A Fair Approach to Marijuana:

Mayor’s Task Force on Cannabis LegalizationRecomendations from the

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Letter from Mayor Bill de Blasio Friends,Wehaveaonce-in-a-generationopportunitytogetahistoricissuerightforfutureNewYorkers.LegalcannabisiscomingtoNewYorkState.Whenitdoes,wemustdoallwecantomakesurethathappensinawaythatissafe,takesthehealthofNewYorkCityresidentsintoaccount,andaboveall,providesopportunitywhilerightinghistoricwrongs.We’veseenthesekindsofnewindustriesspringupbefore.Legalizationcanfollowtworoutes.Inone,corporateCannabisrushesinandseizesabig,newmarket,drivenbyasinglemotive:greed.Inanother,NewYorkersbuildtheirownlocalcannabisindustry,ledbysmallbusinessesandorganizedtobenefitourwholediversecommunity.Tragically,weknowwhathappenswhencorporationsruntheshow.Fordecades,BigTobaccoknewitsproductwasbothdeadlyandaddictive.Butitdenied,obscured,advertised,andlobbieditswayintoAmerica’shomes,targetingchildren.Fordecades,BigOilknewitsproductwaschokingthehumanraceontheonlyplanetwehave.Yet,itdiditslevelbesttocreateaneconomybasedonfossilfuels.Morerecently,BigPharmapeddledopioidsasasafe,non-addictivecureforpain.Now,Americansarecrushedbyaplagueofoverdosedeaths.Wecan’tletcannabisfollowthatcourse.InJuly,IaskedataskforcetosetforthNewYorkCity’svisionofwhatlegalcannabisshouldlooklikehere.Thatisthereportyouholdinyourhands.Asweplanforlegalization,weareguidedbythreeprinciples:safety,health,andequity.Safetymeansregulatingthemarket,toensurethatsupplyiscleanandsafe.Itmeanskeepingpeoplefromdrivingwhileundertheinfluence.Anditmeansmakingsurethatkidsdon’thaveaccesstocannabis.

Healthmeanseducatingthewholecommunity,andyoungpeopleespecially,abouttherealpublichealthrisksthatlegalizationmaypose,includingdependence,trafficcollisions,andimpairedcognitivecapacity.Equityisespeciallyimportant,becausewehaveapainfulpasttoovercome.Theburdenofcurrentcannabislawshasnotbeensharedequally.Forfartoolong,one'sracehasplayedtoobigaroleindeterminingcriminality.Toomanypeopleofcolorhaveseentheirlivesruinedbylow-levelarrests,lockedoutofjobsandprosperitybyasinglejointonthestreet.Ouradministrationtookofficetorightthosewrongs.We’vealreadystoppedthevastmajorityofarrestsforsmokingandlow-levelpossession,andseencrimecontinueitshistoricdecline.Now,legalizationoffersanopportunitytoautomaticallyexpungelow-levelmarijuanaconvictions,givingNewYorkersacleanslateandclearfuture.

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Butwemustdomore.Wehavetomakesurethatthosewhoborethebruntofpastburdensreapthemostfuturebenefit.Thatmeansthatamajorityoftheopportunitygeneratedinthisnewindustrymustgotopeopleofcolor,tolow-incomeNewYorkers,topeoplewhoseliveshavebeenstalledbymarijuanaconvictions,orwholiveinneighborhoodswheretherehavebeenthehighestnumberofmarijuanaarrests.Itmeansusingpartoffuturemarijuanarevenuestofundpublichealthcampaigns,jobtrainingprograms,andlow-interestloanstosupportlocalentrepreneursandworkersinthisnewfield.Ourmissionisclear:WewantNewYorktobethefairestbigcityinAmerica.Ifwegetlegalizationright,marijuanacanbeanimportantnewpartofthesolution.MayorBilldeBlasioCityofNewYork

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Executive Summary 1

A.Introduction 1

B.GuidingPrinciples 2

1.Protectpublichealthandsafetywhileminimizinginteractionswiththecriminaljusticesystem 2

2.Redresspastdisparitiesfromcannabiscriminalization 2

3.Extendeconomicopportunitiestodiverseparticipants 2

4.BalanceneededStateregulationtosetstatewidestandardswithamplelocalgovernmentcontrol 3

C.SummaryofTaskForceRecommendations 3

1.RecommendationstoEstablishState-LevelInfrastructurePairedwithLocalControl 3

2.RecommendationstoLiftBurdensofCriminalizationWhileProtectingPublicHealthandSafety 4

3.RecommendationstoEstablishConsumerProtectionsandProductandInformationTrackingSystems 5

4.RecommendationstoLicenseandRegulatetheCommercialCannabisIndustrytoPromoteEconomicOpportunityandPublicHealthandSafety 5

5.RecommendationstoAffordLocalGovernmentsAuthorityoverLandUseDeterminations 5

6.RecommendationstoSupportAccesstoFinancialResourcesandServices 6

7.RecommendationsforTax-RelatedPolicyandRevenueUse 6

Current Landscape for Cannabis Reform 6

1.CostsofCriminalization 7

2.PublicHealthRisksofLegalization 9

3.LegalizationofAdultCannabisUseinOtherStates 10

4.FederalProhibition 11

5.NewYorkCity-SpecificConsiderationsforCannabisRegulation 13

Recommendations of the Task Force 14

I.RecommendationstoEstablishEffectiveCannabisRegulation 14

1.DevelopEffectiveLocalControltoRegulateAdult-UseCannabis 14

2.ImplementationofCommercialCannabisLegalizationShouldBeCarefullyTimedtoAllowAdvanceStateandLocalPreparation 16

II.RecommendationstoLiftBurdensofCriminalizationWhileProtectingPublicHealthandSafety 16

1.LimitLegalSaleandPossessionofCannabistoAdultsAges21andOver 16

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2.ProvideAutomaticExpungementofPriorCriminalRecordsUponLegalizationofIdenticalConduct 16

3.EstablishParametersforPersonalPossessionofCannabisthatReduceCriminalizationWhileProtectingPublicSafety 20

4.ProhibitPublicConsumptionwithCertainExceptions,andAllowLocalRegulation 22

5.AllowLocalitiestoRestrictorProhibitPersonalCannabisCultivation 23

6.ProhibitUnlicensedandUnregulatedCannabisExtraction 24

7.AllowLocalitiestoEnforceandPlaceLegalLimitationsonCommercialCannabisActivities,SimilartotheState’sAlcoholicBeverageControlLaws 25

8.MaintainProhibitionsAgainstImpairedDriving,andAllocateFundingforResearch,PublicSafetyEducation,andEnforcement 27

9.EliminateCriminalPenaltiesforMinors 28

10.SupportDevelopmentofPreventionandEducationResourcesforYouthandEducators 29

11.SupportDevelopmentofEducationalMaterialsandHarmReductionServicesforAdultCannabisConsumers 30

12.SupportDevelopmentofEducationalMaterialsforHealthCareProfessionals 31

13.EliminateRoutineTestingasaPrerequisitetoSocialServiceBenefitEligibility 31

14.ParentalRightsShouldNotBeImpairedontheBasisofCannabisUseorCultivationUnlessEndangeringtheChild 31

15.EnactMeasurestoPreventEmploymentDiscrimination 32

16.RequireSecurityProgramsforRetailLicensees 33

III.RecommendationstoEstablishStatewideConsumerProtectionsandProductandInformationTrackingSystems 34

1.EstablishProductSafetyGuidelines,IncludingRequirementsforPre-SaleTestingforPotencyandContaminates 34

2.AdoptStandardsforLabelingandPackagingCannabisProducts 35

3.AdoptStandardsforMarketingandAdvertisingCannabisProductsandAllowLocalRegulation 36

4.RequireaTraceableSeed-to-SaleTrackingSystem,withInformationSharingBetweenStateandLocalRegulators 37

5.EstablishanElectronicLicensingManagementSystem,withCoordinationattheStateandLocalLevels 40

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IV.RecommendationstoLicenseandRegulatetheCommercialCannabisIndustrytoPromoteEconomicOpportunityandPublicHealthandSafety 41

1.EstablishaDualLicensingStructurewithBothStateandMunicipalAuthority 41

2.GiveLocalGovernmentsAmpleAuthoritytoPromoteEquityinLicensing–WhichtheCityWouldUsetoPromoteEconomicOpportunities 42

3.EstablishaTieredandCappedLicensingSystem 44

4.LocalitiesShouldControlWhethertoPermitandRegulateOn-SiteConsumptionEstablishments 46

5.LocalitiesShouldControlWhethertoPermitandRegulateLicensedDeliveryBusinesses 47

6.ProhibitVerticalIntegration,withCertainExceptions,ToPromoteEquityOpportunities 47

7.SetInitialLicenseTermstoAllowTimeforaStart-UpProcess 49

8.AllowLimitedLiabilityCompaniestoApplyforLicenses 50

9.AllowCooperativestoParticipateasLicensees 50

10.DesignateLicenseTypesforResearchers,ServiceWorkers,andLimited-PurposeEvents 50

11.AllowOnlySole-PurposeCannabisBusinesses 52

12.GiveNoPreferentialTreatmenttoExistingRegisteredOrganizationsforMedicalCannabis 53

13.ApplicantswithPriorDrug-RelatedConvictionsShouldBeEligibleforLicenses 54

14.ProvideTargetedWorkforceDevelopment 55

V.RecommendationstoAffordLocalGovernmentsAuthorityoverLandUseDeterminations 56

1.LocalitiesShouldHaveAuthoritytoDetermineCannabisUseandAreaRestrictions 56

2.LocalAuthoritytoSetRestrictionsonCannabisBusinessDensity 57

VI.RecommendationstoSupportAccesstoFinancialResourcesandServices 58

1.ToReduceBarrierstoEntryforSmallBusinessOwners,LegislationShouldExpresslyProvidethatBankingandProfessionalServicesforCannabis-RelatedBusinessesDoNotViolateStateLaw 58

2.TheStateDepartmentofFinanceShouldExpandGuidanceonBankingServicesforCannabis-RelatedBusinesses 61

3.TheStateShouldProvide,andPermitLocalitiestoProvide,TechnicalAssistancewithBankingServicesandAccesstoCapitalServices,IncludingaLoanFund,toPromoteEconomicOpportunity 62

4.FosterCity-StateRegulatoryInformationSharing 62

5.ConductaFeasibilityStudywithRespecttoFinancialServicesforCannabisBusinesses 63

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6.EliminateaSuretyBondRequirement 64

VII.RecommendationsforTax-RelatedPolicyandRevenueUse 65

1.LocalAuthoritiesShouldHaveAuthoritytoImposeaSalesTaxonAdult-UseCannabis 65

2.EstablishMechanismstoStudyandSetTaxRates 66

3.ProvideStateandCity-levelDeductionsofBusinessExpensesforCannabis-relatedBusinesses 67

4.MaintainCurrentTaxTreatmentofMedicalUseCannabisUndertheCompassionateCareAct 68

5.NewYorkCityTaxRevenuesShouldBeDepositedandDirectedThroughtheCity 69

6.StateTaxRevenuesShouldBeFairlyDistributedtoLocalGovernments,WhichCanPromoteLocalPriorities 69

Conclusion 70

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Executive Summary

A. Introduction

NewYorkStatemaybepoisedtolegalizenon-medicaladultcannabis1useinthecomingyear,joiningtenotherstatesandtheDistrictofColumbia.ThiscrossroadspresentsNewYorkCitywithuniquechallengesandopportunities. Thesechallenges includeworking tosee that theStatelegislationisbeststructuredtoprotectNewYorkCityresidentsandvisitorstoavoidunwantedconsequencesfromadultlegalization.Thelegislation,andStateandCityregulationsthatfollow,mustdoalltheycantoprotectthehealthandsafetyofNewYorkers.Atthesametime,wehavethe responsibility to use this turning point to help redress the disproportionate harms thatcriminalizationof cannabisusehas caused theCity’s communitiesof color. LegalizationalsoposesuniqueopportunitiestobuildanewindustryinwaysthatadvanceourCity’scommitmentto promote economic opportunities for economically disadvantaged New Yorkers and smallbusinesses.TheStatelegislationshouldforgeapathtoopportunitiesnotforbigcorporationsbut forNewYorkerswhoneed themmost. Ongoing federalcriminalizationofcannabisaddsfurthercomplexitytothesechallenges,perpetuatingpotentialill-consequencesparticularlyfordisadvantagedcommunitieswhilelimitingaccesstofinancial,tax,andotherservicesandbenefitstosupporttheburgeoningindustry.

TohelpcharttheCity’scourseforcannabislegalization,MayorBilldeBlasioconvenedtheTaskForceonCannabisLegalizationwiththechargeofidentifyingthegoalsandchallengesthatshouldguidetheCity’spreparationsforpotentiallegalization.TheTaskForceincludesrepresentativesofCityagenciesthatengageinareasaffectedbycannabislegalization,includingthoseconcernedwithpublichealth,publicsafety,education,economicopportunity,andfinance,amongothers.2

TheTaskForcereviewedtherangeofregulatoryregimesinotherjurisdictionsthathavelegalizedadultcannabisuseandthepracticalexperiencesofthosejurisdictions.ItconductedinterviewswithpublichealthandpublicsafetyofficialsthroughoutthenationandinCanada,andconsultedwithacademicandotherexperts,NewYorkCityofficials,andcommunityorganizations. TaskForcemembersalsoattendedcommunitylisteningsessionsinNewYorkCitytoheartheviewsofNewYorkersontheissuesposedbylegalization.1Theterms“cannabis”,“marijuana”,and“marihuana”areoftenusedinterchangeably.Thisreportprimarilyusestheterm“cannabis”inlight

ofitsdirectreferencetotheplantfromwhichmarijuanaproductsderive.2TheTaskForceiscoordinatedbytheMayor’sOfficeofCriminalJustice.CityagenciesandofficesparticipatingonorconsultedbytheTask

Forceinclude:theAdministrationforChildren’sServices;theBusinessIntegrityCommission;theCityCommissiononHumanRights;theDepartmentofBuildings;theDepartmentofCityPlanning;theDepartmentofConsumerAffairs;theDepartmentofEducation;theDepartmentofFinance;theDepartmentofHealthandMentalHygiene;theDepartmentofHomelessServices;theDepartmentofParksandRecreation;theDepartmentofProbation;theEconomicDevelopmentCorporation;theFireDepartment;theHumanResourcesAdministration;theLawDepartment;theMayor’sOfficeforEconomicOpportunity;theMayor’sOfficeofMinorityandWomen-OwnedBusinessEnterprises;theMayor’sOfficeofOperations;theMayor’sOfficeofPolicyandPlanning;theNewYorkCityHousingAuthority;theNewYorkCityPoliceDepartment;theOfficeoftheDeputyMayorforHealthandHumanServices;theOfficeoftheDeputyMayorforHousingandEconomicDevelopment;theOfficeoftheFirstDeputyMayor;theOfficeofManagementandBudget;theDepartmentofSmallBusinessServices;andothers.ThelawfirmsClearyGottliebSteen&HamiltonLLPandDebevoise&PlimptonprovidedprobonoservicestotheTaskForce.

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Basedonthisresearch,theTaskForcedevelopedthefollowingguidingprinciplesforcannabislegalizationandtherecommendationssummarizedintheExecutiveSummaryanddetailedinthereportbelow.B. Guiding Principles

Theframeworkforlegalizationshouldadvancefouroverarchinggoals.

1. Protect public health and safety while minimizing interactions with the criminal justice system

Legalizationmustallowthegovernment toprotectNewYorkers fromtheadverse impactsofcannabis legalization through robust regulations aimed at ensuring the safety and health ofpeopleinourCity,particularlyyouth.Atthesametime,thenewenforcementregimemustbecarefully tailored to avoid inequitably criminalizing the same communities that have alreadybornethebruntofcannabisandmassincarceration.

2. Redress past disparities from cannabis criminalization

Legalization will bring with it an enforceable obligation to redress the historical harms thatoccurred when cannabis was criminalized. This will require, at minimum, (i) automaticexpungement of cannabis-related convictions, giving people with prior cannabis-relatedconvictionsachancetostartover,freeofthestigmaofcriminalization,and(ii) investmentofcannabisrevenuesdirectlyintocommunitiesmostimpactedbypastcriminalizationinordertoimproveeducation,jobprospects,andoverallqualityoflife.

3. Extend economic opportunities to diverse participants

Legalizationmust promote a diversity of participants in the cannabis industry, assuring thatcommunitiesdisproportionallyaffectedbypastcriminalizationhaveanequitablestake.Thenewindustryshouldbeconstructedtopromoteeconomicempowermentofthosedisproportionatelyharmedbycriminalization,notprofitsforthoseseekingtobenefitfromlegalization. Thiswillrequirepreferentiallicensingopportunities,aswellaslegislativeandprogrammaticsolutionstothe challenges equity applicants will face, including lack of capital, information asymmetry,compliance with changing State and local regulations, and the demands of commercialcompetition with large established businesses. This should also include mandated jobopportunitiesforthosemostimpactedbypastcriminalization.Ongoingfederalcriminalizationof cannabis,withattendantcostsandobstacles for industryparticipants,poseschallenges toadvancingeconomicempowermentforthosewithfewerresources.Achievingtherealityofadiverseindustrywillrequirethoughtfulandintentionalactiontoovercometheseobstacles,sothatpromotingsmallbusinessandjobopportunitiesismorethananemptypromise.

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4. Balance needed State regulation to set statewide standards with ample local government control

Legislation should strike the right balance between State regulation establishing uniformstatewide standards and resources, and local control to chart the course for the diversecommunitiesthroughoutNewYorkthatwillbedirectlyimpactedbylegalization.WhatwillbestservethisCitymaynotmeettheneedsofotherareasoftheState.LocalitiesshouldbegivenbroaddiscretionunderStatelawtodeterminehowtoadvancetheircommunities’publichealth,safety,andequitygoals.AlsocriticalwillbesufficienttimebeforenewStatelawtakeseffectforcarefulplanningandcoordinationbytheStateandCitytoensureasoundfoundationfortheadventoflegalizedcannabis.

NewYorkCitysupportsaregulatoryframeworkforcannabislegalizationthateffectivelyprotectsthehealthandsafetyofallNewYorkers.Criticallyimportantaswellmustbeacommitmenttouse legalization as a platform to redress historic inequities that cannabis criminalization hasproducedincommunitiesofcolor.Anylegalizationregimemustproducenewopportunitiestoredress—notperpetuate—historicdisadvantagessufferedbythesecommunities.

C. Summary of Task Force Recommendations

1. Recommendations to Establish State-Level Infrastructure Paired with Local Control

Strong coordination between the State and local governments will be crucial to building alegalizedadult-usecannabisindustrythatprotectspublichealthandsafetywhileadvancingsocialpolicygoals.CannabisregulationshouldincorporatesubstantiallocalcontrolwithinthecontextofaneffectiveState-levelinfrastructure.ThisstructureofStateandlocalbalancehaspermittedthe City to respond in other contexts to local needs, and in the process adopt policies thatultimatelybecamenationalmodels.Inthecannabislegalizationcontextaswell,localitiesshouldhavethefreedomtochartcoursesthatfittheirdiversecommunities,andadvancelocalpublichealth,safety,andequitygoals.

The Task Force supports creation of a State office to coordinate statewide issues and setstatewide regulations,while permitting local authority in appropriate areas. Local control iscritical todealwithsharplydiffering local imperatives,suchasthose inNewYorkCity,wheresheerpopulationdensitydemandsspecificregulationthattherestoftheStatemaynotrequire.Inparticular, localauthority isessential todeterminewhethertopermitandhowtoregulatedesignated public places of consumption, home cultivation, and consumer delivery services;licensing, location, and regulation of commercial cultivation, production, and retail sites; themost effective public health and safety educational campaigns; and how best to advanceeconomicopportunityandequityimperatives.

Development of a regulatory structure and promulgation of specific regulations should be ameasured process, allowing time for consultation and coordination between the State and

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localities.TheCityhasbenefittedfromlearningfromjurisdictionsthatwerelessdeliberateintheirimplementation,producingpatchworkregulationandmarketsdominatedbybigbusiness.

2. Recommendations to Lift Burdens of Criminalization While Protecting Public Health and Safety

TheCity’spriority for legalization is a robust frameworkaimedatensuringpublichealthandsafety,especiallythatofyoungNewYorkers. Purchaseandpossessionofcannabisshouldbelimited to adults ages 21 andover,while public consumption should beprohibitedunless atlocally-regulated consumption sites. Commercial cannabis activities should be subject torestrictionssimilartothoseappliedinthecontextofalcoholregulation,whileadditionaltoolsformeasuringimpaireddrivingshouldbedevelopedtomaintainroadsafety.

Atthesametime,legalizationshouldseektoredresstheharmsproducedbypriorcriminalization,andavoidcreatingnewpunitivestructuressusceptibletoperpetuatingthedisparatetreatmentofNewYork’sresidentsthatcharacterizedpriorcannabisenforcement.

TheCitywoulddefer to imposingcivil rather thancriminalpenalties toviolationsofcannabisregulationstothegreatestextentpossibleconsistentwithpublicsafety.Balancingpublichealthand safety goals and impeding the illicitmarket on the one hand,with lifting theweight ofcriminalization disproportionately borne by communities of color on the other, should guidelegislativesolutions.

Centraltothesegoalsisautomaticexpungementofpriorcriminalrecordsrelatingtonowlegalconduct,suchasadultpossessionoruseofsmallamountsofcannabis.Bygivingafreshstarttothousands of New Yorkers whose job, education, housing, and other prospects have beensignificantlyburdenedby cannabis-related criminal records,NewYorkwouldbeempoweringthemtolearn,andtoearn,inwayspreviouslybarredtothem.Expungementshouldoccurasanautomatic process—subject to notice and opportunity by District Attorneys’ Offices to raiseobjectionsinspecificcases—tominimizeproceduralburdensonthosewithpastconvictions.

Relatedrecommendationsincludelimitingcannabistestingforjobapplicantswithexceptionsforsafety-sensitivejobs,treatingcannabisconsistentlywithalcoholinchildcustodydeterminations,andeliminatingcriminalpenaltiesforminors.Thesemeasuresareimportanttoensurethatwedonotrecreateasystemthatimposesharmsdisproportionatelybycommunity.

Educationofthepublicandofkeyprofessionalssuchaseducatorsandhealthcareworkersiscritical to ensuring safe cannabis use; some of the resources that adult use legalization canproduceshouldbedirected to theseareas. Other stateshaveexperimentedwitha rangeofapproachestoachievethemosteffectivedeliveryofharmreductioneducation,andNewYorkCitywouldbuildonthoseexperimentstocraftcomprehensiveandpersuasivecampaigns.

Publichealthandsafetyregulationshavealwayshadastronglocalcomponentbecauseofthepracticalneedtomatchgeneralpolicyobjectivestothespecificconditionsthatprevailwhereenforcement is taking place. Overall statewide regulation balanced by local flexibility in

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appropriate areas has been a successful model in tobacco regulation, and it is even morenecessaryintheadult-usecannabiscontext.

3. Recommendations to Establish Consumer Protections and Product and Information Tracking Systems

Regulationwillbecriticaltoestablishingproductsafetyandotherconsumerprotections,aswellastoensurethatcannabiscommerceandregulationcanbeeffectivelytrackedandcoordinatedthroughouttheState.

TheCitywouldbenefitfromstatewidestandardsforproductsafety,labelingandpackaging,andmarketing and advertising, but localities should be allowed to place further restrictions andprohibitionsasnecessary.Topreventcannabisproductsfrommovingbetweenregulatedandillicitmarkets, theCity recommendscreationofastatewidetraceablesupplychainthroughaseed-to-salesystemaccessibletoregulatorsandfinancial institutionsservingcannabis-relatedbusinesses.

4. Recommendations to License and Regulate the Commercial Cannabis Industry to Promote Economic Opportunity and Public Health and Safety

NewYorkCityshoulddevelopalicensingframeworksufficientlyflexibleandpermissivetoallowdevelopmentofthelegalmarketandsuppressionoftheillicitone,whilealsopromotingthewell-beingofallcommunitiesandextendingeconomicopportunitiestothosepreviouslystymiedbycriminalizationanddiscrimination.

