The long-anticipated New York cannabis market is finally coming into shape. The New York State Office of Cannabis Management (“OCM”) has issued more than 250 Adult Use Conditional Cultivator Licenses and 25 Adult Use Conditional Processor Licenses and began processing retail license applications on August 25. There’s no doubt that New York is the cannabis industry’s next land of milk and honey. As potential investors prepare to inject capital into this promising new market, it’s important they—and their target businesses—be aware of potential regulatory pitfalls particularly as they apply to “True Parties of Interest.” Below, this blog discusses what it means to be a True Party of Interest in New York and how such designation may affect investment in New York’s Adult Use Cultivation and Processing market.
What is a True Party of Interest??
To promote more balanced competition, many states with legalized recreational cannabis have implemented restrictions and limitations on the number of licenses an individual or entity can have a direct or indirect “interest” in. In New York, individuals with such interests are identified by the OCM as “True Parties of Interest.”
The definition of “interest” and the restrictiveness of these provisions vary from state to state. … Keep reading
Are supply contracts a thing of the past in the cannabis market? As many cannabis markets continue to develop state to state — whether it be veteran markets adjusting to changes in consolidation or emerging markets expending efforts to establish a foundation — many operators are considering moving away from having a master supply agreement govern the legal terms and conditions of the business relationship between B2B product suppliers and product buyers for one-page purchase orders and invoices as a replacement. This blog identifies the top 5 legal considerations you need know when relying on this latter approach.
Under the traditional approach used in many industries, product fulfillment arrangements to be supplied by a distributor, on the one hand, and received by either a middle-entity operator, like a product manufacturer, or retailer for resale, on the other hand, are papered up as a form of master supply agreement (aka, purchase agreement, distributor agreement or wholesale agreement). These agreements govern the terms of the purchase, payment, delivery, and other legal jargon of the purchase-supply relationship generally and would be later supplemented by the parties through the use of purchase orders or invoices from time to time when the purchaser … Keep reading
The cannabis market in America has expanded and continues to grow with each election cycle. State lawmakers and their respective voters continue to propose and pursue the passage of ballot referendums, constitutional amendments, and new legislation that seek to legalize the recreational use of cannabis and establish a framework for the adult-use commercial market and the regulatory oversight thereof. The November 8th midterm elections are no exception, as five states seek to legalize recreational cannabis.
The following states seek to join the nineteen (19) states that have previously legalized recreational cannabis.
- Action: Ballot Referendum. Lawmakers in Arkansas passed a constitutional amendment to permit the addition of this initiative to the ballot. The state Supreme Court upheld the constitutional amendment and ordered the initiative to legalize recreational cannabis to be added to the ballot for November 2022.
- Faces a legal challenge claiming the title of the ballot initiative is misleading. Many state officials are arguing that this legal challenge should be resolved before adding it to the ballot, which remove it from this year’s ballot.
- The legal challenges have delayed the secretary of state’s ability to certify the signatures received supporting the ballot referendum. The initiative
… Keep reading
Join us on Monday, October 17, for Burns & Levinson’s nationally recognized State of the Cannabis Industry Conference! Each year our team convenes national experts and industry leaders to share unique strategic legal and financial perspectives on forecasted trends, regulations, M&A, investments, and more. Make connections, develop partnerships, and gain insight from industry leaders.
We’re back for our sixth and best event yet with a full day of in-person programming at the Westin Waltham Boston — although there is a live stream option for those who’d like to access the panels remotely.
Early bird tickets are on sale for a limited time for a discounted price of $149. Click here to purchase.
This year’s panels include:
- A discussion on restructuring, workouts, and distressed mergers and acquisitions,
- A spotlight on women executives in the cannabis industry,
- A deep dive into capital markets, financing, debt, and the state of M&A,
- A fireside chat with Steven Hoffman, the former chairman of the Massachusetts Cannabis Control Commission,
- A CEO roundtable.
Be sure to subscribe for more updates on confirmed speakers and panels.
… Keep reading
“If you build it, they will come.” These were the words spoken from above to Kevin Costner’s character, Ray Kinsella, in Field of Dreams, as he walked through an Iowa cornfield and envisioned Shoeless Joe Jackson standing in what would become a beautiful ballfield. And this vision did come true. Like Ray, countless entrepreneurs have walked through farmlands, warehouses and retail shops alike – dreaming of building state-of-the-art cannabis facilities.
The cannabis industry is home to some of the hardest working, gritty, thoughtful, and passionate entrepreneurs in the world, and there are plenty of success stories out there. However, the industry at large is quickly experiencing a difficult truth: it’s not as simple as if you build it, they will come. The saying for the industry, at this point, should probably be something more along the lines of if you build it, and build it in a great location, and are well capitalized, and execute effectively, with a great team that provides customers with a consistent product, then they will come.
Yes, there is momentum from 2021’s state legislative victories that resulted in Connecticut, New Mexico, New Jersey, New York, and Virginia all legalizing adult use. But … Keep reading
On July 1, 2022, the Illinois Department of Financial and Professional Regulation (IDFPR)—the regulatory department charged with implementing and administrating multiple aspects, including licensing, of Illinois’ Adult Use Cannabis Program—published an Advisory Notice online providing information to conditional dispensary licensees (Conditional Licensees).
