensaries would quickly cut out the middleman if consumers would need to visit their websites anyway. While largely untapped marketing opportunities exist, marijuana marketers must be aware of the restrictive nature of the newly-passed regulations.
How Do the New Regulations Affect Your Marijuana Marketing Business
One marketing company has already been able to convince a court to grant a stay on the State’s new marijuana marketing provisions. However, this stay is company specific. If your marketing company is able to operate within the bounds delineated by the new regulations, you are in prime position to capitalize on the deluge of new licenses that are sure to be handed out in New York over the next few months. For those that are interested in learning what the regulations specifically allow for, it is best to consult with experienced legal counsel.
Please contact us if you require legal assistance in connection with advertising marijuana and/or other cannabis-related products, please e-mail us at: info@kleinmoynihan.com, or call us at (212) 246-0900.
The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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