Bigbusinessshouldnotgetastrangleholdonthisnewindustry.Licensestooperatethroughthemultiple stages of the cannabis industry should not be granted to single conglomerates;diversificationoflicensingshouldberequiredinstead.Anylicensingregimeshouldhaveatieredandcappedsystem,withlicensesdistributedfairlyamongbusinessesofdifferentsizes.

Localitiesshouldhaveflexibilitytoregulatecommercialcannabisactivities,aswellascultivation,extraction,andpublicconsumption,topermitappropriate integrationofpolicyconcernswithlocalconditionsandcommunitypreferences.

A dual State-local licensing structure will permit the City to pursue its own innovations topromoteeconomicopportunitiescreatedbythisnewmarket,subjecttotheminimumstandardsset by the State. A dual system is a key element in facilitating programs that target selectpopulations in the most need of redress from past harms. Massachusetts, San Francisco,Oakland,andLosAngelesalreadyarestakingoutsimilarprograms.

5. Recommendations to Afford Local Governments Authority over Land Use Determinations

Localities should also have the authority to determine zoning and density restrictions forcannabisbusinesses.TheCityshouldbeempoweredtodeterminehowcannabiscommercecanbestfitintothefabricofitscommunities.

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6. Recommendations to Support Access to Financial Resources and Services

Ongoingfederalcriminalizationofcannabis,whichposesobstaclestoaccessfederally-regulatedbankingandother financial services,wouldbenefit fromspecialState focusandresources toensure that cannabis enterprises—particularly small businesses—have access to financialservices. The City advocates for State legislation expressly providing that banking andprofessionalservicesforcannabis-relatedbusinessesdonotviolateStatelaw.TheCitywouldseekallocationofStatefundingtolocalitiestoprovidetechnicalassistanceandaccesstocapitalthrough locally-administered equity initiatives. Further study and expanded guidance onfinancialservicesforcannabis-relatedbusinesseswouldaidtheemergingindustry.Developingalternativestocash-onlytransactionswillalsodeterpotentialcriminalactivity.

7. Recommendations for Tax-Related Policy and Revenue Use

Theframeworkfortaxinganduseofrevenuesfromlegalcannabis-relatedactivitiesshouldfocusoncoregoalsofcreatingaviablelegalmarketwhilesuppressingtheillicitmarket,promotingonlysafecannabisuse,andbuildingeconomicopportunitiesfordisadvantagedcommunities.

TheCitywillseekauthoritytoestablishanoptionforanadd-onlocalsalestaxonretailsalesofadult-usecannabis.NewYorkCitymustensurethatthetotaltaxburdenimposedoncannabisactivitydoesnotraiselegalcannabispricestoalevelthatincentivizesillicitmarketandillegalcross-bordersales.Atthesametime,thetotaltaxleviedshouldreflectabetterbalancebetweenStateandCitytaxessothattheCityretainsafairerdistributionofrevenuescommensuratewiththeCity’sneedstorespondtopublichealthandsafetychallengesofcannabislegalizationandadvancelocalequityinitiatives.

Tofurtherhelplocalbusinesses,theCityrecommendsthatlocalandStateleveldeductionsforbusiness expenses compensate for the lack of federal deductions. The City will seekestablishmentofnewStatemechanisms,suchasaStateandlocaladvisorybody,tostudyandadjusttaxratesinresponsetoshiftsinthecannabismarket.Finally,nochangeisrecommendedtothetaxtreatmentofmedicalusecannabisundertheNewYorkStateCompassionateCareAct.

TheCitywillpursuethe legislativeauthoritytoallocatetaxrevenue, licensingfees,andothersourcesoffinancingthroughtheCitygeneralfundtoadministerthenewindustryandsupportcannabis businesses and workers, with a focus on target populations and communityreinvestment. Furthermore, the City proposes tax revenues collected at the State level beearmarkedforlocalcommunitiesandfairlydistributedaccordingtolocalpriorities.

Current Landscape for Cannabis Reform

NewYorkStateisactivelyconsideringlegalizationofadultcannabisuse,whichisnowpermittedin 10 states and the District of Columbia. Given legalization in Canada, Vermont, andMassachusetts,aswellasactiveconsiderationofbillsinConnecticutandNewJersey,NewYork

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couldsoonfindlegalizedadult-usecannabisacrossmanyofitsborders.AsrecentlyasNovember2018,acomprehensivebillwasproposedinAlbanyforcannabislegalization(the“2018ProposedBill”).3InaJuly2018report,theNewYorkStateDepartmentofHealthrecommendedlegalizationaswell,basedonsubstantialevidencethatthebenefitsofregulatinganadultcannabismarketoutweighthepotentialrisks.4InAugust2018,GovernorAndrewM.Cuomoannouncedthathesupportslegalization,andhasappointedaworkinggrouptostudytheissue.5AndinDecember2018,theGovernorstatedthatlegalizationwouldbeacentrallegislativepriorityfor2019.

New York CityMayor Bill de Blasio announced in June 2018 and convened in July 2018 theMayor’sTaskForceonCannabisLegalizationtoproposegoalsandchallengestobeconsideredinStatelegislationandtoguidetheCity’spreparationsforpotentiallegalization.

1. Costs of Criminalization

Criminalization of adult cannabis use imposes high costs on society, felt most acutely bycommunitiesofcolor.In2017,approximately599,284peoplewerearrestedintheUnitedStatesfor cannabis possession, accounting formore than a third of all arrests nationwide for drugoffenses.6Despitesimilarusageratesacrossraciallines,7arrestsarepredominantlyofpeopleofcolor.InNewYorkState,86%of2017arrestsstatewideforpossessionofcannabisinthefifthdegreewereofpeopleofcolor.8In2017,ofthe16,925peopleinNewYorkCityarrestedonthecharge of Criminal Possession ofMarihuana in the Fifth Degree, 48%were black, 38%wereHispanic, and 9% were white. 9 Additionally, arrests of Blacks and Hispanics accounted for3ThemostrecentStatecannabisbillwasintroducedinNovember2018astheMarihuanaRegulationandTaxationAct,S.3040-C,A.3506-C.

ThisreportwillreferencetheSenateBill3040-C,whichisidenticaltothebillintroducedintheNewYorkAssemblyasA.3506-C.SenateBill3040-CamendsthebillintroducedinJanuary2018asS.3040-BandthebillintroducedinJanuary2017asS.3040-A. 4SeeN.Y.Dep’tofHealth,AssessmentofthePotentialImpactofRegulatedMarijuanainNewYorkState(July2018)[N.Y.Dep’tofHealth,

AssessmentofthePotentialImpactofRegulatedMarijuanainNewYorkState],https://www.health.ny.gov/regulations/regulated_marijuana/docs/marijuana_legalization_impact_assessment.pdf.5SeePressRelease,Governor’sPressOffice,GovernorCuomoAnnouncesWorkgrouptoDraftLegislationforRegulatedAdult-UseMarijuana

Program(Aug.2,2018),https://www.governor.ny.gov/news/governor-cuomo-announces-workgroup-draft-legislation-regulated-adult-use-marijuana-program;PressRelease,Governor’sPressOffice,GovernorCuomoAnnouncesSeriesofListeningSessionsonRegulatedMarijuana(Aug.30,2018),https://www.governor.ny.gov/news/governor-cuomo-announces-series-listening-sessions-regulated-marijuana;PressRelease,Governor’sPressOffice,GovernorCuomoAnnouncesTwoAdditionalRegulatedMarijuanaListeningSessions(Sept.21,2018),https://www.governor.ny.gov/news/governor-cuomo-announces-two-additional-regulated-marijuana-listening-sessions.6AccordingtotheFederalBureauofInvestigation(“FBI”),1,632,921peoplewerearrestedin2017nationwidefordrugabuseviolations.See

Fed.BureauofInvestigation,Unif.CrimeReportingProgram,2017CrimeintheUnitedStates:Table29,https://ucr.fbi.gov/crime-in-the-u.s/2017/crime-in-the-u.s.-2017/tables/table-29.Ofthesepeople,theFBIreportedthat36.7%—orapproximately599,284—werearrestedformarijuanapossession,comprisingthesinglelargestcohortofpeoplearrestedfordrugabuseviolationsthatyear.SeeFed.BureauofInvestigation,Unif.CrimeReportingProgram,2017CrimeintheUnitedStates:ArrestTable,https://ucr.fbi.gov/crime-in-the-u.s/2017/crime-in-the-u.s.-2017/tables/arrest-table.7SubstanceAbuse&MentalHealthServs.Admin.Ctr.forBehavioralHealthStatisticsandQuality(“SAMHSA”),Resultsfromthe2016National

SurveyonDrugUseandHealth229(Sept.2017)[SAMHSA,ResultsfromtheNationalSurvey],https://www.samhsa.gov/data/sites/default/files/NSDUH-DetTabs-2016/NSDUH-DetTabs-2016.pdf.8Ofthis86%,48%wereBlack,38%wereHispanic,andonly9%wereWhite.SeeN.Y.Dep’tofHealth,AssessmentofthePotentialImpactof

RegulatedMarijuanainNewYorkState,at12.9SeeCyrusR.Vance,Jr.,OfficeoftheManhattanDist.Attorney,Marijuana,FairnessandPublicSafety:AReportontheLegalizationof

RecreationalMarijuanaintheUnitedStates,at31(May2018)[ManhattanDist.Att’y,May2018Report],https://www.manhattanda.org/wp-content/uploads/2018/05/DANY-Report-on-the-Legalization-of-Recreational-Marijuana-Final.pdf.Otherstatisticsinthereportunderlinethevastoverrepresentationofpeopleincolorincannabisarrestnumbers:ForestHills,Queensis16%BlackandLatinx,butpeopleofcolormake

8

between86%and89%ofcannabispossessionarrests ineachof theyears from2013-2017.10Thisdisparateenforcementhasledtopoorereconomicoutcomes,poorerhealthoutcomes,andpooreryouthoutcomesforcommunitiesofcolor.11

In states where adult use is legalized, total numbers of arrests have decreased, resulting insignificantlylowernumbersofpeopleofcolorsufferingcriminaljusticeinteractionsbecauseoftheir cannabis use. Nonetheless, disparate arrest rates for violations of cannabis laws havepersisted in these jurisdictions. In fact, while total numbers of arrests have decreased, theproportionofarrestsforpeopleofcolorhasremainedconstantorevenincreased,indicatingthatsystemic disparities still flourish. 12 No state with cannabis legalization laws has fullydecriminalizedcannabis-relatedoffenses.Thismeansthatindividualswhouse,possess,sell,orpurchasecannabisoutsideofthecannabisregulationsarestillsubjecttoarrest,prosecution,andincarceration,includinginstatesallowingregulatedlegalizeduse.

As discussed in greater detail below, if cannabis is legalized in New York State, the Citywillcontinuetoworktoreducedisparateenforcementofcannabislaws,mitigatepreviousharms,andempowerthosedisproportionatelyaffectedbycriminalenforcement.13

up80%ofarrests;inFlushing,Queens,peopleofcolormakeup19%ofthepopulationand71%ofarrests;Greenpoint,Brooklyn’snumbersare19%and71%;ParkSlope,Brooklynis24%and73%;andWilliamsburg,Brooklynis37%and83%.Id.at32.10

Inthemostrecent10-yearperiod,arrestsinNewYorkCityforopencannabispossessionhitapeakin2011,with51,051arrests,decliningto17,881in2017.Source:Mayor’sOfficeofCriminalJusticeAnalysisofComputerizedCriminalHistoryDataprovidedbyDCJS.11SeeN.Y.Dep’tofHealth,AssessmentofthePotentialImpactofRegulatedMarijuanainNewYorkState,at12.12

Whilearrestratesforcannabispossessionanddistributionhavedecreasedacrosstheboard,thebenefitshavebeenmorepronouncedforWhitepeople.Forinstance,thenumberofcannabisarrestsinitiallyafterlegalizationofcannabisinColoradodecreasedby51%forWhites,33%forHispanics,and25%forAfrican-Americans,andthecannabisarrestrateforAfrican-Americansin2014wasalmostthreetimesthearrestrateofWhitepeople.SeeColo.Dep’tofPub.Safety,MarijuanaLegalizationinColorado:EarlyFindings(Mar.2016),at21,https://cdpsdocs.state.co.us/ors/docs/reports/2016-SB13-283-Rpt.pdf.Coloradocannabisarrestsdecreasedoverallby52%between2012and2017,butthe2017cannabisarrestrateforBlackswasnearlydoublethatforWhites.SeeColo.Div.ofCriminalJustice,Dep’tofPub.Safety,ImpactsofMarijuanaLegalizationinColorado.AReportPursuanttoSenateBill13-2831(Oct.2018),at20,http://cdpsdocs.state.co.us/ors/docs/reports/2018-SB-13-283_report.pdf.Inaddition,whiletherateofjuvenilecannabisarrestsinColoradodecreasedbetween2012and2017by22%,Whitejuvenilearrestsdecreasedby21%,whereasHispanicjuvenilearrestsdecreasedby4%andBlackjuvenilearrestsdecreasedby15%.Seeid.InOregon,thearrestrateforBlackadultswasmorethan50%higherthanthatofWhiteadultsintheyearafterlegalization.SeeOr.HealthAuth.Pub.HealthDiv.,MarijuanaReport:MarijuanaUse,Attitudes,andHealthEffectsinOregon69(Dec.2016),https://apps.state.or.us/Forms/Served/le8509b.pdf.InWashington,D.C.,in2017,92%ofarrestsforcannabisdistributionand75%ofarrestsforcannabisconsumptionwereBlackresidentsinWashingtonD.C.,whocompriseonly47%oftheDistrict’spopulation.SeeDrugPolicyAlliance,StarkRacialDisparitiesandDisturbingGrowthinWashingtonD.C.MarijuanaArrestsDespiteLegalization(Aug.8,2018),http://www.drugpolicy.org/press-release/2018/08/stark-racial-disparities-and-disturbing-growth-washington-dc-marijuana.13

Otherstateshavestartedtoaddresspastharmsaswell.Forexample,Californiarecentlyenactedalawprovidingautomaticexpungementforcertainpreviouscannabisconvictions.SeeCal.Health&SafetyCode§11361.9.Californiahasalsodevelopedanextensiveequityprogramgearedtowardprovidingopportunitytothoseincommunitiesmostnegativelyaffectedbycannabisenforcement.SeeCal.BureauofCannabisControl,OverviewofCaliforniaCannabisEquityPrograms(Feb.2018),https://bcc.ca.gov/about_us/meetings/materials/20180301_equ_overview.pdf;S.1294,2018Leg.,Reg.Sess.(Cal.2018)(creatingastatewidecannabisequityprogramthroughtheCaliforniaCannabisEquityAct).

9

2. Public Health Risks of Legalization

Whilelegalizationhasdemonstratedbenefits,itisnotwithoutpotentialriskstopublichealth.Cannabiscanhavenegativeeffectsonindividualhealthoutcomesifmisused.Thepotentialforhealthharmsduetocannabisuseisgreatestwhenuseoccursatayoungerage.14Inparticular,individualswhoinitiatecannabisuseduringadolescencearemorelikelytoengageinheavyuseor todevelop cannabisusedisorder thanpeoplewho start cannabisuseduringadulthood.15Adults also face some cannabis-related health risks,which are usually associatedwith heavyuse.16

Themajorityofresearchonharmsassociatedwithcannabisuseshowtheseharmsoccurringintheshortterm.Forexample,althoughthereissomeevidencethatcannabisuseisassociatedwithshort-termcognitiveimpairment,17thesecannabis-associatedeffectshavenotbeenshowntopersistovertime.18

For youngpeople,while cannabisusemayonly temporarilydiminish cognitiveandacademicfunction and is not associated with permanent cognitive damage,19 frequent use can haveadverseeffectsonacademicperformanceandeducationalattainmentovertime.20

Whilelong-termcannabissmokingisassociatedwithrespiratorysymptomslikecough,asthma,andbronchitis,21evidenceindicatesthatcannabissmokingmaynotincreaseanindividual’sriskforcancersassociatedwithtobaccouse,includinglung,head,orneckcancers.22

14

SeeDavidM.Fergusson,etal.,CannabisUseandLaterLifeOutcomes,103Addiction969,975(2008).15

SeeNat’lAcad.ofSci.,Eng’g,&Med.(“NASEM”),TheHealthEffectsofCannabisandCannabinoids:TheCurrentStateofEvidenceandRecommendationsforResearch(2017)[NASEM,TheHealthEffectsofCannabisandCannabinoids].16

Forexample,thereisstrongresearchevidenceshowingthatlong-termcannabissmokingcauseschronicrespiratoryproblemsinadultsandthatsmokingcannabiswhilepregnantincreasestheriskoflowerbirthweightsforbabies.Seeid.17

SeeMadeleineH.Meier,etal.,PersistentCannabisUsersShowNeuropsychologicalDeclinefromChildhoodtoMidlife,109PNASE2657(2012);J.C.Scott,etal.,AssociationofCannabisWithCognitiveFunctioninginAdolescentsandYoungAdults:aSystematicReviewandMeta-analysis,75JAMAPsychiatry585(2018)[J.C.Scott,etal.,AssociationofCannabisWithCognitiveFunctioninginAdolescentsandYoungAdults].18

SeeJ.C.Scott,etal.,AssociationofCannabisWithCognitiveFunctioninginAdolescentsandYoungAdults;I.Grant,etal.,Non-acute(Residual)NeurocognitiveEffectsofCannabisUse:AMeta-analyticStudy,9J.Int’lNeuropsychol.Soc’y679(2003);A.M.Schreiner,etal.,ResidualEffectsofCannabisUseonNeurocognitivePerformanceAfterProlongedAbstinence:AMeta-Analysis,20Experimental&ClinicalPsychopharmacology420(2012).19

SeeDustinPardini,UnfazedorDazedandConfused:DoesEarlyAdolescentMarijuanaUseCauseSustainedImpairmentsinAttentionandAcademicFunctioning?,43J.AbnormalChildPsychol.1203(2015).Forresourcesregardinglimitsoneducationalattainmentandexposuretothecriminaljusticesystem,seeAmeliaM.Arria,etal.,TheAcademicConsequencesofMarijuanaUseDuringCollege,29Psychol.ofAddictiveBehav.564(2015)[AmeliaM.Arria,etal.,TheAcademicConsequencesofMarijuanaUseDuringCollege];KerryM.Green,etal.,DoesHeavyAdolescentMarijuanaLeadtoCriminalInvolvementinAdulthood?EvidencefromaMultiwaveLongitudinalStudyofUrbanAfricanAmericans,112Drug&AlcoholDependence117(2010).20

Whileresearchontheassociationbetweencannabisuseandeducationalattainmentremainsscant,atleastonestudyhasfoundthatearlyusemayhaveanadverseimpact.SeeAmeliaM.Arria,etal.,TheAcademicConsequencesofMarijuanaUseDuringCollege.21

SeeNASEM,TheHealthEffectsofCannabisandCannabinoids.22

Seeid.

10

Recent studies show that following legalization in other states, past-month use generallyremainedstableordeclinedamongadolescentsandcollegestudents.23AColoradopollindicatedthatcannabisuseamongteenagershadactuallydippedandthattherateofusebyColoradoteenswas somewhat lower than the national average.24 In New York State, 19.3% of teensreportedusingcannabisintheprior30days.25IntheCity,morethanone-third(33%)ofNewYorkersaged18to25reportedcannabisuse intheprioryear. Morethanone-quarter(26%)aged26to34reportedprioryearuse.26

Asdiscussedbelow,theCitysupportsmeasurestodetercannabisusebyindividualsundertheage of 21, in addition to measures that will mitigate or eliminate legal and academicconsequencesrelatingtocannabisforyoungindividuals.Moreover,theCitysupportslaunchingpublic awareness campaigns relating to cannabisuse,providingharm-reduction services, andimplementingstatewidelabeling,packaging,andadvertisingstandards,sothatconsumerscanmakeinformeddecisionsaboutthesafeuseofcannabis.

3. Legalization of Adult Cannabis Use in Other States

TenstatesandtheDistrictofColumbiahavelegalizedtheuseofcannabisforadults21andolder.Alaska,California,Colorado,Maine,Massachusetts,Michigan,Nevada,Oregon,andWashingtonlegalized the possession, cultivation, distribution, and sale of cannabis, while the District ofColumbiaandVermont legalizedpossessionbutnotcommercialcultivationorsale. ThecleartrendinNewYork’speerandneighboringstatesistowardlegalizationofbothpossessionandsale of cannabis: an adult-use cannabis bill was passed out of legislative committee inConnecticutinApril2018,27abillpassedoutoflegislativecommitteeinNewJerseyinNovember2018,28another bill was introduced in Pennsylvania in September 2018,29and a report wasrecentlyissueddescribingapathwayforlegalizationinNewHampshire.30Inaddition,Canada,withwhichNewYorkStatesharesalongborder,alsorecentlylegalizedadultuseofcannabis.

23

SeeDavidC.R.Kerr,etal.,ChangesinUndergraduates’Marijuana,HeavyAlcoholandCigaretteUseFollowingLegalizationofRecreationalMarijuanaUseinOregon,112Addiction1992(2017)(collegestudents);SAMHSA,NationalSurveyonDrugUseandHeath:Comparisonof2014-2015and2015-2016PopulationPercentages,https://www.samhsa.gov/data/sites/default/files/NSDUHsaeShortTermCHG2016/NSDUHsaeShortTermCHG2016.htm;SAMHSA,ResultsFromthe2016NationalSurvey(Table4.10APastYearInitiationofSubstanceUseamongPersonsAged12orOlderWhoInitiatedUsePriortoAge18,byGender:NumbersinThousands,2015and2016).24

SeeColo.Div.ofCriminalJustice,Dep’tofPub.Safety,ImpactsofMarijuanaLegalizationinColorado.AReportPursuanttoSenateBill13-2835(Oct.2018),http://cdpsdocs.state.co.us/ors/docs/reports/2018-SB-13-283_report.pdf.25

CurrentNewYorkStateratesareclosetonationalaverages.SeeN.Y.C.Dep’tofHealth&MentalHygiene,YouthRiskBehaviorSurvey,Table1d:PrevalenceofMarijuanaUse(Past30Days)AmongYouthintheUnitedStates,NewYorkCity,andNewYorkState,1999-2015,https://www1.nyc.gov/assets/doh/downloads/pdf/basas/youthdrugtrendsmj.pdf.NotethatNewYorkstatisticsarecollectedonlyfrompublicschools,whileU.S.statisticsarecollectedfrombothpublicandprivateschools.26

SAMHSA,NationalSurveyonDrugUseandHealth,2003-2005,2006-2010(revised3/12),and2011-2016. 27

SeeH.5394,Gen.Assemb.,Feb.2018Sess.(Conn.2018).28

SeeS.2703,218thLeg.,Reg.Sess.(N.J.2018).29

SeeH.928,Gen.Assemb.,2017Sess.(Pa.2017).30

SeePatrickAbrami,StateofNewHampshire,FinalReportoftheCommissiontoStudytheLegalization,Regulation,andTaxationofMarijuana(Nov.1,2018),http://mediad.publicbroadcasting.net/p/nhpr/files/201811/PotReport.pdf.

11

Thisunderscorestheimportanceofadeliberateapproachtoensuringsafeuseofcannabisandgenerating economic opportunities for diverse communities to thrive in a competitivemarketplace.

4. Federal Prohibition

Evenasstatelegalizationeffortsarerealized,cannabiscontinuestobeprohibitedunderfederallaw,causingspecialcomplexitiesandhurdlesinlegalizedstates.Cannabishasbeenclassifiedasa Schedule I drugunder federal law sincepassageof theControlled SubstancesAct in 1970,placingcannabisinthesamecategoryasaddictivedrugslikeheroin,whichhasgreaterhealthrisks(includinghighriskoffataloverdose)andisnotpermittedformedicalusesintheUnitedStates.31 Under federal law, doctors are prohibited from prescribing Schedule I drugs, andcriminalpenalties—includingbothfinesandsubstantialprisonsentences—canbeimposedonanyoneconvictedofpossessing,producing,ordistributingthem.32

The federal cannabis prohibition poses significant legal and practical complications injurisdictions that have legalized at the state level. Federal cannabis enforcement has thepotential to severely undermine state efforts to permit cannabis possession, use, anddistribution. Accordingly, states have sought guidance from the federal government aboutwhether and how it will enforce the federal prohibition in states that move towarddecriminalizationandlegalization.