Buried amongst otherwise relatively straightforward guidance regarding rules related to business operations and timing expectations for the conditional license process was new crucial guidance regarding the use of Management Service Agreements (MSAs) by Conditional Licensees.
The IDFPR stated that MSAs require new Principal Officers to be added to the ownership structures of Conditional Licensees. Conditional Licensees are barred from changing their Principal Officers until they have received an active license—so the IDFPR’s declaration effectively prohibits the use of MSAs by Conditional Licensees.
The IDFPR’s stance is somewhat surprising given the definition of “Principal Officer”:
Principal Officer includes a cannabis business establishment applicant or licensed cannabis business establishment’s board member, owner with more than 1% interest of the total cannabis business establishment or more than 5% interest of the total cannabis business establishment of a publicly traded company, president, vice president, secretary, treasurer, partner, officer, member, manager member, or person with a profit sharing, financial interest, or revenue … Keep reading
Over the past few years, August has become a popular month for cannabis industry reform in Massachusetts.
Most recently, the Massachusetts legislature approved a bill, S. 3096, earlier this week that significantly changed many of the challenges faced by operators in the Commonwealth’s cannabis market for years. At a high level, the reforms focused on two main aspects – social equity and host community agreements (HCAs). The bill has been sent to the desk of Charlie Baker for approval.
Here’s the top three things you need to know about the updates to social equity and HCA as proposed in the new bill.
- Leveling the HCA Playing Field – The new bill establishes that the Massachusetts Cannabis Control Commission (CCC) will now have the power to develop a model HCA with minimum standards and best practices to be implemented during the negotiation process between social equity licensees and their host communities that they intend to operate. These standards will be specific to social equity businesses (SEBs), which presumably could give SEBs a leg up in negotiating power with municipalities with respect to HCAs that may not necessarily be available to other licensees.
- Cannabis Social Equity Trust Fund –
… Keep reading
Regardless of the jurisdiction in which it conducts its business, licensed cannabis businesses (“Cannabis Operators”) are constantly grappling with what I’ll refer to as “control issues” while negotiating the documentation of a corporate transaction. Cannabis regulations in most states prohibit people from exercising a certain level of control (i.e., decision-making authority over operations, finances, strategic planning and/or marketing of a Cannabis Operator) without first being approved by the applicable regulatory authority, undergoing background checks, fingerprinting and submitting other application requirements. Conversely, people who contract with Cannabis Operators but are not afforded a material level of control over the Cannabis Operator according to the contract can avoid such rigorous requirements. Control issues arise when some third party (e.g., investor, lender, consultant, management services provider, each a “Contracting Third Party”) contracts with a Cannabis Operator to provide a service to the Cannabis Operator or funding in the form of an equity investment or a loan. For various reasons, Contracting Third Parties do not want to be considered persons with control over a Cannabis Operator or be subject to background checks or other reporting requirements to the applicable regulatory authority. It is the collective duty of counsel to the Cannabis Operator and … Keep reading
The CannaBusiness Advisory Spotlight Series features expert perspectives from Burns & Levinson clients and contacts who are blazing new trails in the cannabis market.
This week we spotlight Jason Sidman, CEO of Sanctuary Medicinals, a vertically-integrated, multi-state cannabis company with operations in Florida, New Hampshire and Massachusetts as well as a medical dispensary license in New Jersey.
From your corner of the cannabis industry, what’s the single greatest challenge right now?
There are many challenges in this industry, as well as many opportunities. From where I sit, one of the most significant challenges is operating across multiple states with different and distinct regulations. What works as a best practice in Massachusetts may not be compliant with regulators in Florida, and this applies to everything from product testing and approvals to opening new locations, wholesale, marketing, and beyond.
How does your business solve issues related to this challenge?
Sanctuary is rapidly expanding into new markets, bringing our high-quality, award-winning products to patients and consumers across multiple states, and we have assembled a strong team to help us navigate state and local regulatory requirements. Every municipality is different, and it’s critical we have the best talent in place to remain … Keep reading
After a few days in the Miami sun — well, actually, in the air-conditioned exhibition spaces of the Fontainebleau hotel — the Burns & Levinson team is happy to report that the 2022 Benzinga Cannabis Capital Conference was a great success.
Our Cannabis Business & Law Advisory Group was well represented by Frank A. Segall, Scott Moskol, Bryan Natale, and myself – Max Borg. We had the opportunity to connect with many of our fantastic clients throughout the industry and to meet many key industry participants we hope to work with soon.
Benzinga was a concentrated gathering of many – if not most – of the key players throughout the cannabis industry, from the largest investors in the space to founders and CEOs of the largest cannabis companies in the world, to activists, politicians, consultants, advisors, professionals and many others.
Before discussing my five biggest takeaways from the conference, I want to briefly reflect on the experience of the event itself. The passion and enthusiasm for this rapidly growing industry could be felt throughout the conference. It was a fantastic networking and educational experience, and people seemed to be having FUN! I wonder if it was a coincidence the … Keep reading