Retail Pot Licenses Approved, Could Mean Shops on East End, Including Southampton Town

The New York State Cannabis Control Board approved its first round of retail dispensary licenses last week.

Some 28 licenses for business owners with a cannabis conviction or a family member with a cannabis conviction, along with eight nonprofit organizations, got the green light initially.

And, while the seven Long Island licenses all went to businesspeople based up-island — three in western Suffolk County — that doesn’t mean Southampton won’t see its own retail establishments.

According to Aaron Ghitelman, the deputy director of communications for the Office of Cannabis Management, “A licensee does not have to operate in the municipality they live in. We expect these initial stores to be placed all across the island, in commercial real estate locations chosen to maximize potential revenue for each store.”

The first licenses approved are known as Conditional Adult-Use Retail Dispensary, or CAURD, licenses.

The Office of Cannabis Management will work with the Dormitory Authority of the State of New York as they build out locations in municipalities that did not opt out of cannabis sales on Long Island, he said. According to its website, DASNY “provides construction, financing and allied services which serve the public good of New York State.”

Municipalities in New York State had until the end of 2021 to opt out of allowing retail marijuana sales in their jurisdictions. If they did not vote to opt out, they were automatically opted in under the state legislation that legalized recreational marijuana sales.

Southampton Town is among the Long Island municipalities that chose not to opt out. Riverhead and Brookhaven towns also will allow the sale of marijuana, as will Babylon Town, the only other town in Suffolk County that didn’t opt out.

That means the eastern half of the county could become the place to buy marijuana. It’s also home to the Shinnecock Indian Nation in Southampton and the Unkechaug tribe’s Poospatuck Reservation in Mastic, where the sale of legal marijuana on sovereign land is permitted.

With the legalization of marijuana came the power of individual municipalities to regulate where such shops might be located through their zoning powers. State law prohibits municipalities from making zoning regulations so strict as to prohibit marijuana shops by default.

Officials in Southampton began looking at zoning regulations earlier this year but ultimately decided to wait and see if the state would impose additional regulations that town law needs to mirror.

The Southampton Town Board held hearings on its first draft of pot-related zoning regulations last summer. The proposal, if adopted as drafted, would allow the retail sale, by special exception permit, in village and highway business zoning districts, as well as districts slated for light industry.

The proposed code change lists 16 standards that must be met to procure a special exception approval.

A cannabis store may not be located within 500 feet of a school or within 200 feet of a house of worship, daycare facility, active park or recreational facility, museum, village green, youth center, or library. It can’t be near any other marijuana dispensary, whether regular retail or one providing medical marijuana. To ensure the location restrictions are enforced, potential purveyors must provide the town with an inventory of all dispensaries in town.

When the Planning Board reviews the proposed store, it may require a traffic study to show the shop won’t generate more additional traffic than the desired area can absorb. “In no case shall a cannabis dispensary be located on Noyac Road or County Road 39 west of the intersection of David Whites Lane,” the proposal reads.

A retail shop can’t be any bigger than 3,000 square feet, can’t have a drive-up window, and must conform to the look of its surrounding community. No outdoor music would be permitted, and the signs, displays and promotional material used by the establishment can’t use any “graphics related to marijuana, marijuana paraphernalia, or figures or symbols related to cannabis,” the draft legislation states.

Finally, a potential entrepreneur must prove all necessary licenses and/or permits have been obtained from the New York State Office of Cannabis Management.

“At this point, municipalities may have enough information to move forward with establishing zoning standards for dispensaries,” Southampton Town Planning and Development Administrator Janice Scherer said Monday. “However, despite the state approving some conditional licenses, there are also instances of litigation between the state and some municipalities, which appears to be stalling the roll-out.

“If you review the Office of Cannabis Managements Twitter account, the OCM references plans to recommend dozens of CAURD applicants across the state, but due to ‘active litigation, the office was blocked from doing so.’”

Sherer continued, “Based on the guidelines provided by the state, we are continuing our effort to determine appropriate zoning regulations that take into consideration what we have heard so far from the board and the public and in line with what we are enabled to do from OCM. Following the analysis, the Department of Land Management intends to meet with elected officials to further discuss the findings.”

State regulations allow municipalities to enact local laws and regulations governing the time, place and manner of the operation of licensed adult-use cannabis retail dispensaries as long as they don’t make the operation “unreasonably impracticable,” according to the State Cannabis Control Board.

In regulating the times shops may be open, state officials say they can’t be open between 2 and 8 a.m. without written permission or an express local ordinance allowing it. The town cannot restrict operation to less than 70 hours per week, though the business owners may choose to not operate that many hours.

The structure of the regulations is similar to the structure of the alcohol industry in New York, and separates supply — cultivation, processing, distribution — from retail.

Individuals can’t have an interest in businesses across tiers, meaning if you grow it, you can’t also sell it. If you operate or invest in a business on the supply side, you cannot also hold any interest in a retail business.

“This key principle of the law creates opportunity, opens up the market, and will help establish a diverse and equitable industry,” according to the control board’s release.

The regulations also outline criteria for identifying social and economic equity market participants and detail targeted opportunities for minority- and women-owned businesses, service disabled veteran-owned businesses, and distressed farmers as well as individuals from communities that were disproportionately impacted by the enforcement of cannabis prohibition.

“Access alone doesn’t cut it,” said Damian Fagon, OCM’s chief equity officer. “A legal marketplace will inevitably reflect legacy disparities across wealth, race and privilege. A fair, competitive and consumer-driven marketplace, grounded in principles of restorative justice, will not only produce broad economic prosperity across the state, but ensure the resilient entrepreneurs announced today get a real shot in this emerging industry.”

CAURD licenses will go to those most impacted by the enforcement of the prohibition of cannabis or nonprofit organizations whose services include support for the formerly incarcerated. OCM received over 900 applications for CAURD licenses. Up to 175 licenses will be granted in total: as many as 150 to individual applicants and up to 25 to nonprofit applicants.

“Today is a monumental day for New York’s nascent cannabis industry. With the first adult-use retail dispensary licenses in the hands of businesses and eligible nonprofits, we’ve ensured the first sales will be made at dispensaries operated by those impacted by the unjust enforcement of cannabis prohibition,” said Tremaine Wright, the chair of the Cannabis Control Board, in a release announcing the action. “This is just the start — we will continue to work to build an industry that is open to anyone who wants to participate.”

“Today marks another huge win for so many advocates who fought for years to end cannabis prohibition in New York State. Last year we ended prohibition, and now we’re making sure those harmed by prohibition are launching New York’s market,” said Office of Cannabis Management Executive Director Chris Alexander. “Now we’ll keep our foot on the pedal and do all that we can to ensure that these businesses and those that follow are successful.”

Approvals for additional licenses will roll out in batches as review continues. Concurrently, the Cannabis Control Board last week voted to advance regulations for packaging, labeling, marketing, advertising and laboratory permitting, oversight and testing of adult-use cannabis. They include requirements for child-resistant packaging and labeling that identifies products as containing cannabis with THC, limiting marketing to adult-only audiences, and the rules for establishing testing procedures to ensure products are safe for consumption.

The proposed regulations will be filed for a 60-day public comment period. Comments can be filed by emailing regulations@ocm.ny.gov. Packaging regulations will undergo a 45-day public comment period anticipated to begin on December 7, 2022, and end on January 23, 2023.