In 2011, Congress passed an appropriations rider forbidding the Justice Department fromspending funds on enforcement againstmedical cannabis in stateswith approved reforms.33UndertheObamaadministration,theDepartmentofJustice,acknowledgingthestates’roleintheenforcementof federal cannabis laws,permitted states toestablish theirown regulatorystructuresto legalizeadultcannabisuse,as longastheyabidedbyeightfederalenforcementpriorities(the“ColeMemo”).34

Theseprioritiesaretoprevent:(i)distributionofcannabistominors;(ii)cannabisrevenuefromfundingcriminalenterprises,gangs,orcartels;(iii)diversionofcannabistootherstates;(iv)useofstate-authorizedactivityasacoverorpretextfortraffickingotherillegaldrugsorforotherillegalactivity; (v)violenceanduseof firearms incultivationanddistributionofcannabis; (vi)druggeddrivingandexacerbationofotheradversepublichealtheffects;(vii)growingcannabis31

See21U.S.C.§801etseq.32

See21U.S.C.§841etseq. Infiscalyear2016,18%ofallfederaldrugsentenceswerecannabis-related,withanaverageprisonsentenceof28months.SeeU.S.Dep’tofJusticeDrugEnf’tAdmin.,2017NationalDrugThreatAssessment114–15(Oct.2017),https://www.dea.gov/sites/default/files/2018-07/DIR-040-17_2017-NDTA.pdf.33

SeeCommerce,Justice,Science,andRelatedAgenciesAppropriationsAct,2016,H.R.2578,amendedbyH.Amend.332,114thCong.(2015)(the“Rohrabacher-FarrAmendment”).Thisamendmentisnotpermanentlawandiscontingentonthecontinuingresolutionsthatfundthefederalgovernment.34

SeeJamesM.Cole,DeputyAttorneyGen.,MemorandumforallUnitedStatesAttorneys:GuidanceRegardingMarijuanaEnforcement,at1-2(Aug.29,2013),https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf.

12

on public lands and attendant public safety and environmental dangers posed by cannabisproductiononpubliclands;and(viii)cannabispossessionoruseonfederalproperty.35

TheColeMemostatesthatthefederalgovernmentwouldoptnottoprosecutemorelocalizedorlower-levelcannabiscasesinjurisdictionswithsomeformofcannabislegalizationsolongastheyhave“implementedstrongandeffectiveregulatoryandenforcementsystemstocontrolthecultivation,distribution,sale,andpossession”ofcannabis.36Thejurisdictionsthathavelegalizedadult-usecannabishavefollowedthisenforcementregime.37

OnJanuary4,2018,thenAttorneyGeneralJeffSessionsreleasedamemorandumforallUnitedStates Attorneys rescinding theObama administration’s cannabis enforcement guidance andleaving enforcement to the prosecutorial discretion of each U.S. Attorney. 38 Despite therescissionoftheColeMemo,thereareindicationsthatfederalenforcementpracticesmaynotchangedramatically.39

Nevertheless, federal criminalization creates unique problems for the cannabis industry inlegalizedstates.Federallycharteredbanksarehesitanttolendtocannabisbusinessesforfearofviolatingfederalanti-money-launderingstatutes.Forcedtorelyoncashtransactions,cannabisbusinessesfaceaddedoperationalandsecuritychallenges.Thepotentialthattheycouldbeusedfor money laundering remains a law enforcement concern. In the tax context, federalcriminalization isalsocostly,as federaldeductions forbusinessexpensesarenotavailable tocannabis companies legal under state law. Employeeswhose income is derived from state-licensed cannabis businesses may face their own challenges in holding bank accounts andobtaining federally-secured mortgages. Moreover, non-citizens convicted of consuming or

35

Seeid.at1-2.36

Seeid.at3.37

Inadditiontothe11jurisdictions(includingWashington,D.C.)thathavelegalizedadult-usecannabistovaryingextents,33statesandD.C.haveapprovedmedicalcannabisprograms.SeeNat’lConferenceofStateLegislatures,StateMedicalMarijuanaLaws(Nov.2018),http://www.ncsl.org/research/health/state-medical-marijuana-laws.aspx.Anotherninehavelegalizedmedicalonlyuse.Ninestates—NewYork,Connecticut,Delaware,Illinois,Maryland,Mississippi,Nebraska,NewHampshire,andRhodeIsland—havedecriminalizedpossessionofsmallamountsofcannabisforadultpersonaluse,butnotfullylegalizedadultpersonaluse.SeeManhattanDist.Att’y,May2018Report,at6.Fourstates(Minnesota,Missouri,NorthCarolina,andOhio)stillclassifycannabisuseasacriminalmisdemeanor,butnolongerpunishwithjailtime.Seeid.at5.38

SeeJeffersonB.Sessions,III,AttorneyGen.,MemorandumforAllUnitedStatesAttorneys:MarijuanaEnforcement(Jan.4,2018),https://www.justice.gov/opa/press-release/file/1022196/download.39

SeeIanStewart&DeanRocco,FederalCannabisLegalizationMayBeCloserThanYouThink,Law360.com(July16,2018),https://www.law360.com/articles/1063280/federal-cannabis-legalization-may-be-closer-than-you-think;AndrewBlake,Sessions:StatesHaveRighttoLegalizePot,butFederalBanShouldStayinPlace,Wash.Times(July27,2018),https://www.washingtontimes.com/news/2018/jul/27/jeff-sessions-says-states-have-right-legalize-mari/(A.G.Sessionsstatementthat“stateshavearighttosettheirownlawsandwilldoso,andwewillfollowthefederallaw”).SeealsoPressRelease,U.S.Attorney’sOffice,StatementfromU.S.AttorneyAndrewLellingRegardingtheLegalizationofRecreationalMarijuanainMassachusetts(July10,2018),https://www.justice.gov/usao-ma/pr/statement-us-attorney-andrew-lelling-regarding-legalization-recreational-marijuana(providingthattheareasoffocusfortheU.S.AttorneyofMassachusettsreflecttheprioritiescontainedintheColeMemo).

13

possessingcannabisinstateswheresuchconductislegalmayfacedeportationbythefederalgovernment.40

5. New York City-Specific Considerations for Cannabis Regulation

EnforcementofcannabispossessionintheCityhasalreadymovedtowarddecriminalization.TheMarijuanaReformActof1977decriminalizedprivatepossessionofsmallamountsofcannabis,withamaximumpenaltyofafineofnomorethan$100.41OnSeptember1,2018,theNewYorkCity Police Department changed its cannabis enforcement policies in recognition that publicsafetydoesnotdemandarrestsforallcannabis-relatedoffenses,42resultinginaprecipitousdropin cannabis arrests. In the five weeks after the New York City Police Department’s newenforcementpolicywent intoeffect,cannabisarrestsdroppedfrombetween266-342arrestsperweek, to between 21-31 arrests perweek for the sameperiod.43 In an effort to reducedisparateoutcomes, theManhattanDistrictAttorney’sOfficeannouncedthatasofAugust1,2018, itwould not prosecute cannabis possession or smoking charges “in the absence of anidentifiable public safety risk,” instead recommending issuance of summonses. Brooklyn’sDistrictAttorney’sOfficehasadoptedasimilarpolicy,decliningtoprosecutemostcasesinvolvingsmallamountsofcannabisandinvitingthoseconvictedtorequestconvictiondismissals.44

However,withrespecttobroader legalization,NewYorkCityhasspecificconcernsthatotherstates and localitiesmay not share. For example,New York City has the highest populationdensityofanymajorU.S.city,withover27,000peoplepersquaremile.45TheCity’spopulationdensitymeansthatcertainpotentialregulations(e.g.,firesafetywithhomegrowth,secondhandsmokeinapartmentbuildingsandCityparks)willimpacttheCitydifferentlythaninotherareaswherelegalizationhasbeenattemptedtodate.46

TheCityhashadadecidedlypositiveexperiencewiththeNewYorkCityCriminalJusticeReformAct(“CJRA”),enactedin2016,whichcreatedcivilenforcementalternativesforcertainlow-level,non-violentoffenses thathadbeensubject tocriminalenforcement, includingarrest, suchashavinganopencontainerofalcohol,littering,publicurination,unreasonablenoise,andviolatingParksDepartmentrules.CJRA’sintentwasto“createmoreproportionalpenalties”foroffenses40

In2013,cannabispossessionwasthefourthmostcommoncauseofdeportationforanyoffense.SeeDrugPolicyAlliance,S.1689,H.R.4815MarijuanaJusticeAct:EndingProhibitionwithaRacialJusticeFocus(Sept.2018),http://www.drugpolicy.org/sites/default/files/mjafactsheet_0.pdf.41

Seeid.at4.42

SeeComm’rJamesO’Neill,N.Y.C.PoliceDep’t,PrepareforFewerPotArrests:ThePoliceCommissionerExplainstheNYPD'sNewApproach(Aug.31,2018),https://www1.nyc.gov/site/nypd/news/s0831/prepare-fewer-pot-arrests-police-commissioner-explains-nypd-s-new-approach43

Source:NYPD.44

SeeManhattanDist.Att’y,May2018Report,at3;AssociatedPress,BrooklynDA’sPlanCouldDismiss20,000MarijuanaConvictions,CBSN.Y.(Sept.7,2018),https://newyork.cbslocal.com/2018/09/07/plan-to-dismiss-marijuana-convictions/.45

SeeN.Y.C.Dep’tofCityPlanning,NewYorkCityPopulation:PopulationFacts,https://www1.nyc.gov/site/planning/data-maps/nyc-population/population-facts.page.46

SanFranciscoistheseconddensestmajorU.S.city,withover18,000peoplepersquaremile.SeeMikeMoffitt,SanFrancisco'sPopulationDensity:AVisualComparison,S.F.Gate(Mar.13,2017),https://www.sfgate.com/news/slideshow/San-Francisco-s-Population-Density-A-visual-142338.php.

14

that had been “over-criminaliz[ed]” and to address criminal justice enforcement that haddisparatelyimpactedcommunitiesofcolor.47InenactingtheCJRA,theCityCouncilalsonotedthat people in these communities had been burdened by the requirement of personal courtappearancesinalmostallcasesandbypermanentcriminalrecordsresultingfromenforcementof these offenses. 48 Between June 2017 and September 2018, criminal court summonsesdropped89%andwarrantsforCJRA-eligibleoffensesdropped94%astheCitymovedtowardenforcementviacivilcourtsummonses49TheCity’sexperiencewithpassingandimplementingthe CJRA informs the City’s vision of how social justice concerns can guide a cannabisenforcement scheme, to appropriately protect public safety while lightening the burdens ofcriminaljusticeinvolvementforcommunitiesofcolor.

Recommendations of the Task Force

I. Recommendations to Establish Effective Cannabis Regulation

1. Develop Effective Local Control to Regulate Adult-Use Cannabis

StrongcooperationbetweentheStateand localgovernments isessential tobuildingasoundlegalized adult-use cannabis industry from the ground up. The City will seek creation of acentralized governing body to coordinate statewide issues and set statewide regulation andsafety standards, but, at the same time, reserve substantial powers to local governments toregulateonawiderangeoflocalissues.50

TheCitywillsupportarobuststateinfrastructuretodevelopandoverseeappropriateState-levelregulation to facilitate safe and stable implementationof legalization. For example, theCitywouldbenefitfromstatewidestandardsforproductsafety,labeling,packaging,marketing,andadvertisingtoensurethesafetyofcannabisproductsofferedforsaleinNewYorkCity.TheCitysupportsaseed-to-saletrackingprogramtotrackmovementofcannabisandcannabisproductsthroughout the distribution chain across the State. In the absence of federal bankingopportunities,CitybusinesseswouldbewellservedbyStateassistancetocoordinateaccesstofinancing.TheCityenvisionsintegratinglocalandStatelicensinginaduallicensingstructurethatcreates opportunity, not red tape. Moreover, the City will seek to partner with the Stateregardingresearchintotheeffectsoflegalizationtoensurecomparabilityofdataacrossregional

47

NewYorkCityCouncil,TheCriminalJusticeReformAct:OneYearLater,https://council.nyc.gov/the-criminal-justice-reform-act-one-year-later/.48

Seeid.49

SeeNewYorkCityMayor’sOfficeofCriminalJustice,SummonsReform:OneYearAfterLegislation(CJRA),https://criminaljustice.cityofnewyork.us/wp-content/uploads/2018/09/summons_ref_factsheet_v3.pdf.50

California,Colorado,andMassachusetts,forexample,eachcoordinatestateandlocaleffortsundercooperativeregimesthatallowforsubstantiallocalinputandcontrolonmattersinvolvinglicensing.SeeCal.Bus.&Prof.Code§§26032(a)(2),26055(d),(g)(2),26200;Colo.Rev.Stat.§44-12-301;Mass.Gen.Lawsch.94G,§3.

15

lines. AndtheCitywillstaunchlyadvocateforliftingburdensofcriminalrecordsforcannabisoffensesattheStatelevel.

But substantial local control will also be critical to meet the needs of the State’s diversecommunities. There isnoone-size-fits-allblueprint for implementingcannabis legalization ineveryNewYorkcommunity. TheCitywillseekauthoritytoregulatethecannabisindustryonlocal issuesandtodevelopinnovativeprogramstailoredtotheneedsoftheCity’spopulationwithoutStatepreemption. Thisconsiderationholdsparticularweight inacity likeNewYork,wherethediversityofitsresidentsandsheerpopulationdensityshoulddrivespecificregulationdistinct from other locales. Areas where local control is particularly key include ensuringeconomic opportunities for small businesses and those burdened with criminal records,developinglicensingprograms,determiningwhetherandhowtoallowpublicconsumptionsites,andregulationofhomeandcommercialcultivationandmanufacturing.

AuthorizinglocalcontrolwouldbeashiftfromNewYork’sexistingAlcoholicBeverageControllaws (“ABC laws”). Under theABC laws,all regulatoryauthority is vestedwitha singleStateagency,theStateLiquorAuthority,whichisnotauthorizedtodelegatepowerstolocalities.Statepreemptiononalcohol-relatedregulatorymattersisexplicit,includingwithrespecttolicensingandenforcement.ThisregulatoryschemeseverelylimitstheabilityofNewYorkCitytorespondtoalcohol-relatedqualityoflifeissuesthatariseatthecommunitylevel,andmakesitdifficultforgovernmenttorespondtothenear-constant innovationsofthealcohol industryandtheirinterplaywithlocaldrinkingtrends.

Municipalitiesdonotfacetheseconstraintsintobaccoregulation,whichdonotpreemptlocalcontrol.Forinstance,NewYorkCityhaspassedandamendedlocallawsto:

i. adapttoshiftingtobaccousenorms,forexample,byexpandingtheSmoke-FreeAirActtoincludeoutdoorspaceslikeparksandbenches;

ii. accountfortheintroductionofnewproductsonthemarket,likee-cigarettes,orthedifferentiationofexistingproducts,suchasflavoredtobacco,thatarefoundtohaverisksforyouth;and

iii. regulateassociatedbusinessesastheyemerge,likeNewYorkCityhookahbars.

Localauthority inthetobaccoarenaallowsNewYorkCitytodeveloptobaccocontrolpoliciesthat respond to theCity’sdistinctneedsand take intoaccount theCity’spopulationdensity,housinglandscape,enforcementcapacity,socialjusticecontext,andepidemiologicdata.TheneteffectisthatlocaltobaccolawsaddressthespecificpublichealthandsafetyconcernsarisinginNewYorkCity.TheCityproposesthatStatelegislationtolegalizeadult-usecannabissimilarlypermits localities to regulate inways thatmeet theuniqueneedsof communitiesacross theState.

Municipalgovernmentsareclosest tograssrootsefforts; localcontrolwouldbestensurethatcommunitiesdisparately affectedbyhistorical criminalizationareengaged in community and

16

context-responsiveprogramming andopportunities post-legalization. TheCitywouldbenefitfromState legislation thatprovides theCity ample leeway tobuild apotential equity licenseprogramtoincreaseaccesstoeconomicopportunityforkeytargetpopulations.

Moreover,toredresspastharmsandpreventfuturehealthhazards,theCitywillseekfundsbedirectedtomunicipalitiestosupportlocalcannabisregulationandenforcementregimes,aswellasinnovations.TheCitywoulduseitslocalauthoritytoensurethatlegalizedcannabiscanbeusedandsoldsafelyintheCity,whiledrivingopportunitiestothosewhoneedthemmost.

2. Implementation of Commercial Cannabis Legalization Should Be Carefully Timed to Allow Advance State and Local Preparation

TheCitymustlearnfromthegrowingpainsofotherjurisdictionsthatwereinthevanguardoflegalization. Weshouldavoidhasty implementationofcommercialcannabis legalization thatresultsinapatchedtogetherregulatorysystemandoutsizedinfluencebyspecialinterestgroups.

Therefore,legalizationshouldtakeeffectonatimetableallowingtheStateandCitytoplanandissue regulations, so that the contours of permissible production and sale are clear beforecommercializationbegins.Thiscanavoidtheconfusionofrapidlychangingregulationandreducebarriers to market entry for equity applicants. It can also allow for public education anddeploymentofCityresourcestoprotectthehealthandsafetyofNewYorkers—particularlyofouryouth.

II. Recommendations to Lift Burdens of Criminalization While Protecting Public Health and Safety

1. Limit Legal Sale and Possession of Cannabis to Adults Ages 21 and Over

Asallotherjurisdictionshavedone,cannabisshouldbelegalizedonlyforadultsage21andover.Possessionanduseofcannabisbypersonsundertheageof21shouldbeprohibited,withlimitedexceptionsrelatingtomedicalcannabis.ThiswouldbeconsistentwiththefederalenforcementguidanceintheColeMemo51andaddresspublicsafetyandhealthconcerns.

2. Provide Automatic Expungement of Prior Criminal Records upon

Legalization of Identical Conduct

TheCitystronglyendorsesState legislationprovidethatcriminalrecords, includingrecordsofarrests and convictions for past cannabis-related conduct that is no longer prohibited, beautomaticallyexpungeduponcannabislegalization,subjecttoanopportunityforprosecutorstoraiseobjectionsinindividualcases.

51

SeeJamesM.Cole,DeputyAttorneyGen.,MemorandumforallUnitedStatesAttorneys:GuidanceRegardingMarijuanaEnforcementat1-2(Aug.29,2013),https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf.

17

Aprimaryimpetusdrivingeffortstolegalizeadultcannabisuse—andaCityimperative—hasbeento address the impact of past criminal enforcement of cannabis prohibitions, particularly oncommunitiesofcolordisproportionatelyaffectedbycannabis-relatedarrestsandincarceration.Asistrueacrossthecountry,anddiscussedabove,African-AmericanandLatinxresidentsinNewYorkCityarearrestedforcannabisoffensesatmuchhigherratesthanwhiteresidents,despitesimilarratesofuse.

Theeconomic,emotional,andotherburdensofcannabis-relatedarrestsandincarcerationaretherefore disproportionately borne by communities of color.52 A criminal record for a pastcannabis-relatedoffensecanhaveadevastatingimpactonanindividual’sfamilyrelationships,employment and educational opportunities, access to student loans and federally-fundedhousing,andotherfacetsoflife.53

Anautomaticprocessforexpungingcriminalrecordsforcannabis-relatedconvictionsforconductnolongercriminalizedoffersthesurestmeanstomitigatealegacyofracialdisparitiesandharmsofpastcannabisenforcement.

Most states that have legalized adult-use cannabis allow an individual to petition forexpungementorsealingofcriminalrecords,resentencingofcertainpastconvictions,orboth.54However,forthevastmajorityofpeoplewithcriminalrecords,thesemeasureshavehadlittlepracticaleffect,giventheconsiderablebarrierstheyfaceinaccessingthisrelief,rangingfrom52

SeeN.Y.Dep’tofHealth,July2018Assessment,at4.53

See,e.g.,AmandaAgan&SonjaB.Starr,TheEffectofCriminalRecordsonAccesstoEmployment,107Am.Econ.Rev.:Papers&Proc.560(2017);OaklandCityCouncil,EquityAnalysisandProposedMedicalCannabisOrdinanceAmendments5(Feb.2017),http://www2.oaklandnet.com/oakca1/groups/cityadministrator/documents/report/oak063627.pdf.54

California,Colorado,Massachusetts,Nevada,Oregon,Vermont,Washington,andtheDistrictofColumbiahavestatutoryprovisionstosealorexpungecriminalrecords.Untilrecently,individualsinCaliforniawithpriormarijuanaconvictionsontheircriminalrecords,includingyouthsunder18,couldpetitionthecourtwheretheywereconvictedtohavepriormarijuanaconvictionsreducedtomisdemeanorsorinfractionsordismissed,nomatterhowoldtheconvictions,atlittletonocost.SeeCal.Health&SafetyCode§11361.8.Coloradoallowsformisdemeanorcannabis-relatedconvictionstobesealed.SeeColo.Rev.Stat.§24-72-710.InMassachusetts,feloniesmaybesealedafter10yearsiftheindividualhasnosubsequentconviction(5yearsformisdemeanors).SeeMass.Gen.Lawsch.276,§100A.InNevada,sealingisavailableafterawaitingperiodof2to10yearsforfelonies(dependingontheoffense)anda1-7yearwaitingperiodformisdemeanors,ifthereisnosubsequentconvictionduringthewaitingperiod.SeeNev.Rev.Stat.§§179.245,179.285,179.301,453.3365.Oregonallowsforlessseriousnon-violentoffensestobesetasideandsealedafterawaitingperiodof1-20yearsiftheindividualhasnootherconvictionfor10years(orever,ifsettingasideaClassBfelony)orarrestwithin3years.SeeOr.Rev.Stat.§137.225.Oregonalsoallowsforfelonycannabis-relatedconvictionstoberesentencedasClassAmisdemeanors.SeeOr.Rev.Stat.§161.705.Vermontallowsforsealingorexpungementofnon-violentmisdemeanorsand4typesofminorfeloniesafter5yearsiftheindividualhasnofurtherconviction;iftheindividualisconvictedofamisdemeanorduringthewaitingperiod,thewaitingperiodincreasestoatleast10years,withnoconvictionintheprevious5years.SeeVt.Stat.Ann.tit.13,§§7601-09.InWashington,allbutthemostseriousfeloniesandmisdemeanorsmaybevacatedandrecordssealedafterawaitingperiodof3-10years.SeeWash.Rev.Code§9.94A.640.TheDistrictofColumbiahasasealingprovisionforselectedmisdemeanorsandasinglefelonyafterawaitingperiodofatleast2years.SeeD.C.Code§§16-803,16-806.Althoughtheyhavenotyetlegalizedadultcannabisuse,MarylandandNewHampshirehavemadeiteasierforpeoplewithcertaincannabis-relatedconvictionstogettheirrecordssealedorexpunged.SeeSophieQuinton,InTheseStates,PastMarijuanaCrimesCanGoAway,PewCharitableTrusts(Nov.20,2017),https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2017/11/20/in-these-states-past-marijuana-crimes-can-go-away.AlthoughAlaskaandMainedonothavegeneralexpungementlaws,alljurisdictionsthathavelegalizedadultcannabisusehavesomesortofsysteminplacetoexpungeorsealjuvenilerecordseitherafterawaitingperiodorwhentheindividualreachestheageofmajority.SeeAlaskaStat.§§47.12.300(c),(e),(f);Cal.Health&SafetyCode§11361.5(a);Colo.Rev.Stat.§19-1-306;Me.Stat.tit.15,§§2251-59,3308;Mass.Gen.Lawsch.276,§100B;Nev.Rev.Stat.§62H.140;Or.Rev.Stat.§§419A.262,419C.610;Vt.Stat.Ann.tit.33,§5119;Wash.Rev.Code§13.50.260;D.C.Code§16-2335(a).

