New York opened the application window for its branding processor license, creating the possibility for larger, established cannabis brands to enter or expand in the market without running afoul of the state’s true-party of interest restrictions.
“If you have a cannabis brand and you want to launch in New York, you must receive one of these licenses to license your brand in New York compliantly,” said attorney Ken Seligson of Seligson Law.
Without the branding licenses, recognizable companies such as Cookies or Glass House Brands were unable to enter the adult-use market. If the company is not already licensed in the state, like Curaleaf Inc., the only way established brands could enter the market is through hemp products or through illicit sales in unlicensed smoke shops.
The branding license does not authorize plant-touching activity, nor does it require a licensed place of business, just a registered address.
New York has three separate processor license types, each of which allow the packaging, labeling and branding of product. Type 1 also allows a processor to extract THC, Type 2 allows for infusing and blending products, while Type 3 allows neither.
The Type 3 Branding License is a processor sub-type that does not allow a company to package product, but it does allow branding.
TPI rules limit financial control
New York’s adult-use market has a strict two-tier system intended to prevent anyone from having a stake or financial control in both the supply and retail sides of the industry. In order to guard that divide, the state established the true-party of interest (TPI) label, which refers to any person or company that has direct or indirect financial or controlling interest or is a passive investor, which means they own at least 5% of a publicly traded licensee, 10% in a privately held medical licensee, or 20% in another type of licensee.
TPIs can only be involved in one licensed cultivation or processing operation, or up to three retail licenses. A TPI that is invested in the supply side in another state may not be involved with a New York retailer, although a TPI who owns a retail license in another state can get involved in the supply side of New York’s cannabis market.
The branding license allows white label agreements that could enable New York cultivators with excess product to sell their supply under a new brand that is perhaps more recognizable to consumers, according to John Kagia, director of policy at the Office of Cannabis Management.
“This doesn’t add capacity to the market,” said Kagia, during the Cannabis Control Board’s Nov. 12 meeting. “If anything, the entering of these brands into the space will help draw down some of the excess capacity that we might be seeing.”
The window for branding license applications opened Nov. 12, and there is no cap on the number of licenses that will be awarded.
“I think they want to monitor who the brands are that are coming in,” said Seligson. “They want to know who are the true parties of interest involved.”
Seligson also noted that the license does not require any plant-touching activity, so individuals who might have more strength in marketing than cultivation can still get involved in the market.
“It’s a license that I think a lot of people are going to be applying for,” he said.
Cannabis Control Board approves more licenses
New York’s Cannabis Control Board has steadily approved new licenses throughout 2024. Most recently, the board approved 125 more licenses during its Nov. 12 meeting. Of that total, 36 licenses were for processors. There were also 30 microbusiness licenses, 41 retail, six cultivation, 11 distribution, and one final license for a Conditional Adult-Use Retail Dispensary license holder.
So far this year, the state has issued 256 processor licenses.
The board also approved four additional Registered Organizations, which exclusively serve the medical market. Last month, the board issued its first new RO licenses since 2015, indicating that now that the adult-use market is steadily growing, the state can work on expanding medical access as well.
The new ROs are Project Verde I, Pure Beaty NY, NY State of Mind Flower and Amethyst Health.