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lackof resources for legal assistance, to lackof awareness that expungement is available, toreluctance to have further interaction with the criminal justice system. These barriers arereflectedinthelownumbersofpetitionfilings.Forexample,accordingtotheOregonJudicialDepartment,anestimated78,000cannabis-relatedconvictionscouldbesetasideinthatstate,butcourtsreceivedonly388suchpetitionsin2015,453in2016,and365asofNovember2017.55California saw only 5,000 petitions submitted from an estimated pool of 218,000 eligibleindividuals.56

Respondingtocriticismthatitsresealingandresentencingsystemsforcannabis-relatedchargeswerelargelyinaccessible,Californiarecentlyenactedastatewideprocessforautomaticsealingandexpungementofpastcannabisconvictions.Underthenewsystem,thestate’sdepartmentofjusticemustreviewitsdatabasetoidentifypotentiallyeligiblepastconvictionsandnotifytheprosecutorintherelevantjurisdiction,whothenhasayeartodeterminewhethertochallengeexpungementbasedonapublicsafetythreat.57Iftheprosecutordoesnotobject,therecordisexpunged.MassachusettsrecentlyenactedlegislationthatallowsforsealingandexpungementofcriminalrecordsforoffensesthatarenolongercriminalizedinthatState,likesimplecannabispossession.58

Earlierthisyear,theSanFranciscoDistrictAttorney’sOfficemovedtoautomaticallyexpungeallcannabis-relatedmisdemeanorconvictionssince1975andtoreviewallcannabis-relatedfeloniesfrom the sameperiod for possible resentencing.59 Seattle, acting through its CityAttorney’s

55

SeeSophieQuinton,InTheseStates,PastMarijuanaCrimesCanGoAway,PewCharitableTrusts(Nov.20,2017),https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2017/11/20/in-these-states-past-marijuana-crimes-can-go-away.56

SeeJudicialCouncilofCal.,CriminalJusticeServs.,Proposition64DataSummaryReport(June2018), http://www.courts.ca.gov/documents/Prop64-Filings.pdf;LindsaySchnell,MarijuanaReform:NewCaliforniaLawGivesPeopleWithRecordsaDo-Over,USAToday(Oct.1,2018),https://www.usatoday.com/story/news/2018/09/30/california-passes-landmark-marijuana-law-residents-reclaim-lives/1340729002/(“TheJudicialCouncilofCaliforniaestimatesatleast218,000residentswouldbenefitfromthenewlaw.”). 57

SeeA.1793,ch.993,2018Assemb.,Reg.Sess.(Cal.2018).SeealsoLindsaySchnell,MarijuanaReform:NewCaliforniaLawGivesPeoplewithRecordsaDo-Over,USAToday(Oct.1,2018),https://www.usatoday.com/story/news/2018/09/30/california-passes-landmark-marijuana-law-residents-reclaim-lives/1340729002/.58

SeeMass.Gen.Lawsch.276,§100A;seealsoMichaelCrowley,MassachusettsSetsanExampleforBipartisanCriminalJusticeReform,BrennanCtr.(May1,2018),https://www.brennancenter.org/blog/massachusetts-sets-example-bipartisan-criminal-justice-reform.59

SeeKatieZezima,SanFranciscotoClearAllMarijuanaMisdemeanorConvictionsDatingto1975,Wash.Post(Jan.31,2018),https://www.washingtonpost.com/news/post-nation/wp/2018/01/31/san-francisco-to-clear-all-marijuana-misdemeanor-convictions-dating-to-1975/?utm_term=.342583aea2a9.TheSanDiegoandAlamedaCountyDistrictAttorneys’officessimilarlybeganindependentlyreviewingallmisdemeanorandfelonycannabisconvictionsintheirjurisdictions,withtheintentiontoexpungeordowngradethem.SeeDavidDebolt,ThousandsofMarijuanaConvictionsCouldbeReduced,TossedOutUnderAlamedaCountyDA’sPlan,E.BayTimes(Feb.20,2018),https://www.eastbaytimes.com/2018/02/20/thousands-of-marijuana-convictions-could-be-reduced-tossed-out-under-alameda-county-das-plan/;JadeHindmon,SanDiegoAttorneysWorktoOverturnMarijuanaConvictions,KPBS(Feb.13,2018),https://www.kpbs.org/news/2018/feb/13/san-diego-attorneys-work-overturn-marijuana-convic/.

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Office, followed suit with similar measures.60 There is also burgeoning federal support forautomaticexpungement.61

Currently,NewYorkState’sCriminalProcedureLawpermitssealingofcriminalrecordsundercertainconditions,includingcompletionofadrugtreatmentprogram,orifanindividualhasnootherconvictionswithina10-yearperiod.62Thesesealingstatutesrequireindividualpetitionsandimposeotherrequirements.63Oncesealed,accesstotheserecordsisseverelyrestricted,andtheunderlyingconvictionis“deemedanullity,”withthesubjectoftherecorddeemedtobe“restored...tothestatushe[orshe]occupiedbeforethearrestandprosecution.”64However,therecordofthesealedarrestandconvictioncontinuestoexist,andNewYorkdoesnotcurrentlypermittheexpungement,orerasure,ofcriminalrecords,meaningthatsealedrecordsremainavailablefordisclosureinresponsetocertainsubpoenasoracourtorder.Inthecaseofviolation-levelcannabisoffenses,nosubpoenaorcourtorderisrequiredfordisclosure—recordsremainpubliclyavailable,evenifotherrelatedrecordsaresealed.65Further,giventhatcannabiswouldremainillegalatthefederalleveleveniflegalizedinNewYorkState,federalauthoritiesmaystillgain access to New Yorkers’ sealed records, which could impact their eligibility for federalbenefits,disqualifypeopleinneedoffederalhousingassistance,andhavenegativeimmigrationconsequences,includingdeportation.

Thegoalsofmitigatingdisparitiesandreducingharmswouldbestbeachievedbyanautomaticexpungementprocessforconductnolongercriminalized,balancedwithnoticeandopportunityforprosecutorstoobjectbasedonspecificthreatstopublicsafety.Anautomaticexpungementprocesswouldensurethatpreviously-convictedindividualscanobtaina“freshstart”withleastburden.

Whilethismethodforexpungingrecordsforpriorcannabisoffensesshouldbeadopted,itshouldalsobeacknowledgedthatconsiderationofpriorcannabis-relatedconvictionsmayberegardedasappropriateundercertaincircumstancesevenforconductnolongercriminal.Forexample,somemayregardsuchpriorconvictionsasrelevanttoassessanindividual’scandidacyasalawenforcementofficerorasalicenseepermittedtoworkwithvulnerablepopulations,scenarios

60

TheSeattleCityAttorney’sOfficehasoptedtovacatemisdemeanorcannabisconvictions.SeeDanielBeekman&ChristineClarridge,SeattletoVacateHundredsofMisdemeanorMarijuanaConvictions,DismissCharges,SeattleTimes(Feb.8,2018),https://www.seattletimes.com/seattle-news/seattle-to-vacate-misdemeanor-marijuana-convictions-dismiss-charges/;seealsoOr.Rev.Stat§137.225(establishingaprocessforsettingasideconvictionsandsealingcriminalrecords).61

ThefederalMarijuanaJusticeActcurrentlypendinginCongressprovidesforautomaticexpungementofconvictionsrelatedtocannabisuseorpossession.SeeMarijuanaJusticeAct,S.1689,115thCong.§C(3)(2017).62

Oneprovision(N.Y.Crim.Proc.Law§160.58)requirespetitioningthecourtandcompletionofadrugtreatmentprogramfordrug-relatedmisdemeanorsorfelonies.Theotherprovision(N.Y.Crim.Proc.Law§160.59)permitspetitioningthecourttosealrecordsiftheindividual(ofanyage)hasbeencrime-freeforatleast10years;therecordhasamaximumoftwoconvictions,onlyoneofwhichisafelony;andtherecordbeingsealedisnotasexoffense,violentfelony,orseriousfelony,aslistedinthestatute.63

Seeid.64

N.Y.Crim.Proc.Law§160.6065

N.Y.Crim.Proc.Law§160.55requiresthesealingofrecordsbypolicedepartmentsandotherlawenforcementagenciesuponaperson’sconvictionofcertainviolationsandtrafficinfractions,includingcannabis-relatedoffenses;however,thelawdoesnotrequirethesealingofcourtrecordsuponsuchconvictions.

20

whereaperson’sabilitytofollowthelawmaybeespeciallycriticaltotheperformanceoftheirresponsibilities. However,onbalance,expungementbetterprotectsagainstunduecollateralconsequences resulting from prior convictions, including in immigration, 66 education, 67 andpublic housing contexts. 68 Accordingly, the City strongly favors legislation that recognizesautomaticexpungementascentraltomitigatingdisparitiesandreducingharmsofpastcannabiscriminalization.3. Establish Parameters for Personal Possession of Cannabis that Reduce

Criminalization While Protecting Public Safety

Legalizationshouldinherentlyencourageconsumerstoparticipateonlyinthelegalmarketwhileavoidingunnecessarilyexposingcannabisuserstocriminal liability. Newcannabisregulationsshouldpermitadultstoconsume,possess,andsharecannabiswithotheradults,astheycanwithalcohol,withoutexposuretocriminalenforcement.Atthesametime,lawenforcementshouldbeallowedthemeanstocontinuetocombatillicitmarketactivity.

Guidedbyitsownexperiencesandthoseofotherlegalizedstates,whichvaryonwhencivilorcriminal penalties apply to violations of cannabis regulations, New York City strongly prefersdeferringtouseofcivilratherthancriminalpenaltiestothegreatestextentpossibleconsistentwithpublicsafety.69TheCitywilladvocateforanapproachthatcriminalizesonlyviolationsofthe regulatory scheme substantially threatening health and safety—such as sustained highvolumetransportandcommercialsaleofunregulatedcannabiscultivatedintheillicitmarket.Strikingtheappropriatebalancebetweenpromotingpublichealthandsafetygoalsandimpedingtheillicitmarketontheonehand,withliftingtheweightofcriminalizationdisproportionatelybornebycommunitiesofcolorontheother,shouldguidepolicymakers.

66

Federallawrenderssomeonedeportableuponconvictionofcontrolledsubstanceconvictions,includingforstateconvictionsoflow-level,non-criminalcannabisoffenses.See8U.S.C.§1227(a)(2)(B)(i).Uponadeterminationthatapersoniseligiblefordeportationonthebasisofsuchconvictions,federallawfurtherrequirestheperson’sautomaticdetentioninfederalcustodypendingadjudicationoftheirimmigrationmatterabsentexerciseoffederaldiscretion.See8U.S.C.§1226(c)(1)(B).Aconsequenceofleavingcriminalrecordsun-expunged—evenifsealed—isthattherecordsremainsubjecttodisclosurebysubpoenaorcourtorder.67

Individualscanlosetheireligibilityforfederalstudentaidasaresultofpriorlow-levelcannabisconvictions.See20U.S.C.§1091(r)(1)(makingindividualsineligibleforoneyearuponafirstoffense,twoyearsuponasecondoffense,andindefinitelyuponathirdoffense).68

Householdsmaybeexcludedfrompublichousingasaresultofaresident’scurrentillegaldruguse,ofwhichlow-levelconvictionsmaybeindicative.See24C.F.R.§960.204(a)(2).69

Ofthejurisdictionsthathavelegalizedcannabisforrecreationaluse,allexceptWashington,D.C.havebothcivilandcriminalpenaltiesforviolationsoftheircannabislaws.Moststateshavecivilpenaltiesforpossessionofamountsofcannabisaboveadefinedthresholdandcriminalpenaltiesforfurnishingcannabistopersonsundertheageof21,whileallstateshavecriminalpenaltiesforoperatingamotorvehicleundertheinfluenceofcannabis.SeeAlaskaStat.§28.35.030(a)(1);Colo.Rev.Stat.§§18-18-406(5)(a)(I),(5)(a)(II);Colo.Rev.Stat.§18-18-406(1)(d);Colo.Rev.Stat.§18-1.3-401.5;Colo.Rev.Stat.Ann.§42-4-1301(1)(a)-(c);Me.Stat.tit.28-B,§1501(1)(A);Me.Stat.tit.29-A,§2411(1-A)(A)(1);Mass.Gen.Lawsch.94G,§§13(e),13(i);Mass.Gen.Lawsch.90,§24;Nev.Stat.484C.110(4),§453D.400(6);Or.Rev.Stat.§475B.337(1);Or.Rev.Stat.§813.010(1);Or.Rev.Stat.§§475B.329(2)(a);Or.Rev.Stat.453D.400(6);Vt.Stat.Ann.tit.18,§4230(a)(1)(A);Vt.Stat.Ann.tit.23,§§1134(a),4230f(a);Wash.Rev.Code§69.50.401;Wash.Rev.Code§79A.60.040;D.C.Code§§48–904.06,50–2206.11.California,Maine,andVermontgofurtheranddifferentiatetheirpenaltiesforminorsunderage18andthosebetween18and21.SeeAlaskaStat.§17.38.020;Cal.Health&SafetyCode§11357;Colo.Const.art.XVIII,§16(1)(a);Me.Stat.tit.28-B,§1501;Me.Stat.tit.22,§2383;Mass.Gen.Lawsch.94G,§§7(a),13(f);NevadaStatewideBallotQuestions2016,Question2,InitiativetoRegulateandTaxMarijuana,Sec.2,http://nvsos.gov/sos/home/showdocument?id=4434;Or.Rev.Stat§§475B.316,475B.337;Vt.Stat.Ann.tit.18,§4230(b);Wash.2013ch.3§1(InitiativeMeasureNo.502,approvedNov.6,2012);D.C.Code§48-904.01.

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Eachstate legalizingadult-usecannabis todatehasmaintainedcriminalpenalties forat leastsomecannabis-relatedconduct,includingillegalsaleanddistribution.70The2018ProposedBill,whichsetsalegalpossessionlimitoftwopoundsofcannabisplantandfourandahalfouncesofconcentratedcannabis,71differs fromapproaches takenby the jurisdictions thathavealreadylegalizedadult-usecannabis,whichsetlowermaximumpossessionamounts,generallyrangingfromoneouncetoonepoundofplant.72

Asindicatedinthesponsor’smemorandumforthe2018ProposedBill,73onerationaleofferedforthisdifferenceisthatsettingpossessionlimitsatrelativelyhighlevelswilladdresstheracialandethnicdisparitiesfromcannabislegalizationandenforcementinstatesthathavepartiallydecriminalizedindividualcannabispossession.Whilepartialdecriminalizationwithlowerlegalpossessionlimitshasreducedoverallarrests,racialdisparitieshavepersistedinallstateswithlegaladult-usecannabis,andhaveevenwidenedinsomejurisdictions.74

Ashiftawayfromcriminalcannabisenforcementwouldhelpreducetheprofoundimpactthatcannabisenforcementhashadonlow-incomeandcommunitiesofcolor,whereenforcementhashistorically been concentrated.75 Resources that would otherwise be dedicated to low-levelcannabis enforcement could be diverted to other public health and safety priorities, and taxrevenuesfromthelegalcannabismarketcouldbeusedtosupportnewinitiativesinpublichealth,employment,andeducation.76Regularsystematicmonitoring,evaluation,andreportingofthe

70

SeeAlaskaStat.§17.38.020etseq.,11.71.010–090,11.71.190,12.55.035;Cal.Health&SafetyCodeDiv.10,ch.6,art.2;Cal.Veh.Code§§23220,23222,23500etseq.;Colo.Rev.Stat.§§18-1.3-401.5,18-1.3-501,18-18-406;Me.Stat.tit.28-B,§602;Me.Stat.tit17-A,§§1102,1105-C,1107-A,1114,1117,1301;Me.Stat.tit.22,§2383;Mass.Gen.Lawschs.90,94C,94G;Nev.Rev.Stat.§§453.011etseq.;Mich.Prop.18-1(2018),https://www.michigan.gov/documents/sos/Full_Text_-_CRMLA_635255_7.pdf;Or.Rev.Stat§475B.005etseq.;Vt.Stat.Ann.tit.18,§4230etseq.;Wash.Rev.Code§§9A.20.021,69.50.401etseq.;D.C.Code§§48-904.01,48-904.06,48-904.07,48-905.02,48-1201,69.50.4013etseq.71

SeeS.3040-C,sec.15.72

PossessionofmorethanoneouncecarriesacriminalpenaltyinAlaska,California,Colorado,Massachusetts,Nevada,Vermont,andWashington.Mainehascriminalpenaltiesforpossessionofmorethantwoandahalfounces.Oregonhascriminalpenaltiesforpossessionofmorethanoneounceinpublicandeightouncesathome.Washington,D.C.criminallypenalizespossessionofmorethantwoounces.Morethanhalfofthestates,includingColorado,Maine,Oregon,Vermont,andWashington,havegraduatedpenaltiesforincreasingamountsofcannabis,andMassachusetts,Nevada,Vermont,andtheDistrictofColumbiaalsoexplicitlyincreasepenaltiesforsubsequentoffenses.SeeAlaskaStat.§§11.71.040,11.71.050,17.38.020;Cal.Health&SafetyCode§11357;Colo.Rev.Stat.§18-18-406(4),(5);Me.Stat.tit.28-B,§1501(1)(B);tit.17-A,§1107-A(1)(F);Mass.Gen.Lawsch.94G§§7(a)(1),13(b);ch.94C§§32C,32E,34;Nev.Rev.Stat.§453.336(4);Or.Rev.Stat475B.337;Vt.Stat.Ann.tit.18,§4230(a);Wash.Rev.Code§§69.50.4013,69.50.4014;D.C.Code§§48-904.01(a)(1)(A),(e)(1);48-904.08.Michigan’sProposal18-1,whichpassedbyvoterreferendumonNovember6,2018,eliminatesanypenalty,civilorcriminal,forpossessionoftwoandahalfouncesofcannabisgenerally,ortenounceswithinaperson’shome.SeeMich.Prop.18-1(2018),https://www.michigan.gov/documents/sos/Full_Text_-_CRMLA_635255_7.pdf.Criminalpenaltiesarereservedeitherformoreseverecannabis-relatedoffenses,likeoperationofamotorvehiclewhileundertheinfluenceofcannabis,orforcertainrepeatoffenses.73

SeeS.3040-B,SponsorMemo(Jan.19,2017),https://www.nysenate.gov/legislation/bills/2017/s3040/amendment/b(“ExistingmarihuanalawshavealsodisproportionatelyimpactedAfrican-AmericanandLatinocommunitiesandcostNewYorkgovernmentsmillionsofdollarseveryyeartoenforce.Theintentofthisactisto...endtheraciallydisparateimpactofexistingmarihuanalawsandcreatenewindustriesandincreaseemployment.”).74

SeeCostsofCriminalizationsectionabove.75

SeeEzekielEdwards,etal.,Am.Civil.LibertiesUnion,TheWaronMarijuanainBlackandWhite4(June2013),https://www.aclu.org/report/report-war-marijuana-black-and-white?redirect=criminal-law-reform/war-marijuana-black-and-white.76

TheNewYorkStateDepartmentofHealthhascitedthepotentialfortaxrevenuetosupport“programinitiativesinareassuchaspublichealth,education,transportation,research,lawenforcement,andworkforcedevelopment.”SeeN.Y.Dep’tofHealth,July2018Assessment,at5.

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impactsoftheselawreformsonracialdisparitiesandthelegalmarketwillbecriticaltoguidefutureregulation,investment,andlawenforcementefforts.

4. Prohibit Public Consumption with Certain Exceptions, and Allow Local Regulation

Likeallotherjurisdictionswithlegalizedcannabis,NewYorkCityproposestoprohibitsmokingand consuming cannabis in public. Exception should be made for consumption at locally-authorized licensed consumption sites, detailed later in the report. Violation of this publicconsumptionbanaloneshouldcarryonlycivil,notcriminal,penalties.

Informedbyconversationswithlawenforcementinotherjurisdictions,includingCaliforniaandColorado,theTaskForceconsideredwhetherthegreaterdeterrenttopublicconsumptionfromacriminalenforcementregimewasdemandedbyharmsfrompublicusage,includingtoqualityoflife.TheTaskForcealsoweighedtheimportantgoaltoremedydisparateimpactssufferedbycommunitiesofcolorfromcannabisenforcement,andconcludedthattheseconcernsoutweighthedeterrentvalueofcriminalenforcementofpublicuseviolations.

Whilealljurisdictionsprohibitpublicconsumption,77eachhasgrappledwithstrikingabalancebetweensocialjusticeandlawenforcementconcernsinsettingpenaltiesforviolations.Amongjurisdictions that impose criminal penalties for offenses involving public consumption ofcannabis,includingAlaska,California,Nevada,Vermont,andtheDistrictofColumbia,onlyD.C.punishes mere public consumption with possible incarceration.78 Alaska, California, Maine,Massachusetts, Michigan, Nevada, andWashington provide only civil penalties, with limitedexceptions in some states when consumption occurs near schools or childcare facilities. 79Cannabislegalizationhasthusgenerallyinvolveddecriminalizationofpublicconsumption,withviolationsofprohibitionsenforcedcivillyratherthancriminally.80

TheNew York State Clean Indoor Act of 200481and the City’s Smoke-Free Air Act of 200282providelocalmodelsforregulationthatcouldeitherbeadoptedorinformfuturedeliberations

77

SeeAlaskaStat.§17.38.040;Cal.Health&SafetyCode§11362.3(a)(1);Colo.Rev.Stat.§18-18-406(5);Me.Stat.tit.28-B§1501(2)(A);Mass.Gen.Lawsch.94G,§13(c);Nev.Rev.Stat.§453D.400(2);Or.Rev.Stat475B.381;Vt.Stat.Ann.tit.18,§4230a(a)(2)(A);Wash.Rev.Code§69.50.445;D.C.Code§48-911.01.78

SeeAlaskaStat.§17.38.040;Cal.Health&SafetyCode§11362.4(a);Colo.Rev.Stat.§18-18-406(5);Me.Stat.tit.28-B,§1501(2)(B);Mass.Gen.Lawsch.94G§13(c);Nev.Rev.Stat.§453D.400(2);Or.Rev.Stat475B.381;Vt.Stat.Ann.tit.18,§4230a(a)(2)(A);Wash.Rev.Code§69.50.445;D.C.Code§48-911.01.79

SeeCal.Health&SafetyCode§11357(d);Mich.Prop.18-1(2018).80

AsnotedintheManhattanDistrictAttorney’sreportoncannabislegalization,evenjurisdictionswithcontinuedcriminalprohibitionsagainstpublicconsumptionrankcannabisenforcementrelativelylowamonglawenforcementpriorities.SeeManhattanDist.Att’y,May2018Report,at11-13.81

SeeN.Y.Pub.HealthLawart.13-E.SeealsoN.Y.Dep’tofHealth,AGuidetotheNewYorkStateCleanIndoorAirAct(May2018),https://www.health.ny.gov/publications/3402/.82

SeeN.Y.C.Dep’tofHealth&MentalHygiene,NewYorkCitySmoke-FreeAirActof2002:ImportantInformationforNewYorkCityBusinessOwnersandEmployers(lastupdatedDec.2006),https://www1.nyc.gov/assets/doh/downloads/pdf/smoke/tc5.pdf.SeealsoN.Y.C.Dep’tofHealthandMentalHygiene,SmokeFreeAirAct–Information,https://www1.nyc.gov/nycbusiness/description/smoke-free-air-act--information.

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onthisissue.83Forexample,asthe2018ProposedBillcontemplates,smokingcannabiscouldbeprohibitedinthesamelocationswheresmokingtobaccoisalreadyprohibited.AndtheCitycouldtreatcannabisburninginpublicasaviolationundertheselocalsmokinglaws.Aligningpenaltiesforpubliccannabisconsumptionwithexistingpenaltiesfortobaccousewouldinturnpromoteequity,astheburdenofenforcementforpublicconsumptionismorelikelytofallonlowincomecommunitiesandcommunitiesofcolor.

5. Allow Localities to Restrict or Prohibit Personal Cannabis Cultivation

The Task Force strongly recommends that local jurisdictions be granted authority to entirelyprohibitor restrictpersonal cannabis cultivation to reduce the riskofunlicensed commercialcultivation,safetyhazards,andaccessbyminors.

Other thanWashington State,84all jurisdictions that have legalized adult cannabis use allowadultstocultivateacertainnumberofcannabisplantsintheirhomes,typicallyaround4-6plantsperpersonand12-18plantsperresidence.85Somejurisdictionshavesetadditionallimitationsonhowplantsmustbesecuredorstoredinthehome,soastolimitaccessbyminors.86

AlthoughWashingtonistheonlystatetocompletelyprohibithomecultivation,others,includingCaliforniaandColorado,87permit localitiesto imposeeitherstricterormorepermissivehomecultivation regimes than otherwise prescribed by state law. These jurisdictions present twomodelsfordelegatingauthoritytolocalitiestoregulateprivatecannabiscultivation.

PersonalcultivationpresentsrisksthatarecauseforcautioninurbanenvironmentssuchasNewYorkCity. Itwouldallow forgrowthanddistributionofunregulatedcannabis, risk increasedexposuretominors,andpotentiallyimpactcannabispricesandfacilitateillicitmarkets.88Italso

83

AwaitedresultsfromtheimplementationofCJRAmayalsoguidetheStateuseofacivilenforcementmodel. 84

CultivationofanyamountofcannabisisaclassCfelonypunishablebyuptofiveyearsinprisonand/ora$10,000fine.Anadditionalmandatoryfineof$1,000appliestoafirstoffenseand$2,000toasecondorsubsequentoffense.SeeWash.Rev.Code§§69.50.401,69.50.430,9A.20.021(marijuanaasaScheduleIdrug).85

Alaska,California,Colorado,Maine,Massachusetts,Nevada,andtheDistrictofColumbiaallowcultivationofuptosixcannabisplants(withnomorethanthreematureones).OregonandVermontallowuptofour.SeeAlaskaStat.§17.38.020;Cal.Health&SafetyCode§11358;Colo.Rev.Stat.§18-18-406(3);Me.Stat.tit.28-B,§1501(1)(E);Me.Stat.tit.17-A,§§1105-D,1117;Mass.Gen.Laws.ch.94G§§7(2),13(e);Nev.Rev.Stat.§453.3393;Or.Rev.Stat§475B.301;Vt.Stat.Ann.tit.18,§4230(a);D.C.Code§48-904.01(a)(1)(C). 86

SeeAlaskaStat.§17.38.030;Colo.Rev.Stat.§18-18-406(3);Me.Stat.tit.28-B,§1502(2);Mass.Gen.Laws.ch.94G,§§13(a),(b);NevadaStatewideBallotQuestions2016,Question2,InitiativetoRegulateandTaxMarijuana,sec.6,http://nvsos.gov/sos/home/showdocument?id=4434;Or.Rev.Stat§475B.306;H.511,2018Gen.Assemb.(Vt.2018). 87

SeeCal.Health&SafetyCode§11362.2(b)(allowinglocalitiestofurtherrestrict,butnotcompletelyprohibit,thepersonalcultivationofcannabis);Colo.Rev.Stat.§18-18-406(3)(allowinglocalitiestodeterminethepermissibilityofresidentialcultivationofcannabis,includinganyapplicablerestrictionsorrequirements,providedsuchcultivationoccurswithin“anenclosedandlockedspace”).88

Wash.StateLiquor&CannabisBd.,RecreationalHomeGrow–LegislativeDirectedStudy7-14(Dec.2017)[Wash.Liquor&CannabisBoard,RecreationalHomeGrow],https://lcb.wa.gov/marj/homegrow-study;Mass.SpecialSenateComm.,ReportoftheSpecialSenateCommitteeonMarijuana59(Mar.2016),https://www.umass.edu/ccc/sites/default/files/Report%20of%20the%20Special%20Senate%20Committee%20on%20Marijuana.PDF;AngelaEykelbosh&LeelaSteiner,Nat’lCollaboratingCtr.forEnvtl.Health,GrowingatHome:HealthandSafetyConcernsforPersonalCannabisCultivation1(2018),http://www.ncceh.ca/sites/default/files/Growing_At_Home_Health_Safety_Personal_Cannabis_Cultivation_Mar_2018.pdf.TheNewYorkStateDepartmentofHealthrecognizesthatprivatecannabiscultivationcouldalsoimpactpotentialtaxrevenuefromlegal-marketcannabis,

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implicatesseveralpublichealthconcerns,especiallyinadenselypopulatedcitywithmultiple-storyandattachedhousing.Indoorcultivationofteninvolvesuseofpesticidesandcancreateanenvironment susceptible to indoormold.89 It requires heavy use ofwater and electricity toreplicate the tropical environment inwhich cannabis natively grows,which can create a firehazard.90 Identifying and addressing illegal home growing operations presents enforcementchallenges.91 For example, verifying that the correct number of plants are being grown andstored in the propermanner poses significant operational difficulties, particularly given thataccesstoaprivatehomeishighlyrestrictedintheabsenceofawarrantsupportedbyevidenceofcriminalwrongdoing.92

Accordingly, localities should be able to restrict or prohibit private or home cultivation tominimizenegativeimpactsonpublichealthandtoensurethattheillicitmarketisnotbolsteredby new sources of unregulated cannabis. Further, allowing localities to setmore restrictivelimitationsonprivatecultivationwouldpermittheCitytoadoptcannabiscontrolmeasuresthatbestmeetitspublicsafety,health,andenforcementneeds.93

6. Prohibit Unlicensed and Unregulated Cannabis Extraction

Ofthestates(plusWashington,D.C.)wherepersonalcultivationofadult-usecannabisislegal,eightrestrictprocessingcannabisforpurposesofpreparingconcentrates,suchashashoilandwax,usedtomakecannabisdabsorothercannabis-infusedproducts.94StatessuchasCaliforniaand Colorado have banned use of hazardous substances in extraction outside of licensed,regulatedenvironments,sinceextractioninvolvingsolvents likebutaneorpropanecancreateexplosiveorignitablemixtures.95Vermontalsoprohibitsunlicensedextractionwithbutaneandhexane.96

Someextractionprocessesdonotinvolvehazardoussubstancesandcanbeaccomplishedwithwaterornon-chemicalextractorslikebutter.Ratherthanacompleteprohibitiononextraction,

revenuethatcouldotherwisebeusedtosupporthealth,research,lawenforcement,andcommunityinvestmentefforts.N.Y.Dep’tofHealth,at21.89

SeeAngelaEykelbosh&LeelaSteiner,Nat’lCollaboratingCtr.forEnvtl.Health,GrowingatHome:HealthandSafetyConcernsforPersonalCannabisCultivation3-4,6(2018),http://www.ncceh.ca/sites/default/files/Growing_At_Home_Health_Safety_Personal_Cannabis_Cultivation_Mar_2018.pdf.90

Seeid.at1.91

SeeMass.SpecialSenateComm.,ReportoftheSpecialSenateCommitteeonMarijuana59(Mar.2016),https://www.umass.edu/ccc/sites/default/files/Report%20of%20the%20Special%20Senate%20Committee%20on%20Marijuana.PDF. 92

Seeid.93

TheManhattanDistrictAttorney’sOfficehasissuedasimilarrecommendation.SeeManhattanDist.Att’y,May2018Report,at28-29.94

SeeAlaskaRev.Stat.tit.8,§8.35.350(A)(1);Cal.Health&SafetyCode§§11357,11362.3(a)(6);Colo.RevStat§18-18-406(2)(a)(1);Mass.Gen.Lawsch94G§2(c);Nev.Rev.Stat.§453D.400(5);Or.Rev.Stat.§§475B.090(c),475B.096;Vt.Stat.Ann.tit.18,§4230i(a);Wash.Rev.Code§69.50.450.Michiganhasyettopassdetailedregulationsdescribingpermissibleusesofpersonallycultivatedmarijuana.SeeMich.HouseFiscalAgency,BriefSummaryofBallotProposal(Oct.2018),https://www.house.mi.gov/hfa/PDF/TestPDF/Ballot_Proposal_2018-1_Marijuana_Initiative.pdf.95

SeeCal.Health&SafetyCode§11362.39(6);Colo.Rev.Stat.§18-18-406(2)(a)(1).96

SeeVt.Stat.Ann.tit.18,§4230h.

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Oregon’scannabislawrequireslicensedcannabisprocessorstomeet“publichealthandsafetystandardsandindustrybestpractices”establishedbytheregulatorybody.97

Consistentwiththesestates’cannabisprocessinglaws,theCityproposesthatNewYorkStateconsiderrestrictingcannabisextractiontolicensedandregulatedenvironmentsasahealthandsafetyprecaution.Unlicensedextractionshouldbeenforcedthrougharegulatoryregimeandtriggercriminalenforcementonly ifhazardoussubstancesareusedandposeaseriousrisktohealthandsafety.Further,anyretailerthatsellsproductsusedincultivationorprocessingofcannabisshouldberequiredtohavesignageinformingcustomersoftherelevantStateandlocallawsonlegalcultivation,processing,andextraction,andtheirrisks.

7. Allow Localities to Enforce and Place Legal Limitations on Commercial Cannabis Activities, Similar to the State’s Alcoholic Beverage Control Laws

TheCityrecommendsthatStatelegislationconsiderimplementationofcannabiscontrollawsforlicensedcommercialenterprisessimilartotheState’sAlcoholicBeverageControllaws.98Basedonpublichealthconsiderations, localitiesshouldbegrantedauthority topermitandregulateretailoutletsandothercannabisbusinesses.

AlljurisdictionsthatpermitretailsaleofcannabishavemadeitillegaltoconductsaleswithoutaState-issued license.99VermontandtheDistrictofColumbiaaremorerestrictive,anddonotpermittheretailsaleofcannabis.Bothjurisdictionsallowpersonalhomecultivationwithoutalegal, licensed cannabis business market.100 In most jurisdictions, unlicensed sales result ingraduatedcriminalpenaltiesbasedontheamountofcannabisintendedfordistribution.101Aspart of the licensed sale and distribution regulatory scheme, each jurisdiction has attachedadditional penalties for distributing cannabis to a minor, and the majority of these statesspecificallypenalizesaleofcannabiswithinacertaindistancefromschoolsand/orotherlocationswherechildrenarelikelytobe.102

97

Or.Rev.Stat.§§475B.090(3),475B.096.98

SeeN.Y.Alco.Bev.Cont.Law§§1-164etseq. 99

SeeAlaskaStat.§§11.71.040,11.71.050;Cal.Health&SafetyCode§11360;Colo.Rev.Stat.§18-18-406(2);Me.Stat.tit.17-A,§1103;Mass.Gen.Lawsch.94C§32E;Nev.Rev.Stat.§453.339;Or.Rev.Stat§475B.346,475B.354;Vt.Stat.Ann.tit.18,§4230(b);Wash.Rev.Code§69.50.401(3);D.C.Code§48-904.01.100

SeeH.511,2018Gen.Assemb.(Vt.2018);D.C.Code§48–904.01(a)(1)(D).TheDistrictofColumbiaisprohibitedbyCongressfromspendingfundstosetupasystemtoregulateortaxthesaleofcannabis.SeeConsolidatedandFurtherContinuingAppropriationsAct,2015,H.R.83,113thCong.§809(2014).101

SeeNewYorkCityCouncil,TheCriminalJusticeReformAct:OneYearLater,https://council.nyc.gov/the-criminal-justice-reform-act-one-year-later/. 102

Forstatesthatimposehigherpenaltiesfordistributingcannabistominors,seeCal.Health&SafetyCode§11361;Colo.Rev.Stat.§18-18-406(1);Me.Stat.tit.17-A,§1105-D;Wash.Rev.Code§69.50.406.Forstatesthatimposebothhigherpenaltiesfordistributingcannabistominorsandhigherpenaltiesfordistributingcannabisnearschools,seeAlaskaStat.§11.71.030;Mass.Gen.Lawsch.94C,§32J;Nev.Rev.Stat.§§453.334,453.3345,453.562,453D.400;Or.Rev.Stat.§§475B.109,475B.211,475B.371;Vt.Stat.Ann.tit.18,§§4230f,4230g;D.C.Code§§48-904.06(b),48-904.07a.

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Theunlicensedsaleofcannabisshouldbeprohibitedtoprotectthelegalmarketandtaxrevenuesaswellasguardconsumersagainstunregulated,unlicensedproducts.Thisprohibition,however,wouldnotextendtocircumstanceswherecannabisissharedamongadultsabsentanexchangeofpayment. As inseveralother jurisdictions,103suchexchanges, includinggiftingof specifiedamountsofcannabis,shouldbeexplicitlypermitted,althoughanydistributiontominorsundertheageof21shouldbeprohibited.However,anygiftingallowanceshouldbepreciselydefinedsoastoprecludeloopholeswherebycannabisisbundledwithsomeotheritemforsalebyanunlicensedseller.

TheCityrecommendsthatpenalties forunlicenseddistributionbeguidedbybalancingpublicwelfareanddeterrencegoalswiththegoaltoredressracialdisparities,withgraduatedcivilandcriminal penalties imposed against unlicensed cannabis sellers, depending on their post-legalization enforcement history and the nature of their unlicensed sales activity. Penaltiesshouldbegraduatedbasedonthequantityofcannabisintendedforsaleordistribution,andthenatureof the sale, includingwhether the salewas toaminor. TheCitybelieves itwouldbebeneficial forState legislation toalsoprovide that thosewhoviolatecriminalprohibitionsonunlicensed sale or distribution would remain eligible for adjournments in contemplation ofdismissal(“ACDs”)toallowfordismissalofthechargeifthedefendantincursnofurtherarrestsor convictionsduring theperiodof theadjournment,which can lastup tooneyear.104 Suchdispositionscouldbemademandatoryforfirstoffensesandremainanoptionforsubsequentoffenses.105UseofACDswouldallowthegovernmenttointerveneasnecessaryagainstunlawfuldistributionofcannabiswhilereducingpenaltiesforthosearrestedforillegalcannabissales.

Inconjunction,NewYorkCitywouldconsiderinitiativesthatpromoteparticipationinthelegalmarket,suchashostingweb-basedanonymousworkshopstoeducateillicitmarketparticipantswhowanttotransitiontothelegalmarket.

Additionally, as with enforcement of alcoholic beverage control laws, the focus of criminalenforcementshouldnotextendtoemployeesofcannabisbusinesses.Giventhatemployeesareoftenuninvolvedinlicensingandotherregulatorycomplianceissues,theymaybeunawareofthe legality of their employer’s business. Accordingly, the City would advise not focusingpenalties on employees of cannabis businesses, and particularly young employeeswith littleknowledgeoftheiremployer’sfailuretocomplywithrelevantlawsandregulations.

103

SeeAlaskaStat.§17.38.020(3);Cal.Health&SafetyCode§11360;Colo.Const.art.XVIII,§16(3)(c);Me.Stat.tit.28-B,§1501;Mass.Gen.Lawsch.94G§7(4);D.C.Code§48-1201.104

N.Y.Crim.Proc.Law§170.56makesACDsavailableforcannabisoffensesandgivesjudgestheoptiontoorderimmediatesealingofthecase;thisisincontrasttoACDsissuedunderN.Y.Crim.Proc.Law§170.55,whicharenotexclusivetoanyparticularoffensebutdonotresultinearlysealingforthedefendant. 105

ThecontinuedavailabilityofACDsunderN.Y.CriminalProcedureLaw§170.56wouldmarkadeparturefromcurrentlaw,whichmakespeopleineligibleformorethanonesuchACD.Nonetheless,allowingindividualstoretaineligibilityforsuchACDsevenafterhavingreceivedpriorACDsunder§170.56wouldgivecourts,uponmotionoftheprosecutor,thediscretiontodeterminewhetherthecircumstancesofparticularcaseswarrantsuchdispositions.ThisallowancewouldbeconsistentwithACDsthatareavailableunderN.Y.Crim.Proc.Law§170.55,whichcanbegrantedirrespectiveofadefendant’spriorreceiptofanACD.

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8. Maintain Prohibitions Against Impaired Driving, and Allocate Funding for Research, Public Safety Education, and Enforcement

TheCitywouldpreferthatStatelegislationmaintainprohibitionsagainstdrivingwhileimpairedby a drug, including cannabis. As the 2018ProposedBill does,106theCitywould favor Statelegislationthatincludescontinuedapplicationofpenaltiesassociatedwithdrivingwhileimpairedbyadrug(“DWAI-Drug”)underNewYork’sVehicleandTrafficLaw,107includingfinesandcriminalpenalties.

Evidence indicatesthat individuals impairedbycannabismayexperienceshort-termcognitiveeffects,108whichmay bemagnified by the concurrent use of alcohol.109 At present, limitedempirical research has been conducted to estimate the potential impact of cannabis use onmotorvehiclecrashes,althoughonestudydemonstratednoassociationbetweennon-medicalcannabislegalizationandmotorvehiclecrashfatalityrates.110Reflectingpublicsafetyconcerns,all jurisdictionsthathavelegalizedadultcannabisimposecivilorcriminalpenaltiesfordrivingwhileimpaired.111Mostalsohavevehicleopencontainerlawsthatapplytothepossessionofcannabisandimposecriminalpenaltiesforsuchoffenses.112

Toprotectpublichealthandsafety,properenforcementofStatelawsalreadyprohibitingdrivingwhile impaired by cannabis will require reassessing tools for determining a driver’s level ofimpairment,givencannabis’schanginglegalstatus.Unlikewithalcohol,impairmentbycannabiscannotbe reliably testedbyanoralbreathalyzer test. Available field testing showsonly thepresenceofcannabis,whichcanremaininaperson’ssystemforweeksatatime,anddoesnotindicatetheconcentrationoramountinone’ssystemtypicallyreliedupontodeterminelevelofintoxicationorimpairmentandarisktoroadsafety,asinthecaseofalcohol.113Inlightoftheevidentiary challenges of enforcing impaired driving prohibitions, the State should allocatefundingforresearchanddevelopmentofreliablemethodsfortestingcannabisimpairment.

106

SeeS.3040-C,sec.25(amending65-E(1)(D)oftheAlcoholicBeverageControlLawtosaythatnothingintheproposedbill“shallbeconstruedtopermitanypersonto...smokeoringestmarihuanaproductswhiledriving,operatingamotorvehicle,boat,vessel,aircraft,orothervehicleusedoftransportation”).107

SeeN.Y.Veh.&Traf.Law§1192(4). 108

SeeJ.C.Scott,etal.,AssociationofCannabisWithCognitiveFunctioninginAdolescentsandYoungAdults.109

G.Li,etal.,RoleofAlcoholandMarijuanaUseintheInitiationofFatalTwo-VehicleCrashes,27AnnalsofEpidemiology342(2017).110

SeeJaysonD.Aydelotte,etal.,CrashFatalityRatesAfterRecreationalMarijuanaLegalizationinWashingtonandColorado,107Am.J.Pub.Health1329(2017). 111

SeeAlaskaStat.§28.35.030;Cal.Veh.Code§23152(f);Colo.Rev.Stat.§42-4-1301;Me.Stat.tit.29-a,§§2401,2411;Mass.Gen.Lawsch.90§24;Nev.Rev.Stat.§484C.110;Or.Rev.Stat.813.010(1)(b)-(c),813.010(3)-(5);Vt.Stat.Ann.tit.23,§134;Vt.Stat.tit.Ann.18,§4230a(2)(A);Wash.Rev.Code§46.61.502;D.C.Code§§50-2206.11,50-2206.13.112

SeeCal.Health&SafetyCode§11362.3(4);Cal.Veh.Code§23222(b);Colo.Rev.Stat.§42-4-1305.5;MassGen.Lawsch.94G,§13(d);Nev.Rev.Stat.§453D.400(2);Vt.Stat.Ann.tit.23,§1134a;Wash.Rev.Code§46.61.745;D.C.Code§48-911.01(a)(2).113

SeeEricBoodman,BreathalyzersandBrainCaps:ResearchersRacetoDeviseaRoadsideTestforDrivingWhileHigh,STATNews(Jan.9,2018),https://www.statnews.com/2018/01/09/marijuana-sobriety-test/;seealsoE.L.Karschner,DoDelta9-TetrahydrocannabinolConcentrationsIndicateRecentUseinChronicCannabisUsers?,104Addiction2041(2009).

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Mostjurisdictionsrequirea“totalityofthecircumstances”approachtodetermineimpairment,whichincludesobservationsfromaDrugRecognitionExpert(“DRE”)trainedtoidentifysignsofdrug impairmentand intoxication.114 InadditiontoobservationsbyaDRE,somejurisdictionsrequireablooddrawtosupportchargesrelatingtoimpairmentorintoxicationbycannabis.115Whileblooddrawshavebeenthestandardforthesecases,116obtainingthemcanbechallenging,astheyrequirebothawarrantandthetestimonyofaphlebotomist.117

Currently, DREs are deployed as part of the City’s traffic enforcement efforts.118 Given thedifficultiesofevaluatingimpairmentandintoxicationbyothermeans,119DREshavebeencrucialin the City’s traffic law enforcement efforts, and would play an important role in the City’senforcementofacannabisregulatoryregime.Inlightofthis,theCityhopesthatStatelegislationwould include budgetary support for expansion, training, and establishment of statewidestandardsforDREs,aswellasfordevelopingmethodstodetermineadriver’slevelofintoxicationandimpairment.Oncecannabisimpairmentisbetterunderstood,theCityencouragesthattheState’s current vehicle and traffic prohibitions and related cannabis impairment penalties berevisitedandreconfiguredasnecessary.

Inparallel, theCitywill seekState support to implementpubliceducationprograms todeterimpaireddrivingundertheinfluenceofcannabis.

9. Eliminate Criminal Penalties for Minors

Responses to underage involvement with cannabis should be individualized and focused onprovisionofeducation,support,andaccesstohealthandsocialservices.TheCitywouldsupportStatelegislationandregulationinthisareathatisguidedbythegoalsof:(i)deterringunderagecannabisuseandattendantpotentialhealthrisks;(ii)minimizingyoungpeople’sexposuretothecriminaljusticesystem;and(iii)reducingdisparatejusticeexposureforcertainpopulations.

WhiletheCitybelievescannabisuseandpossessionshouldbelegalizedonlyforadultsatleast21 years old, the City recommends that those younger should face only civil, not criminal,

114

NewYorkStateofferstheNewYorkStateDrugEvaluationandClassificationProgram,whichcertifieslawenforcementofficersasDREs.Inordertomaintaincertification,DREsmustcompleteanannualrecertificationclassandpassare-certificationexaminationwithagradeofatleast80%.SeeN.Y.StateGovernor’sTrafficSafetyComm.,TheNewYorkStateDrugEvaluationClassification(DEC)Program,http://safeny.ny.gov/DRE/default.htm;seealsoU.S.Dep’tofTransp.,Nat’lHighwayTrafficSafetyAdmin.,ImpactoftheLegalizationandDecriminalizationofMarijuanaontheDWISystem6(June2017),https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/expert_dwi_panel.pdf. 115

SeeColo.Rev.Stat.§42-4-1301(6)(a)(IV);Nev.Rev.Stat.§484C.110;Wash.Rev.Code§46.61.502(1)(b). 116

SeeManhattanDist.Att’y,May2018Report,at23–25. 117

SeeU.S.Dep’tofTransp.,Nat’lHighwayTrafficSafetyAdmin.,ImpactoftheLegalizationandDecriminalizationofMarijuanaontheDWISystem5(June2017),https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/expert_dwi_panel.pdf. 118

SeePressRelease,Governor’sPressOffice,GovernorCuomoAnnouncesNewPublicServiceCampaigntoCombatDruggedDrivinginNewYorkState(Nov.17,2016),https://www.governor.ny.gov/news/governor-cuomo-announces-new-public-service-campaign-combat-drugged-driving-new-york-state;PressRelease,Governor’sTrafficSafetyComm.,GTSC,DMVAndStatewideLawEnforcementAnnounceLatestClassOfDrugRecognitionExperts(Mar.22,2018),https://dmv.ny.gov/press-release/press-release-03-22-2018.119

SeeDavidBlake&JackFinlaw,MarijuanaLegalizationinColorado:LearnedLessons,8Harv.L.&Pol’yRev.359,375–76(2014).

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enforcementofcannabis-relatedoffenses.Consistentwiththe2018ProposedBill,120inwhichsuchoffensesbyyouthages18-21aretreatedlikeunderagedrinkingandenforcedcivilly.UnderNewYork’sAlcoholicBeverageControlLaw,possessionofalcoholbyaminorispunishablebynomorethana$50fine,completionofanalcoholawarenessprogram,orboth.Arrestsforsuchoffensesarespecificallyprohibited.121TheCityfavorsadoptingthismodelofenforcementforminorsinpossessionofcannabis.

The City will instead focus on deterring underage cannabis use by enforcing prohibitionsrestricting licensed businesses from selling tominors, aswell as through the prevention andeducationeffortsdiscussedbelow.

InNew York City, public schools already havemechanisms formanaging violations of schoolpolicyrelatedtocannabisthatdonotinvolvecriminalconsequencesorlostschooltime.122TheCityhopesthatthoseprogramswouldremainconsistentwithStatelawandineffect.

InadditiontomeetingtheCity’sdeterrencegoals,theserecommendationsareconsistentwithprevailingpolicytrendsinNewYorkState.Forexample,theageofcriminalresponsibilityforallcrimesinNewYorkStatewasrecentlyraisedtotheageof17,andwillfurtherincreaseto18onOctober1,2019.Thesemeasureswereundertakenwiththegoalofreducingcrime,recidivism,andcoststotheState,whileadvancingsocialjusticeandcoreprogressivevalues.123Underagecannabisdecriminalizationcomportswiththiscurrentlegalframework,withoutrunningafoulofothersignificantcompetingpolicygoals.

10. Support Development of Prevention and Education Resources for Youth and Educators

Asonemeasuretopreventunderageuseofcannabis,theCityhopesStatelegislationwillprovideforfundinganddevelopmentofpreventionandeducationresources,includingsupportforlocalgovernmentsandorganizationstodevelopandimplementyoutheducationcampaigns.TheCitywould focus campaigns on risks associated with cannabis use and abuse for adolescents,

120

SeeS.3040-C,sec.24. 121

SeeN.Y.Alco.Bev.Cont.Law§65-c. 122

SeePressRelease,Mayor’sPressOffice,MayordeBlasioAnnouncesExpansionofProgramstoKeepStudentsinSchoolandImproveOverallSchoolSafety(Feb.27,2017),https://www1.nyc.gov/office-of-the-mayor/news/115-17/mayor-de-blasio-expansion-programs-keep-students-school-improve-overall;BenChapman,AllCityHighSchoolsWillGiveWarningsforMarijuanaPossession,DisorderlyConduct,N.Y.DailyNews(Aug.10,2018),http://www.nydailynews.com/new-york/education/ny-metro-students-get-warnings-for-weed-disorderly-conduct-20180810-story.html. 123

SeePressRelease,Governor’sPressOffice,GovernorCuomoSignsLegislationRaisingtheAgeofCriminalResponsibilityto18-Years-OldinNewYork(Apr.10,2017),https://www.governor.ny.gov/news/governor-cuomo-signs-legislation-raising-age-criminal-responsibility-18-years-old-new-york.

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includingadversehealthconsequences,limitsoneducationalattainment,andexposuretothecriminaljusticesystem.124

For example, Denver has implemented a youth education and prevention program gearedtowards“‘help[ing]Denver’syouthunderstandthelegal,educational,health,andsocialrisksthatcomefromusingmarijuanaunderage.’”125Denver’sprogramusesmultipleplatforms,includingbillboards, school bus signage, and fence art displayed at local high schools, socialmedia, agameshow,andatriviacardgame.126Inaddition,theprogram’scampaignisinformedbyacity-organizedyouthcommission,youthsurveys,andfocusgroups.127

TheCitywouldrecommendrevenuegeneratedbedirectedtosubstanceuseandabusedisordertreatmentprogramsforyouthandadults.128

Criticallyimportantwillbelocalparticipationtodevelopandimplementtheseprograms.

11. Support Development of Educational Materials and Harm Reduction Services for Adult Cannabis Consumers

Revenue generated from legalizationof cannabis should support adult consumerswithharmreduction services and educationalmaterials. Thesematerials should be developed by localgovernmentunitstoenabletheinformationtobedelivereddirectlytoadultcannabisconsumersvisiting local retail outlets and on-site consumption spaces. The materials should containaccurate,science-basedproductandsafetyinformation.Resourcesshouldalsobededicatedtocannabis education training for employees at retail and on-site consumption spaces tostandardizetheeducationalmaterialsdeliveredatthepointofsale.

Most states with legal cannabis use, including Colorado, 129 Washington, 130 Oregon, 131 andCalifornia,132allocatetaxrevenuetofundsuchpublichealthcampaignsandprogramsforalcohol

124

SeeNASEM,TheHealthEffectsofCannabisandCannabinoids;AmeliaM.Arria,etal.,TheAcademicConsequencesofMarijuanaUseDuringCollege;KerryM.Green,etal.,DoesHeavyAdolescentMarijuanaLeadtoCriminalInvolvementinAdulthood?EvidencefromaMultiwaveLongitudinalStudyofUrbanAfricanAmericans,112Drug&AlcoholDependence117(2010).125

DanRowland,City&Cty.ofDenverDep’tofExcise&Licenses,DenverLaunches“HighCosts”MarijuanaEducationandPreventionCampaignTargetedatCity’sYouth,https://www.colorado.gov/pacific/marijuana/news/denver-launches-%E2%80%9Chigh-costs%E2%80%9D-marijuana-education-and-prevention-campaign-targeted-city%E2%80%99s-yout-0(quotingDenverMayorMichaelHancock).126

Seeid.127

Seeid.128

SeeS.3040-C,sec.51. 129

SeeColo.Rev.Stat.§39-28.8-501(ontheactivitiesrequiredin§25-3.5-1001through§25-3.5-1007). 130

SeeWash.Rev.Code§69.50.540(2)(b)(i)(A).131

SeeOr.Dep’tofRevenue,MarijuanaTaxes(Mar.2018),https://www.oregon.gov/DOR/press/Documents/marijuana_fact_sheet.pdf. 132

SeeAdultUseofMarijuanaAct,2016Cal.Legis.Serv.Prop.64,sec.7§34019(f)(1).

31

anddruguseprevention.Notably,inColorado,astate-fundedpublichealthcampaignaddressinglegalandsafecannabisconsumptionandstoragehasthusfarbeenshowntobeeffective.133

12. Support Development of Educational Materials for Health Care Professionals

Legalization may encourage patients more readily to disclose cannabis use to health careproviders. Asabodyofevidenceemergesaroundthehealthharmsandbenefitsofcannabis,authoritativeandinformativeguidanceandeducationalmaterialsshouldbedeveloped.Providereducationisneededonsuchtopicsasidentificationandtreatmentofcannabisusedisorder,theroleofcannabisinpainmanagementandothermedicalconditions,andpediatriccannabisuse.TheCitywill aim topartnerwith theStateandother localhealthauthorities todevelopanddistribute guidance around best practices for the integration of cannabis in primary care,psychiatric,painmanagement,andsubstanceusetreatmentsettings.

Asanexample,Colorado’sMarijuanaTaxCashFund,whichcollectssalestaxrevenuefromretailandmedicalcannabis,mustspendpartoftherevenueon“healthcare,monitoringhealtheffects,[and]healtheducation.”134

The2018ProposedBillearmarksresourcestodevelopapublichealthcampaignfocusedonthehealth effects of cannabis and legal use. This is a measure supported by the Task Force.Additionally,theCityrecommendsprovidingresourcestoassistmedicalprofessionalsintegratecannabislegalizationintotheirhealthcarepractices.135

13. Eliminate Routine Testing as a Prerequisite to Social Service Benefit Eligibility

The City recommends eliminating policies that require routine testing for cannabis use as aconditionforaccesstosuchbenefitsashousing,medicalcare,childcare,andnutritionorcashassistance.

14. Parental Rights Should Not Be Impaired on the Basis of Cannabis Use or Cultivation Unless Endangering the Child

Asthe2018ProposedBillprovides,childcustodyorvisitationshouldnotbedeniedonthebasisofcannabisuseorcultivationunlessitplacesachildindanger.136Andasthe2018ProposedBillalso provides, no child should be the subject of a child neglect or abuse investigation or

133

SeeAliMaffey,Colo.Dep’tofPub.HealthandEnv’t,2017AnnualReport(Jan.2018),https://www.colorado.gov/pacific/sites/default/files/MJ_RMEP_FinalMJReport17.pdf. 134

Colo.Dep’tofEduc.,MarijuanaTaxRevenueandEducationFactSheet2(June2018),https://www.cde.state.co.us/communications/marijuana-fact-sheet-marijuana-tax-revenue-for-education-after-july-2018.135

SeeS.3040-C,sec.32§99-GG.136

Seeid.,sec.31§195.3.

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proceeding based solely on a parent’s alleged use of cannabis.137 Likewise, cannabis use orcultivationshouldnotgenerateapresumptionofchildneglectorendangerment.138Norshoulda positive cannabis test in and of itself equate automatically to a compelling measure ofmaltreatmentinthecontextofchildwelfare,particularlygiventhatcannabiscanbedetectedinaperson’sbodyforseveralweeksafterasingleingestion.

Nonetheless, theCity recommends that cannabisbedefinedasequivalent toa “drug” in theFamilyCourtActinordertoremainwithintheambitofsubstancesthatcanleadtoinvestigationorsupervisionofparentsifachildisendangeredbyparentaluse,evenifthecannabisuseisnotcriminalizedattheStatelevel.Ineffect,cannabisuseshouldbetreatedthesameasalcoholuseinthecontextofchildcustody.

Inlinewiththeseprinciples,Massachusettshasexplicitlylegislatedthataperson’scannabisuse,cultivation,orcommercialactivitycannotjustifyimpairingparentalrightsintheabsenceofclearandconvincingevidenceofunreasonabledangertothechild.139Courtsinotherstatesthathavelegalizedmedicalandadult-usecannabishavesimilarlyissueddecisionsestablishingguidelinesforwhencannabiscanbeafactorindeterminingparentalfitness.Forinstance,inColorado,anappealscourtheldthatwhereaparent’suseofmedicalcannabisdoesnotpresent“athreattothe physical and emotional health and safety of the child, or otherwise suggest[] any risk ofharm,”suchuse“cannotsupport[a]trialcourt’srestrictionon[theparent’s]parentingtime.”140InWashingtonState,anappealscourtheldthattrialcourtshavediscretiontorequiresupervisedvisitationwhereevidenceshowsthataparent’susehasdetrimentaleffectsonchildren.141

15. Enact Measures to Prevent Employment Discrimination

The City strongly favors prohibiting private and public employers from denying employmentsolelyonthebasisofapositivecannabisdrugtestorpriorcannabisarrestsorconvictions.Inaddition,pre-employmentandrandomdrugtestingforcannabisshouldbeprohibitedforpublicemployeesandindividualsundergovernmentsupervision(i.e.,individualsonprobation).Asanexception,theCityproposespermittingcannabistestingforsafety-sensitivejobsorwhenthereisevidenceofimpairmentaffectingsafetyortheabilitytoperformthejob,orwhererequiredunderfederallaw.

Thisrecommendationcomportswiththe2018ProposedBill,whichwouldmakeunlawfulforanemployertotakeadverseemploymentactionbasedonlyonapositivedrugtestforcannabis.142Anemployer,may,however,considertheabilitytoperformtheemployee’sjobabilitieswhile

137

Seeid.sec.2.138

Seeid.139

SeeMass.Gen.Lawsch.94G,§7(d).140

InreMarriageofParr,240P.3d509,512(Colo.App.2010).141

SeeInreMarriageofWieldraayer,147Wash.App.1048(2008).142

SeeS.3040-Csec.31§196.

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impairedwhentheemployeemanifestsspecificarticulablesymptomswhileworking.143Similartoalcohol,employerscantakeadverseactionagainstemployeeswhouseintoxicatingsubstancesduringworkhours.144

Maine has similarly legislated revision of employer drug testing policies. Employers areprohibited fromrefusing tohire jobapplicantson thebasisofapositivecannabis testalone.Employers can still discipline employees who are “under the influence of marijuana in theworkplace or while otherwise engaged in activities within the course and scope of theiremployment.”145

TheCitywillneedtoevaluateadditionalworkforceconsiderations, includingdrugtestingandcriminaljusticerecordreviewbyemployers.Employmentregulationsshouldreflectsubstantiallysimilarpracticesasthoseprovidedfortheon-dutyoroff-dutyuseofalcohol.Jobseekersshouldnotbediscriminatedagainst inhiringbasedonpriorarrestor conviction for cannabisuseorcurrentlawfulconsumptionofcannabiswhileoff-dutyorasprescribedbyamedicalprofessional.

16. Require Security Programs for Retail Licensees

Commerciallicenseesshouldberequiredtohavesecurityprogramsinplace.Otherjurisdictionshavetakensimilarstepstoavoidcrimeassociatedwithlegalizedadult-usecannabiscommercialactivityanditsrelianceoncashtransactions.146Specificprogramrequirementsshouldbefleshedoutindetailduringlocallicensingandrulemakingprocesses,butcouldincludefeaturessuchascameras,safes,protocolsforsafetransportofproductandcash,andappropriateprofessionalorregulatoryqualificationsforsecurityguards.

143

Seeid.144

Seeid.sec.31§196.3.145

Me.Rev.Stat.tit.28-B,§112(3).146

SeeL.A.Cty.AdvisoryWorkingGrp.onCannabisRegulation,MeetingFour:CannabisRetailers10(Aug.2017),http://cannabis.lacounty.gov/wp-content/uploads/2017/08/Preparation-packet-Advisory-Working-Group-Week-Four-Retailers_FINA....pdf(notingtheimportanceofsecuritymeasuresincludingalarmsystemsandvideosurveillanceforretailoperationsbecauseoftherelativelyhighvalueofcannabisanduseofcashformostpurchases);JonathanRaskin,CannabisCountry:MarijuanaMadnessandSomeSanity,Too,SonomaW.Times&News(Mar.28,2018),http://www.sonomawest.com/cloverdale_reveille/opinion/columns/cannabis-country-marijuana-madness-and-some-sanity-too/article_350a52cc-32b7-11e8-86d4-9fac15c0ef33.html(notingcrimesuchasrobberiesinSonomaCounty,outsideofSanFrancisco,andsecuritymeasuresdispensarieshavetaken);cf.AngelaDills,etal.,DoseofReality:TheEffectofStateMarijuanaLegalizations14-16,CatoInst.(Sept.16,2016),https://www.cato.org/publications/policy-analysis/dose-reality-effect-state-marijuana-legalizations(findingnomeasurableincreaseinviolentcrimeorpropertycrimeinDenver,Colorado,Seattle,Washington,orPortland,Oregonintheimmediateaftermathofcannabislegalization);DavideDragone,etal.,CrimeandtheLegalizationofRecreationalMarijuana,10522IZAInst.L.Econ.12(Jan.2017),http://ftp.iza.org/dp10522.pdf(findingthatlegalizationofcannabisisassociatedwithadecreaseincrime).

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III. Recommendations to Establish Statewide Consumer Protections and Product and Information Tracking Systems

1. Establish Product Safety Guidelines, Including Requirements for Pre-Sale Testing for Potency and Contaminates

Theabsenceoffederalsafetyguidelinesandenforcementrelatingtolegalizedcannabisleavesalargevoid,makingcoordinatedStateandCitymeasurescriticallyimportant.Becausecannabisremainsaprohibitedcontrolledsubstanceunderfederallaw,nooversightofcannabisproductsisprovidedbytheU.S.DepartmentofAgriculture,theFoodandDrugAdministration(“FDA”),and other agencies responsible for monitoring compliance with federal laws that ensureconsumableproductsaresafe,sanitary,andproperlylabeledforhumanconsumption.

Consistentwiththepracticesofallstatesthathavelegalizedcannabissales,147theCitywouldsupportstatewideproductsafetyregulationsthat include,atminimum,specificstandards forpre-sale testing for potency and growing contaminants such as pesticides. 148 The CityrecommendsthatfoodsafetyprotocolsshouldalsobeestablishedattheStateleveltoensuresafe product distribution and delivery. Additionally, it would be prudent to allow for theseregulationstoberevisedovertimeasproductsandmarketsevolve.

Cityregulatoryagencieswouldbeencouragedtoeducatesmallbusinessownersoncompliancetomeetthedualgoalsofsupportingequitablebusinessdevelopmentwhilealsoensuringthehealthand safetyofNewYorkers. New regulatory changes shouldbe rolledoutwitha cureperiodtoallowbusinessestoadapttonewrequirements. Finally,regulatoryagenciesshouldcoordinate inspections in order to facilitate efficient review for both localities and businessowners.

TheCityproposesthatminimumstandardsbeestablishedattheStatelevel,andthatauthoritybedelegatedtolocalitiestoplacefurtherrestrictionsandprohibitionsasnecessary.Forexample,the City would have authority to restrict the diversity of cannabis products available in themarketplace.Theimpactoflocalcontrolinthecontextoftobaccoregulationhelpsdemonstratewhy.AfterNewYorkCitybannedthesaleofflavoredtobaccoproductscitywidetoreduceyouthtobaccouse,teenswere28%lesslikelytouseanytobaccoproduct.149

Inaddition,theCityseekstheauthoritytobanthesaleofproductsthatcombinecannabiswithothersubstances,likealcoholandcaffeine.PublichealthexpertsinCaliforniaadvisedthatNew

147

See,e.g.,AlaskaAdmin.Codetit.3,§§306.525,306.735;Cal.Bus.&Prof.Code§26110;Colo.CodeRegs.§§212-2.1001-1,212-2.1115;Me.Stat.tit.28-b,§602;935Mass.CodeRegs.500.105;Nev.Rev.Stat.§453D.300;Or.Admin.R.845-025-5700,5760;Vt.Stat.Ann.tit.18,§4474e;Wash.Admin.Code§§314-55-095,108. 148

PotencyisprimarilydeterminedbytheamountofTHC,thepsychoactivecompoundincannabis,presentinaproduct.SeeGenevieveLafaye,etal.,Cannabis,Cannabinoids,andHealth,19DialoguesClinicalNeuroscience309(2017).149

SeeShannonM.Farleyetal.,NewYorkCityFlavouredTobaccoProductSalesBanEvaluation,26TobaccoControl78(2017).

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Yorkconsidersuchaban.150While there is little researchonthehealtheffectsofcombiningcannabiswithalcoholandcaffeine,thereisaconcernaboutthehealthimpactofsimultaneoususebecauseofpotentialdruginteractions.151

Lastly,theCityrequestsauthoritytocappotencyincannabisproductsshoulditbenecessaryforpublichealthpurposes.

TheCityintendstopromulgaterulesandregulationsabovethestatewideminimumstandards.Thiswould includepromulgationofguidelinesgoverningcannabisproducers,processors,andretailers, including: (1)methodsofproducing,processing,andpackagingcannabis, cannabis-infusedproducts,andconcentratedcannabis;(2)conditionsofsanitation;and(3)standardsofingredients andquality and identity of cannabis products produced, processed, packaged, orsold.

2. Adopt Standards for Labeling and Packaging Cannabis Products

Topromotesaferconsumptionofcannabis, theCityrecommendsestablishmentofstatewidelabelingandpackagingstandards,including,ataminimum,requirementsthatallproductshavelabels: (1)containingastatewidestandardwarning; (2)clearly indicatingpotency, suggesteddose,andpossiblesideeffects;and(3)foredibleproducts,stampedattheservinglevelwithauniversally recognizable cannabis symbol. Cannabis packaging should also be child-resistant,tamper-evident(i.e.,containoneormoreindicatorsorbarrierstoentry),opaque,andnotincludeimagesandcolorsdesignedtoappealtochildren.Thelabelingandpackagingrequirementsareintendedtosupportandencouragethesafeuseofcannabisbyadults,whocanmakeinformeddecisions when they know what they are consuming and whether it is a tested product.Regulatingimageryanddesignservesthegoalofreducingcannabisproducts’appealtochildren.TheCitywillbevigilanttopreventmarketingtochildren.

The2018ProposedBillrequiresthatproductsbesoldinsealedcontainerspackagedaccordingtoguidelinessetbytheCannabisBureau,152andthatthepackagingmustprovideadequateinformationaboutthequalityoftheproduct,153manufacturingdetails,154ingredientsandnutritioninformation,155andallergenwarnings.156Packagingisrequiredtobechild-resistant,

150

DiscussionwithLynnSilver,MD,MPH,FAAP,DirectorofGettingitRightFromtheStart,N.Y.C.Dep’tofHealth&MentalHygiene(Oct.2018).151

Researchonimpaireddrivingsuggeststhatalcoholmaycompoundtherisksofexperiencingafatalcrashforadriverwhoisalsoimpairedbyotherdrugs.SeeG.Li,etal.,DrugUseandFatalMotorVehicleCrashes:ACase-ControlStudy,60AccidentAnalysis&Prevention205(2013).152

SeeS.3040-C,sec.31§§175(1),176(2),177(4). 153

Seeid.sec.31§§181(2),181(4). 154

Seeid.sec.31§181(5). 155

See,e.g.,id.sec.31§§180(5),180(7). 156

See,e.g.,id.sec.31§181(5).

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notappealingtochildren,re-sealable,andplacedinseparatepackagingattheservingsizelevel.157TheBillalsobansdeceptivelabelingpractices.158

Otherstateshaveundertakensimilareffortstopromotesafeconsumptionofcannabisthroughstatewidestandards.159California,inadditiontoadoptingregulationssimilartothoserecommendedhere,alsorequiresthatlabelsoncannabisproductscontain:(1)instructionsforuse;(2)theingredientlist;(3)auniqueidentificationnumber;and(4)thedateandsourceofcultivation,manufacturing,andprocessing.160Otherstateshavealsoadoptedanarrayofregulationsonlabelingandpackaging.Forexample,inWashingtonState,packagingforliquidproductsmustincludeanaccuratemeasuringdevice.161InMassachusetts,labelsmustincludeadisclaimerthattheproductisnotFDAtested.162InAlaska,labelsmaynotcontainanyprintedimages,163andinNevada,labelsmaynotcontainspecificimagerysuchasoffruit.164

3. Adopt Standards for Marketing and Advertising Cannabis Products and Allow Local Regulation

Inaccordwiththemajorityofstateswithlegalcannabissales,165theCityfavorsabanonoutdooradvertisements for cannabis products, including on storefronts and public property. Whereregulations aremore lenient, exposure to cannabis advertising is likely to be prevalent. Forexample, a study from Oregon, where retailers can advertise their products on signs andbillboards,166foundthatexposuretocannabisadvertisingiswidespreadamongadults,withoverhalfofstateresidentsexposedtoadvertisinginaone-monthperiod.167

Generally, theCitybelievescannabisadvertising restrictions shouldbealignedwith those foralcohol,butshouldalso,fromtheoutset,prohibitcannabisadvertisingontransportation,publicproperty,andneartreatmentfacilities.Publichealtheffortshaveattemptedtoprecludealcoholadvertisingfromtheselocationsbasedontheresearchonexposuretoyouthandyouthuserates.TheCitywouldalsoprohibitanycannabiseventsponsorshipwithoutanappropriatelicense.

157

Seeid.sec.31§§179(3),180(2). 158

Seeid.sec.31§§179(3),181(2). 159

See,e.g.,Wash.Admin.Code§314-55-105;Colo.CodeRegs.§212-2.1004.160

SeeCal.Dep’tofPub.Health,PackagingandLabelingFAQs(lastupdatedJan.20,2018),https://www.cdph.ca.gov/Programs/CEH/DFDCS/MCSB/Pages/PackagingandLabelingFAQs.aspx. 161

SeeWash.Admin.Code§314-55-105. 162

See935Mass.CodeRegs§500.105(4)(a)(6). 163

SeeAlaskaAdmin.Codetit.3,§306.470. 164

SeeNev.Rev.Stat.§453D.310. 165

See,e.g.,Colo.CodeRegs.§212-2.1111;Wash.Admin.Code§314-55-155. 166

See,e.g.,Or.Admin.R.845-025-8060. 167

SeeStevenC.Fiala,etal.,ExposuretoMarijuanaMarketingAfterLegalizationofRetailSales:Oregonians'Experiences,2015-2016,108Am.J.Pub.Health120(2018).

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Additionally, clear display of accurate health and safety information in all marketing andadvertisementmaterialsshouldberequired.Manyjurisdictionswithlegalsaleshaveregulationsprohibiting falseormisleadingclaimsaboutcannabisproducts.168Forexample,Colorado lawbans language “that asserts its products are safe because they are regulated by the StateLicensingAuthority,”169andallowsmunicipalitiestoaddadditionallanguagerestrictions.170

Localities should be allowed to enact additional regulatory standards for marketing andadvertising,includingonlineandelectronicmarketingandadvertising.Manylocalitiesinstateswith legalizationrequire, forexample, thatadvertisements includewarningstatementsaboutpotentialhealthandsafetyrisksandprohibitcontentthatspecificallytargetsorwouldappealtopeopleunder21.171Californiaisonesuchstate,requiringthatbeforeany“direct,individualizedcommunication or dialogue” by a cannabis business, the business must confirm that theindividual is 21 years or older through user confirmation, birth date disclosure, or anothermethod.172

The2018ProposedBillprohibitsinteriororexteriorsignageforcannabisadvertisingpurposes,173

butissilentwithrespecttotheauthorityofalocalitytoenactadditionalregulatorystandardsformarketingandadvertising.

4. Require a Traceable Seed-to-Sale Tracking System, with Information Sharing Between State and Local Regulators

TheCitywouldsupportcreationandenforcementofanefficientandtraceablesupplychainforlegalcannabisthatcouldbeusedacrossNewYorkState.Withoutatraceabletrackingsystem,cannabis productswillmovebetween legal and illicitmarkets,174promoting illegality and taxevasion,erodingproductsafety,andweakeningtheprovisionofbankingservices.Asystemtotrackcannabisproductsandtheassociatedcashflows,fromplantingtosaletoconsumer,willbeessentialtoregulatelegalizedcannabis.TheProposedBillmandatessuchaseed-to-salesystem,generallyfollowingtheapproachtakeninotherstates.175

168

See,e.g.,AlaskaAdmin.Codetit.3,§306.360(b)(1);Cal.Bus.&Prof.Code§26151(d);Colo.CodeRegs.§§212-2.1001-1–212.1115;Or.Rev.Stat.§475B.605.169

Colo.CodeRegs.§212-2.1109. 170

Seeid.§212-2.1111(A). 171

See,e.g.,AlaskaAdmin.Codetit.3,§306.360;Cal.Bus.&Prof.Code§26151(c);Colo.CodeRegs.§§212-2.1001-1–212-2.1115;Or.Rev.Stat.§475B.605.172

Cal.Bus.&Prof.Code§26151(c). 173

SeeS.3040-C,sec.31§§175(4),177(7).174

Forexample,aCaliforniaDepartmentofFoodandAgriculturereportin2017concludedthatallbut2.5millionofthe13.5millionpoundsofcannabisproducedin2016leftCalifornia.SeePatrickMcGreevy,AsTheTopPot-ProducingStateintheNation,CaliforniaCouldBeonThinIceWiththeFederalGovernment,L.A.Times(Oct.1,2017),http://www.latimes.com/politics/la-pol-ca-marijuana-surplus-export-20171001-story.html.175

SeeS.3040-C,sec.31§182.

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Aseed-to-salesystemisaregulatorycompliancetoolwhichallows—orrequires—eachmemberofthesupplychaintoreportallmandatedactivitiestoacentralgovernmentdatabase,includingwhenevercannabisisplanted,tested,sold,ordestroyed.176Themovementofcannabisthroughthelegalsupplychaincanbemonitoredelectronicallyorinputbythecannabis-relatedbusinessmanually;however,akeyaspectof seed-to-sale systems is linkingof thedatabase to tagsorotheridentifiersonthephysicalproduct.177

Onceataghasbeenassignedtoaplant, it isthenpossibletotrackthespecificplant(anditsevolutionintoanotherproduct),toensurepaymentoftaxesdueandtransferonlytootherlegallyauthorizedindividualsorentities.178Informationcollectedbyaseed-to-salesystemcanbelinkedtoastate’s licensing, lawenforcement,tax,andbankingregulatorysystems. Informationcanalsobeuploadedbyacannabis-relatedbusinessandusedforitsownpurposes(e.g.,inventoryanalysisorpoint-of-salesystems)orsharedwithbanksandothercounterparties.179Theseed-to-salesystemalsoallowsforproductrecallsorothermeasuresshouldcontaminantsorsafetyhazardsbeidentified.

In states with legal adult-use cannabis, seed-to-sale systems are mandated by statute anddeveloped through regulation, and the systems are universally implemented by outsidevendors.180 Nearly all the states with legalized cannabis regimes allow seed-to-sale system information to be used by cannabis-related businesses for their own purposes,181and somestates require shipping manifests to be generated from seed-to-sale systems, 182 whichencouragesbusinessestomaintainproperrecordkeepingpractices.Statesvaryintheexplicitlyauthorized (and permissible) uses of seed-to-sale data, ranging from inspections to broader

176

SeeBenCurren,Seed-to-SaleTrackingandCompliance:IfCoffeeWasRegulatedLikeCannabis,Forbes(Aug.13,2018)[BenCurren,Seed-to-SaleTrackingandCompliance:IfCoffeeWasregulatedLikeCannabis],https://www.forbes.com/sites/bencurren/2018/08/13/seed-to-sale-tracking-and-compliance-if-coffee-was-regulated-like-cannabis/#61a4385253d7;seealsoLarryAlton,HowSeedtoSaleSystemsAreRevolutionizingtheCannabisIndustry,HuffingtonPost(Aug.3,2017)[LarryAlton,HowSeedtoSaleSystemsAreRevolutionizingtheCannabisIndustry],https://www.huffingtonpost.com/entry/how-seed-to-sale-systems-are-revolutionizing-the-cannabis_us_59724910e4b06b511b02c312(explainingbenefitsofaseedtosaletrackingsystem).177

Id.;seegenerallyDebbyGoldsberry,TrackingTroubles:IsSeed-to-SaleTrackingHelpingorHurtingtheIndustry?,CannabisDispensary(June19,2018),http://www.cannabisdispensarymag.com/article/tracking-troubles/;CatherineGoldberg,EverythingYouNeedtoKnowAboutSeedtoSaleTechnology,GreenMarketReport(Sept.15,2017)[CatherineGoldberg,EverythingYouNeedtoKnowAboutSeedtoSaleTechnology],https://www.greenmarketreport.com/everything-you-need-to-know-about-seed-to-sale-technology/.178

SeeBenCurren,Seed-to-SaleTrackingandCompliance:IfCoffeeWasRegulatedLikeCannabis;LarryAlton,HowSeedtoSaleSystemsAreRevolutionizingtheCannabisIndustry(explainingthebenefitsofaseedtosaletrackingsystem);CatherineGoldberg,EverythingYouNeedtoKnowAboutSeedtoSaleTechnology.179

Seegenerallyid.180

SeeCatherineGoldberg,EverythingYouNeedtoKnowAboutSeedtoSaleTechnology.181

Forexample,Alaskapermitscannabis-relatedbusinessestouseapprovedthird-partyapplicationstomanagetheirinteractionswiththeState-mandatedsystem.SeeStateofAlaskaAlcohol&MarijuanaControl,AMCO/ValidatedIntegratorList,https://docs.wixstatic.com/ugd/b7d3d1_76801fe5add9463c92984ba2599185d2.pdf.182

Forexample,Californialawmandatesthecreationof“anelectronicdatabasecontainingtheelectronicshippingmanifeststofacilitatetheadministrationofthetrackandtraceprogram.”Cal.Bus.&Prof.Code§26067(b)(1).

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informationsharingwithothergovernmentauthoritiesandfinancialinstitutionsattherequestorwithpermissionofindividualcannabis-relatedbusinesses.183

Implementationofastatewidestableandsecureseed-to-salesystem,includinguseofthemostadvanced tags and tracking systems to improve automation and accuracy, would be in theinterest of New York City. The City recommends the seed-to-sale system be developed inconsultationwithStatebankingauthorities,StateandCitytaxauthorities,andrepresentativesof local governmental cannabis-regulating authorities to determine the ideal information tocollectandtrack.TheState’sexperiencewithitsexistingmedicalcannabisseed-to-salesystemwillbevaluable.184 TheCityrequeststhatinformationfromtheseed-to-salesystembesharedwithbothStateandlocalregulatoryandlicensingauthorities,185andthatitmaybesharedwithcannabis-relatedbusinesscounterparties.

Stateand local taxationauthoritieswill finddata storedon the seed-to-sale systemuseful inconductingauditsandverifyingreceipts.Banksseekingtocomplywithfederalbankingguidance,Statebankingregulations,andknow-your-customerrequirementscaneachuseseed-to-saledatatoverifythattheirclientcannabis-relatedbusinessesareincompliancewithStateandlocallaws.Andbankingregulatorscanusethedataaswelltoconfirmbanksaremeetingtheirobligations.

To facilitate information sharing, theCitywould support creationof aportal aggregating theseed-to-salesystemandotherdataoncannabis-relatedbusinessesfromregulatorsatalllevels,which can be accessed by regulators aswell as financial institutions186withwhich individualcannabis-relatedbusinessesarebanking,andwithsuchaccessforbankseithermandatedbylaworhighlyencouraged.187

Ifcannabis-relatedbusinessesarerequiredtosharetheiruploadedseed-to-saleinformationandotherbooksandrecordswithbankswhenenteringandcontinuingabankingrelationship,robustprovisionsforprivacyandcontrolleduseoftheinformationwillneedtobedevelopedaswell.188

183

Californiapermitsstateandlocallawenforcementagenciestoaccesstheseed-to-salesystemdata.SeeCal.Bus.&Prof.Code§26067(b)(7).184

ThatsystemiscurrentlyadministeredbyBioTrackTHC.SeegenerallyBioTrackTHC,NewYorkSeedtoSaleTraceabilityKnowledgeCenter,https://www.biotrack.com/new-york/.185

Forexample,Californiapermitsstateandlocallawenforcementagenciestoaccesstheseed-to-salesystemdata.SeeCal.Bus.&Prof.Code§26067(b)(7).186

Considerationshouldbegiventowhetherportalaccessshouldbegrantedmandatorilywithabankdoingbusinesswithagivencannabis-relatedbusiness,byexplicitpermissiongrantedbythecannabis-relatedbusiness,andiflicensingauthoritiesmayconditionlicensesoninformationsharingwaivers,inlinewithOregon’sHouseBill4094andCalifornia’scontemplatedCannabisAuthority.SeeH.R.4094-B,78thLeg.Assemb.,2016Reg.Sess.,§2(Or.2016);Cal.StateAss’nofCtys.,CaliforniaCannabisAuthority,http://www.counties.org/sites/main/files/file-attachments/california_cannabis_authority_cca.pdf.187

TheWashingtonStateLiquorandCannabisBoardwillsharethefileofalicensedcannabis-relatedbusinesswithafinancialinstitutionthatsignsanappropriatewaiverform,andtheDepartmentofFinancialInstitutionsencouragesbankstomakesucharequestoftheircannabis-relatedbusinessclients.SeeLetterfromRandySimmons,DeputyDir.Wash.StateLiquorControlBd.toWash.StateFin.Instit.(Oct.16,2014),https://dfi.wa.gov/documents/banks/liquor-control-board-letter.pdf.188

ACaliforniaStateTreasurer’sreportlaysoutanexpansivevisionforinformationsharing,advisingtheStateandlocalgovernmentstocreate:“anonlineportalaggregatingdataoncannabisbusinessesfromlocalgovernmentunitsandall11stateagencieswithcannabisregulatoryordata-collectionresponsibilities.Theportalshouldbedesignedwithfinancialinstitutioncomplianceneedsinmindandprovide

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Anadequatenumberofanalystswillbeneededtoconvertthedataenteredintothesystemintoactionable information, both for law enforcement purposes as well as to produce usefulinformationforthepublic.189

5. Establish an Electronic Licensing Management System, with Coordination at the State and Local Levels

TheCitystronglysuggeststhatalllicenseapplicationsandsupportingdocumentation—inbothStateandmunicipallicensingsystems—bemanagedelectronically.

Electronicmanagementwould ease administrative burdens on the government and businessowners.Inparticular,itwouldfacilitatedatasharingandanalyticsbyallowingserviceproviders,particularly banking, accounting, and legal professionals, to better conduct customer duediligence. Electronicmanagement would also facilitatemonitoring by law enforcement andlicensingofficialsandallowgovernmentauthoritiestostudymoreeasilymetricssuchasdemandfor licensesbycategoryanddemographicsofmarketparticipants.190 Inaddition, informationcollectedbytheseed-to-salesystemcanbemoreeasilylinkedtotheState’sandCity’sexistinglicensing,lawenforcement,tax,orbankingregulatorysystemsifthesystemsareelectronicallymanaged.191

Becauseprotectingtheprivacyofallindividualsoperatinginthelegalcannabisindustrywillbeimportant, particularly in an environment of continued federal prohibition, any regulatoryrecord-keepingsystem(electronicorotherwise)musttakespecialcaretoappropriatelyretainbutkeepconfidential,throughanonymizationorothertechnicalmeans,allpersonalidentifyinginformation.

materialtohelpinstitutionsfulfilltheirknow-your-customerresponsibilities.Thedatashouldincludelicensingandregulatoryinformation,dataonkeypersonnel,productlists,sourcesofsupply,financialrecordsincludingmajortransactions,ongoingregulatoryactivityincludingcitationsforviolations,adversecomments,andevidenceofsuspiciousorillegalactivities,providedsuchmaterialisnotrestrictedbydisclosurerulesorotheragreements.”JohnChiang,Cal.StateTreasurer,BankingAccessStrategiesforCannabis-RelatedBusinesses:AReportfromtheStateTreasurer’sCannabisBankingWorkingGroup17(2017),https://www.treasurer.ca.gov/cbwg/resources/reports/110717-cannabis-report.pdf.189

Forexample,WashingtonStatehasa“MarijuanaDashboard,”whichupdatesregularlywithinformationdrawnfromtheState’strackingsystemandothersources.Thesystemisalsoopentodeveloperstocopyandusetheunderlyingdatafortheirownvisualizationsorresearch.SeeWash.StateLiquor&CannabisBd.,MarijuanaDashboard,https://data.lcb.wa.gov/stories/s/WSLCB-Marijuana-Dashboard/hbnp-ia6v/.190

Anyapplicantsforpreferentialequitylicensingprogramscouldself-reporttheirortheiremployee/subcontractor’scriminaljusticehistorytoindicatethattheymeetapplicationcriteria.Massachusettsfollowsthispractice.DiscussionwithShaleenTitle,Comm’r,Mass.CannabisControlComm’n.191

SeeS.3040-C,sec.31§182.

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IV. Recommendations to License and Regulate the Commercial Cannabis Industry to Promote Economic Opportunity and Public Health and Safety

1. Establish a Dual Licensing Structure with Both State and Municipal Authority

SpecialcaremustbetakenincraftingStatelawandlaunchingandregulatingthisnewindustryto ensure economic opportunities for small community-based businesses, not for corporateconglomerates. The City hopes to be empowered to create its own cannabis regulatoryauthoritiestoconductlicensingandotheractivities,withstaffingandinteragencycoordinationdeterminedinthelocallegislativeandrulemakingprocesses.

Specifically, the City seeks co-authority with a designated State entity to issue and revokelicenses,aswellastheabilitytocreateadditionallicensecategoriesthatspecificallyaddresslocalneeds.TheCity’sapproachtoregulatingtheconcentrationofretailcannabisoutletswilllikelydifferfromlessdenselocaleswithmorecar-centriccultures. Inaddition,especiallygiventhesignificantnumberofpeoplewithcannabis-relatedlawenforcementhistories,theCitywillwishtodesignatecertaintiersorinitialamountsoflicensestospecific“equity”applicants.TheCityprefersmaximumlocalauthority,withcoordinationbetweentheStateandCitygovernments,toapproachtheseissuesmostappropriatelyforlocalcommunities.

ThisisconsistentwiththeapproachtakeninColorado192andMassachusetts,193whicheachgrantlocalgovernmentbodiesco-equallicensingauthority.

Californiahasalsoembracedaco-licensingmodelthatallowsadegreeoflocalcontrol.Californiaapplicantsmustfirstobtainlocalauthorizationordemonstratecompliancewithlocalordinancesbeforeobtainingastatelicense.194Inaddition,statelicensingauthoritiesareexplicitlyprohibitedfrom approving a license application if approval would violate the provisions of any localordinance or regulation.195 The California legislation created a state oversight committee toadviselocallicensingauthorities,andrequiresthatcommitteemembersinclude“personswhowork directly with racially, ethnically, and economically diverse populations.” 196 Finally,Californiagiveslocaljurisdictionsexplicitpowertoestablishadditionalstandards,requirements,and regulations with respect to, among other subjects, “worker protections.” 197 Using theabundant control entrusted to local jurisdictions, cities across California have been able to

192

SeeColo.Rev.Stat.§44-12-301.193

SeeMass.Gen.Lawsch.94G,§3.194

SeeCal.Bus.&Prof.Code§§26032(a)(2),26055(d),(g)(2),26200.195

SeeCal.Bus.&Prof.Code§26055(d).196

Cal.Bus.&Prof.Code§26014.197

Id.§26201.

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implement innovativeprograms thatpromotebusinessdiversitywithin theirbordersandaresensitivetoparticularlocalconditionsandhistory.198

The2018ProposedBillcurrentlyvestsalllicensingauthorityinaBureauofCannabisPolicyinastructuresimilartothatoftheNewYorkStateLiquorAuthority.199Municipalitieswouldreceive30days’noticeoflicenseapplications,andcouldcommenttotheBureau,butwouldnothavetheabilityeithertoblockorgrantalicense.200TheBureauwouldalsohaveauthorityto“limitthetotalamountof[cannabis]producedinNewYorkbasedonthedemandfor[cannabis]and[cannabis] products and in an effort to reduce illicit [cannabis] markets.” 201 While suchcentralizationofauthorityinaStatebodywouldpromotecertaintyanduniformitywithrespecttobasiccriteriasuchasagelimits,theCitybelievesinvolvementfrommunicipalofficialsiscriticaltonavigatethemanyfundamentallylocalissuespertainingtolicensing.202

2. Give Local Governments Ample Authority to Promote Equity in Licensing—Which the City Would Use to Promote Economic Opportunities

TheCityplacesheavyweightonensuringthatalegalizedcannabisschemeprioritizeseconomicopportunities for thosemost disadvantaged by criminalization and discrimination, and keepscorporatecannabisfromseizingthemarket.Acornerstoneofanylegalizationschememustbeadvancingthisgoal.

The2018ProposedBillprovidesfortheStateto implement“asocialequityplanandactivelypromoteracial,ethnic,andgeographicdiversity” in its licensingpractices, includingtoensureinclusionof“minority-owned”and“women-owned”businesses.203

TheCitywillstrivetosecureauthoritytomakelicensingdeterminationsandimplementequityprogramstailoredtoadvancethegoalsexpressedintheState’sbillandaddresstheprioritiesandneedsofitscommunities.

Accordingly, the the City seeks broad discretion to enact amnesty and preferential equitylicensingprogramssimilartothoseinMassachusetts,SanFrancisco,Oakland,andLosAngeles.Amnestyprograms,suchasSanFrancisco’s,makelicensesavailabletoindividualswhomayhave

198

See,e.g.,SanFranciscoOfficeofCannabis,EquityProgram,https://officeofcannabis.sfgov.org/equity;CityofOakland,BecomeanEquityApplicantorIncubator,http://www2.oaklandnet.com/government/o/CityAdministration/cannabis-permits/OAK068455;L.A.,Cal.MunicipalCode,ch.Xart.4,§104.20.199

SeeS.3040-C,sec.31§166.200

InNewYorkCity,theCommunityBoardestablishedunderSection2800oftheCityCharter,withjurisdictionovertheareainwhichthepremiseswillbelocated,willbeconsideredthelocalbodytowhichtheProposedBillwouldrequirenotificationofintenttofileanapplicationforalicense.Seeid.sec.31§185.2(B).201 Id.sec.31§167.4.202

SeeManhattanDist.Att’y,May2018Report,at28-29.203

S.3040-C,sec.31§190.

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previously been selling cannabis illegally.204More broadly, equity licensing programs createpreferencesforapplicantswhomeetcertaincriteria,suchashavingacannabis-relatedconvictioninthepast,havinganimmediatefamilymemberwithacannabis-relatedconviction,beingoflow-income,orresidinginadisproportionatelyaffectedneighborhood.205

Localcontrolisalsoessentialtoensurethatequitylicensingapplicantsobtainthesmallbusinesssupporttheyneeduponreceiptoftheirlicenses.Underoneprogram,Oaklandreservedhalfofitscannabispermitsforcityresidentsearninglessthan80%oftheaveragecityincomewhohadeitherlivedinaspecifiedhigh-crimezoneforaprescribedperiodorbeenconvictedofacannabiscrimeinOaklandafter1996.206Oaklandalsomovednon-equityapplicantstothefrontofthepermitlineifthey“incubated”equityapplicantsbyprovidingthemwith1,000squarefeetoffreebusinessspaceforthreeyears.207

Any equity licensing program would also incorporate feedback and input from impactedcommunities. Lacking such initiatives, other states, such as Maryland, have already facedcriticismafternationalconglomeratesquicklymovedintothestate’smedicalcannabismarketandoutcompetedlocalresidents.208

To further guarantee the effectiveness of equity programs, New York City will commit tosupporting the development of equity applicants and ensuring the application process isstraightforward,while collectingnecessary information toprevent fraud. Another importantstepwillbetoprovidesupporttoequityapplicantsaftertheconcessionoflicenses.Towardsthis

204

AccordingtotheSanFranciscoCannabisOffice,thiscategoryofbusinessesisreferredtoas“ExistingCannabisBusinesses”inofficialSanFranciscoCannabisOfficematerials,andtheterm“amnesty”hasbeenusedinformallyinoutreachefforts.205

Othercriteriamayincludepastcriminalconvictioningeneral,residencyinhistoricallyover-policedneighborhoods,acertainnumberofyearsintheCitypublicschoolsystem,and/orowningabusinesswithatleast51%verifiedminorityorimpactedcommunityparticipation.Forexample,inOakland,CA,halfoftheavailablecannabisbusinesslicensesarereservedforneighborhoodswithdisproportionateratesofdrugarrests,andapplicantsfortheselicensesmusthavelivedintheneighborhoodforatleast10yearsovera20yearperiodand(i)mustearnlessthan80%ofOaklandAMIoranyonewhomeetstheincomerequirementor(ii)musthavebeenconvictedofacannabis-relatedcrimesince1996(whenmedicalusewasdecriminalized).SeePavithraMohan,IstheCannabisIndustryRepeatingSiliconValley’sWorstMistakes?,FastCompany(Dec.18,2017),https://www.fastcompany.com/40495250/is-the-cannabis-industry-repeating-silicon-valleys-worst-mistakes;OaklandCityOrdinanceNo.13478,§5.81.060(2018),http://www2.oaklandnet.com/oakca1/groups/cityadministrator/documents/agenda/oak070202.pdf.SanFranciscohasincludedinthedefinitionofequityapplicantsthosewho(i)satisfyhouseholdincomerestrictionsandhaveanarrestfrom1971-2016foracannabis-relatedoffense;(ii)haveaparent,sibling,orchildwithacannabis-relatedarrestfrom1971-2016;(iii)losthousinginSanFranciscoafter1995througheviction,foreclosure,orsubsidycancellation;(iv)attendedschoolinSanFranciscoforfiveyearssince1971;and/or(v)livedinSanFranciscocensustractswhereatleast17%ofhouseholdsareatorbelowfederalpovertylevelforfiveyearssince1971.SanFranciscoalsowaivespermitfeesforequityapplicantsandprovidesthreeyearsofincubatorsupport.Sacramentowaivesfeesforsimilarequityapplicants.SeeCal.BureauofCannabisControl,OverviewofCaliforniaCannabisEquityPrograms(Feb.2018),https://bcc.ca.gov/about_us/meetings/materials/20180301_equ_overview.pdf.Massachusettsrecommendsrace-neutralcriteriaforpriorityreviewandaccountingforgentrificationwheneverresidencyisafactorineligibility.ForafulllistoftheMassachusettsequityapplicantrequirements,seeMass.CannabisControlComm’n,GuidanceforEquityProvisions,https://mass-cannabis-control.com/wp-content/uploads/2018/04/FINAL-Social-Provisions-Guidance-1PGR-1.pdf.206

SeeOakland,Cal.MunicipalCodech.5.81,5.81.060(A),5.81.060(D).207

Seeid.ch.5.80.045(D).208

SeeDougDonovan,NationalFirmsAreStartingtoSnapUpMaryland’sMedicalMarijuanaLicenses.RegulatorsWanttoPreventThat,Balt.Sun(July26,2018),http://www.baltimoresun.com/news/maryland/politics/bs-md-maryland-marijuana-dispensaries-20180718-story.html.

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end,theCityembracestheproposalinthe2018ProposedBilltoestablishanincubatorprogramtoprovidedirectsupporttoequityapplicantsintheformofcounselingservices,education,smallbusinessescoaching,andcomplianceassistance.209

A final consideration in developing any equity program is the protection of privacy inadministering screening for equity eligibility. At the same time, to encourage communityparticipation,eligibilitycriteriamustbecleartothepublic.Thereshouldbeasufficientperiodbeforelegalization“goeslive”toallowtheCity,withcommunityinput,todevelopandputinplaceprogramsadvancingequityparticipation,sothatthecannabismarketdoesnotbecomequicklydominatedbylarge,well-resourcedenterprises.

In alignment with equity licensing regulations, the City could create safeguards to preventlicensing regulations and zoning policies fromproducing inequitable distribution of adult-usecannabisbusinesses,withrespecttoeverytypeof license,andprotectCityresidentsofcolorfromexperiencingdisproportionatepolicingandexposuretoadvertisingandcommunityqualityoflifeissues,ashasbeenthecasewithdensityofalcoholsalessitesintheCity.Thiscouldbedonethroughsettingneighborhoodlicensecapsforeachlicensetypeand,aspartofanequityprogram,incentivizingbusinessestolocateinlowoutletdensityareas,forexample.TheCity’splansforlocatingcannabisoutletsmustaccountforthehealthandsafetyofarearesidents.

TheCitymightalsoinstateapolicythatallowsnon-equityapplicantstogainprioritytolicensesif theyprovideapercentageof theirprofits toaCity-directed fund foreconomicopportunityinvestmentsandmakecommitmentstosuchequitymeasuresasprovidingfreespacetoequityapplicants;participatinginajointventureorsubcontractingpartnershipwithanequityapplicant;and committing to a hiring plan that provides meaningful and well-paying workforceopportunitiestolow-incomepopulations,thosewithpriorcannabis-relatedoffenses,orthosewhoqualifythroughtheSmallBusinessServicesWorkforceCareerCenter.210

3. Establish a Tiered and Capped Licensing System

TheCityrecommendsthatasystemoftiersbedevelopedforproducers,processers,andretailersbasedonthevolumeofgoodsprocessedorsold,usingthecurrentNewYorkStatecraftbeveragestructureasamodel.211Atthesametime,afterstudyingtheappropriatelevelsandmechanism,caps shouldbedeterminedbygovernmentson thenumbersofnursery,producer, and retaillicenses.

Creatingdifferent licensetypesbasedonmultiplevariablesallowstheregulatoryauthoritytobettercontrol thedevelopmentof themarketsoas toencouragesmallbusinesssuccessand209

SeeS.3040-C,sec.31§190(4).210

Formoreinformation,seeCityofNewYork,NewYorkWorks:AJobsPlanforAllNewYorkers,https://newyorkworks.cityofnewyork.us/overview.211

SeeN.Y.StateLiquorAuthority,DefinitionofLicenseClasses,https://sla.ny.gov/get-license(licenseclassesincludea“microbrewery”license,forbusinessesproducingupto60,000barrelsofbeerperyear,anda“restaurant-brewer”or“brewpub”license,forestablishmentsproducingupto5,000barrelsperyear).

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equityofopportunity.Forexample,workforcedevelopmentandtechnicalassistanceprogramscouldbetargetedtolicensesinsmallertiers.

Otherjurisdictionshavetakensimilarapproaches.California’slegislationcalledforaminimumoftwentylicensetypes,withtiersforcultivatorsandmanufacturersbasedonoutput,lighting,andwhethergrowthtakesplaceindoorsoroutdoors.212Massachusettssimilarlycreatedeleventiers for cannabis cultivators based on canopy size and tied some retail licenses to specifiedcultivationtiers.213

TheCity,inpartnershipwithnon-profitandcommunitydevelopmentorganizations,couldtargetsomeofitsexistingsmallbusinesssupportprograms(forexample,accesstocapitalfinancing,“starting a business” courses, and similar trainings and offerings)214 to help equity programapplicants obtain low volume production and distribution licenses, thereby diversifying thecannabisindustrywhilesupportingsocialjusticepolicygoals.

Similarly,cappingthenumberofavailable licensesfornurseries,producers (themostsought-after),andretailestablishmentsshouldhelppreventover-saturationandproductleakageintothe illicit market. Anticipating the reality that the illicit cannabis market may persist onlyunderscorestheimportanceofenactingpoliciesthatencouragemarketparticipantstoproduce,distribute,andsellcannabisonlythroughlegalchannels.215

States without caps have experienced oversupply problems. 216 Oregon, a relatively lowpopulationstatethatdidnotsetacaponthenumberofproductionlicenses,217sawthecannabisproductionratesaturateitsdomesticmarket.218TheOregonStatePoliceestimatethatthestatemaybeproducingoveronemillionpoundsofcannabisperyearabovewhat its residentsareconsuming.219ThislikelycontributestoillegalexportofOregon-growncannabistostateswherecannabisremainsillegal.ColoradoandWashingtonStatearealsoexperiencingover-saturationintheirretailmarkets.220Washingtonsawa63%increaseinthenumberofplantsstartedin2017

212

SeeCal.Bus.&Prof.Code§26050.213

See935Mass.Code.Regs.500.105(d).214

SeeN.Y.C.Bus.,BusinessServices,https://www1.nyc.gov/nycbusiness/topicpage/support-for-businesses.215

SeeManhattanDist.Att’y,May2018Report,at3.216

Seeid.at16(citinginterviewswiththeDenverDistrictAttorney’sOfficeandtheDenverPoliceDept.(Mar.19,2018),theBoulderCountyDistrictAttorney’sOfficeandtheBoulderPoliceDept.(Mar.20,2018),andU.S.AttorneyfortheDist.ofColo.RobertTroyer(Mar.30,2018);seealsoGillianFlaccus,GlutofMarijuanainOregonisCautionaryTale,ExpertsSay,Chi.Trib.(May31,2018),http://www.chicagotribune.com/news/nationworld/ct-marijuana-oregon-cautionary-tale-20180531-story.html.217

SeeOr.Rev.Stat.§§475B.070,475B.074,475B.075,475B.085.218

SeeOr.StatePolice,ABaselineEvaluationofCannabisEnforcementPrioritiesinOregon9(Jan.2017),https://mass-cannabis-control.com/wpcontent/uploads/2017/12/A-Baseline-Evaluation-of-Cannabis-Enforcement-Priorities-in-Oregon_.pdf.219

Seeid.220

SeeHowManyDispensariesareinDenver,Colorado?,My420Tours(Feb.28,2018),https://my420tours.com/many-dispensaries-denver-colorado;WilsonCriscione,IndustryExpertsSayWashingtonGrewTooMuchCannabis,andItCouldBeaSeriousProblem,Inlander(Aug.16,2018)[WilsonCriscione,IndustryExpertsSayWashingtonGrewTooMuchCannabis,andItCouldBeaSeriousProblem],https://www.inlander.com/spokane/industry-experts-say-washington-grew-too-much-cannabis-and-it-could-be-a-serious-problem/Content?oid=11473656.

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as compared to 2016, continuing an upward trend since legalization. 221 In contrast, retailvolumes,takingintoaccountpricedecline,wereuplessthan20%.222

Toavoidover-supplyproblemssuchasthoseexperiencedinOregon,Colorado,andWashingtonState, New York should consider establishing caps at different points in the supply chain.Comprehensive analyses will be needed to determine an approach to license caps thatencouragesapplicationsandmarketparticipation,withthegoalofreachinganequilibriumofsupplyanddemandthatbringsparticipantsoutof the illicitmarketandpreventsgluts in themarketplace.

4. Localities Should Control Whether to Permit and Regulate On-Site Consumption Establishments

Asinmostotherlegalizedstates,223NewYorkCityseeksthepowertoenactalegalstructurethatgrantslicensesforon-siteconsumptionestablishments.TheflexibilitytoapproveandregulateconsumptionlocationswillbeparticularlyimportantintheCity,whereresidentslivinginNYCHAhousingandotherbuildingsthatprohibitsmokingcouldhavenolawfulplacetosmokecannabisandcouldfacelossofhousingforuseintheirhomes.224ForamunicipalitylikeNewYorkCity,access to legal, regulated on-site consumption sites is thus amatter of fairness and equity.Permittingdesignatedon-siteconsumptionestablishmentswouldalsoallowlegalconsumptionbyadulttouristsandvisitorstotheCity.

TheCitythereforeaimstoobtaintheflexibilitytoexploreregulatoryapproachestocommercialdistribution and sale that allow greater control over access to cannabis, like government-controlledsalessystemsornon-profitmembershipclubs.TheCitywantstheresponsibilitytooverseethelicensingprocess,withauthoritytoenactregulationsthataddressthedensityanddistributionofbusinessesthroughouttheirjurisdiction,hoursofoperation,andconcurrentsalesoffoodorbeverages.TheCitywouldalsoseektoregulateventilationandfiltrationtoprotectresidents of buildings above and adjacent to on-site consumption spaces from second-handsmoke.

221

SeeWilsonCriscione,IndustryExpertsSayWashingtonGrewTooMuchCannabis,andItCouldBeaSeriousProblem.222

Seeid.223

Alaska,California,Colorado,Maine,Massachusetts,Michigan,andNevadapermitsomeformofon-siteconsumptionestablishment.224

TheDepartmentofHousingandUrbanDevelopmentprohibitstheuseofcannabisproductsinallmultifamilyassistedproperties,includingthoseinstatesthathavedecriminalizedorlegalizedcannabis.SeeBenjaminT.Metcalf,U.S.Dep’tofHous.&UrbanDev.,MemorandumonUseofMarijuanainMultifamilyAssistedProperties(Dec.29,2014),https://www.hud.gov/sites/documents/USEOFMARIJINMFASSISTPROPTY.pdf.AllNewYorkersareprohibitedfromsmokingorvapinginmostpublicareasbytheCity’sSmokeFree-AirAct,whichincludes“commonareas”ofresidenceswiththreeormoreunits.Althoughsmokinginsideone’sapartmentisnotprohibitedbytheAct,LocalLaw127passedinNewYorkCityin2017requiresmultifamilyresidentialbuildingstoadoptasmokingpolicy,whichmayprohibitsmokinginnon-exemptunits.SeeN.Y.C.Dep’tofHealth&MentalHygiene,DisclosureofPoliciesonSmokinginResidentialBuildings:WhatYouNeedtoKnow(lastupdatedJune2018),https://www1.nyc.gov/assets/doh/downloads/pdf/smoke/smoking-disclosure-guide-policy-residential.pdf.

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5. Localities Should Control Whether to Permit and Regulate Licensed Delivery Businesses

TheCityispursuingsecuringtheauthoritytoprohibitorpermitandregulatelicensestodelivercannabisproductstoconsumers.225 InurbanareaslikeNewYorkCity,residentsaregenerallyaccustomedtodeliveryofproductsandservices.Thisculturehasexistedfordecades,predatingtheadventofinternetandsmartphoneapplication-baseddeliveryservices.Moreover,cannabisdelivery to consumers in the illicit market already occurs. Accordingly, following adult-usecannabislegalization,ahighdemandforcannabisproductdeliverywilllikelypersist.Moreover,providingforhomedeliveryservicescanmitigateconcernsaboutconsumersdrivingundertheinfluenceofcannabis.Indeed,alicensed,carefullyregulateddeliverysystemmaybethebestapproachtosafelyaddressdemand.

Cannabisdeliveryserviceposesseriousconcerns,however,andNewYorkCitywouldneedtoundertakecarefulconsiderationandstudybeforeformallyauthorizingthisstep.Akeyconcern,aswiththedeliveryofalcoholproducts,islimitingsalesonlytoadultsoverthelegalconsumptionageandpreventingdeliverytominors.TheCitywouldneedtoexploreanumberofrestrictionstoaddressthisandotherissues.Forexample,cannabisdeliverytransactionswouldneedtobehighlyregulatedtoensureminorswouldbeunabletoplaceordersoracceptdelivery,potentiallywithmandatorycustomeridentitychecksonlineattimeofpurchaseandagainattimeofdelivery.To mitigate concerns about over-consumption, the City might consider restricting same-daydelivery.Additionally,deliverylicenseesmightbelimitedtoworkingwithappropriatelylicenseddispensaries.Inkeepingwiththeproposedgeneralprohibitiononverticalintegration,discussedbelow, most types of delivery licensees might be permitted to hold licenses only in otherconsumer-facingcannabisbusinesses(i.e.,retaildispensaries).

GiventheuniqueneedsofcommunitiesacrosstheState—including,forexample,NewYorkCity’sdensity and consumer patterns—the City hopes to have the ultimate authority over deliverylicenses,rangingfromprohibitingdeliveryentirelytosettingstringentlicenserequirementsandlimits.

6. Prohibit Vertical Integration, with Certain Exceptions, To Promote Equity Opportunities

The City supports largely prohibiting vertical integration of cannabis businesses, with anexceptionformicrobusinesses.Verticalintegrationreferstotheabilityofbusinessestoownandcontroleachstageofthesupplychain,whichmayotherwisebeownedbydifferent,specializedbusinesses. Inthiscontext,vertical integrationrelatestotheabilityofabusinesstoownandcontrolmultiplestagesinthecannabisindustry,fromseedcultivationtoconsumerretail.

225

California,Maine,Nevada,andOregonpermitlocalestolicensehomedeliveryservices.

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Thebasicpurposeoftheproposedverticalintegrationrestrictionistocreateabarrierbetweenconsumer-facing licensees andmore business-to-business licensees operating in parts of thesupply chain that require greater capital investment. Cultivation and processing, as well asdistribution,oftenrequiresignificantcapitalinvestmentandeconomiesofscale.Producersandprocessors could be permitted to hold limited licenses in other categories, to allow suchcompaniestocontroltheproductfromseedtomanufacturedproduct.

But to curb well-capitalized “upstream” cannabis businesses from dominating access andcommunicationswithconsumers,withtheexceptionofmicrobusinesses,ownershipofretailanddeliverylicensesshouldbeprohibitedbyanyotherlicenseetype.Restrictingverticalintegrationwill thus allow small businesses to compete and increase consumer choice by preventingconglomerationanddominationoftheindustrybylargebusinesses.226

Carvingoutanexceptionformicrobusinesseswillcurtailadverseeffectsthataprohibitiononverticalintegrationmayhaveonartisanalproducers.Significantly,themicrobusinessexceptionalsoincreasesopportunitiesforequitableparticipationinthecannabis industry. Itcreatesanopportunity for targeted outreach to promote microbusiness licenses for specific groups ofapplicants,whichfurtherpromotesaccesstoeconomicopportunity.Microbusinessesshouldbepermittedtocultivate,process,andsellcannabisinaretailcapacity.Asamicrobusinessmightreplicate the business model of a microbrewery, the State legislation’s definition of“microbusiness” should also permit locally-licensed consumption of cannabis. Given theflexibilitythatshouldbepermittedformicrobusinessestoverticallyintegrate,localitieswillneedthe leeway over time to adjust the production caps or overall availability of microbusinesslicensestorespondtochangesinthemarketplace.

Otherjurisdictionsthathavelegalizedadult-usecannabishavestruggledwithhowandtowhatextentmultiple licenses and vertical integration should be allowed, suggesting that this areashouldbegivencarefulconsiderationbytheState. InCalifornia,wherevertical integration islargelyunrestricted,industrystakeholdershavevoicedconcernsthatthelackofconstraintscouldharm competition and that large, integrated firms would crowd out small businesses andentrepreneurs.227InWashington,integrationbetweenretailersandcultivatorsorprocessorsisprohibited, but integration between cultivators and processors is permitted.228Washingtoninitiallylimitedproducerstoonelicense,butamendedthoserulesin2017toallowaproducertoholduptothreelicenses.229Smallfarmershavecomplainedthattherulechangehasallowed

226

SeegenerallyJoleneHansen,TheProsandConsofVerticalIntegration,CannabisBus.Times(Sept.21,2017),http://www.cannabisbusinesstimes.com/article/the-pros-and-cons-of-vertical-integration.227

SeeGeorginaMoreno,BalancingVerticalIntegrationinCalif.’sCannabisIndustry,Law360(Jan.12,2018),https://www.law360.com/articles/1001419/balancing-vertical-integration-in-calif-s-cannabis-industry.228

Seeid.229

SeeBartSchaneman,WashingtonStateRuleChangeExpandsBusinessOptionsforMarijuanaCultivators,MarijuanaBus.Daily(Aug.17,2017),https://mjbizdaily.com/washington-state-marijuana-growers-can-multiple-licenses-spurring-potential-mergers/.

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large commercial producers to expand at the expense of small businesses, contributing toproblemswithoversupplyandpricedepression.230

InColorado,however,regulatoryauthoritiesencouragedvertical integrationfor its economicandadministrativebenefits.Followinglegalization,animplementationtaskforcerecommended,andtheColoradolegislatureapproved,amandatoryverticallyintegratedstructureinanefforttoreducethecomplexityofthemarket,limitdiversiontotheillicitmarket,andeasethetasksfacedbyregulatoryenforcersintheindustry’searlydays.231Cannabisdispensaries,bothretailandmedical,wererequiredtocultivate70%oftheproductstheysold.232Acounterpointtothesebenefits,however,isthatverticalintegration,coupledwithavailabilityoflesscostlyrealestatefornewbusinesses,hasmeant that lower incomecommunitieshavebeendisproportionatelyimpactedbycannabisconcentration.233

Whilevertical integrationcarriestheadministrativebenefits inherenttoamoreconcentratedindustry,ultimatelyequityandcommunityimpactconcernsandthedesiretocurbthecreationof “Big Cannabis” akin to “Big Tobacco” outweigh any benefits of vertical integration.Accordingly,theCitysupportsanapproachthatimpedesverticalintegrationand,simultaneously,facilitates a robust microbusiness environment, both of which will expand economicopportunitiesfordisenfranchisedindividualsandcommunities.

7. Set Initial License Terms to Allow Time for a Start-Up Process

TheCityrecommendsinitiallicensetermsthataccommodatethegrowthandchangeinevitablein the early years of the new adult-use cannabis industry. Given the capital and multipleregulatory approvals required to open cannabis businesses (e.g., building and fire permits),licenseesshouldbegivenadditionaltimetolaunchtheirbusinessesfollowinginitialapprovals,before being required to apply for renewals. Licensees should be permitted to retain theirlicensesforaperiodofatleasttwoyearsfollowinginitialapproval.Ataminimum,therenewalprocess shouldbe relaxed in the first fiveyearspost-legalization topermit licensees tomoreeasily renew and retain their licenses, even if their businesses have undergone substantialchanges.Followinganinitialramp-upperiod,licenseperiodscanbeshortenedtooneortwoyears,whichisstandardformostbusinesslicensesinNewYorkCity.

Thismeasurecanbecoupledwithcreationofthetieredlicensingsystemdiscussedearlier,andaspecial set of licenses to benefit equity applicants. The tiered structure generally allows forsmallerandlargerbusinessestohaveaccesstothemarketonsimilartimeframes.Theremay,however, still be applicants, particularly equity applicants, who may face added start-up

230

SeeWilsonCriscione,IndustryExpertsSayWashingtonGrewTooMuchCannabis,andItCouldBeaSeriousProblem.231

SeeJohnHudak,Ctr.forEffectivePub.Mgmt.atBrookings,Colorado’sRolloutofLegalMarijuanaisSucceeding9(July31,2014),https://www.brookings.edu/wp-content/uploads/2016/06/CEPMMJCOv2.pdf.232

Seeid.at9-10.233

SeeDavidMigoya,Denver’sPotBusinessesMostlyinLow-Income,MinorityNeighborhoods,DenverPost(Jan.23,2017),https://www.denverpost.com/2016/01/02/denvers-pot-businesses-mostly-in-low-income-minority-neighborhoods/.

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challenges,suchassecuringaloanorspacelease.Toaddressthis,two-phaselicensesforequityapplicantscanofferstaged licensingpending full satisfactionofall requirements. Thisallowssmallbusinessesthatotherwiselacktheresourcestosubmitcompleteapplicationsinthesametimeframe as larger businesses not to be disadvantaged. For example, in California, wherepermanentregulationswerestillbeingdevelopedafterthepassageofcannabislegalization,thisissuewasaddressedbyprovisionoftemporarylicensestopre-existingcannabisbusinessesorcurrentmedicalcannabisbusinesses.234

8. Allow Limited Liability Companies to Apply for Licenses

TheCityproposesgrantinglimitedliabilitycompanies(“LLCs”)theabilitytoapplyforlicensestoavoidstatutoryambiguityandconfusion.LLCsofferamoreflexibleformofownershipthatcanbenefitsmaller,individual-ownedenterprises.

TheCityrecommendstheestablishmentofreportingstandards,withappropriatebackgroundchecks of relevant owners and shareholders to establish individual accountability andtraceability.NewYorkState’sexistingrulesthatgovernentitiesseekingliquorlicensesfromtheStateLiquorAuthorityprovideamodel.235

9. Allow Cooperatives to Participate as Licensees

In addition to licensing LLCs, the City encourages permitting the formation and licensing ofcooperatives upon meeting certain special requirements. Cooperatives are more informalarrangementsthatmayencourageindividualstobandtogetherandgrowtheirowncropswhilesplittingcostsandprofits,therebyloweringbarrierstoentryandinfusingmorehigh-qualityandspecialtyproducts into themarket.236WashingtonStateandMassachusetts specificallyallowcraftcannabiscooperativestoparticipateintheindustry.237AswithLLCs,reportingstandardsandappropriatebackgroundcheckrequirementsshouldbeconsidered.

10. Designate License Types for Researchers, Service Workers, and Limited-Purpose Events

The 2018 Proposed Bill currently provides for nine types of licenses, which are fairlycomprehensive: (i)acannabisnurserylicense,(ii)acannabisproducerlicense,(iii)acannabisprocessorlicense,(iv)acannabisdistributorlicense,(v)acannabisretailerlicense,(vi)acannabis

234

SeeSanFranciscoOfficeofCannabis,https://officeofcannabis.sfgov.org.235

SeeN.Y.StateLiquorAuthority,FrequentlyAskedQuestions,https://www.sla.ny.gov/get-license.236

SeeShiraSchoenberg,MassachusettsFarmersHopetoKeepMarijuanaBusinessLocal,MassLive(Oct.8,2017),https://www.masslive.com/politics/index.ssf/2017/10/massachusetts_farmers_hope_to.html.237

SeeMass.Gen.Lawsch.94G,§4;seealsoMass.CannabisControlComm’n,GuidanceonTypesofMarijuanaEstablishmentLicenses,https://mass-cannabis-control.com/wp-content/uploads/2018/04/Guidance-License-Types.pdf;Wash.StateLiquor&CannabisBd.,MarijuanaLicensing,https://lcb.wa.gov/mjlicense/marijuana-licensing.

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microbusiness license, (vii) a cannabis on-site consumption license, (viii) a cannabis deliverylicense,and(ix)acannabistestinglicense.238

The2018ProposedBillalsoauthorizesacontemplatedBureauofMarihuanaPolicy tocreateadditional license categories as needed.239 The City suggests creation of several additionallicensecategoriesattheoutsetinordertoensurethatthecommercialindustryhasthesupportstructuretodevelopandgrowsuccessfullyandresponsibly,specificallyforresearch,individualsworkinginthelegalcannabisindustry,andindustryevents.

First,theCityrecommendsconsiderationofcreatingacannabisresearchlicensecategorythatgrants the holder the ability to produce, process, and possess cannabis for limited researchpurposesandnotforsale.BecausecannabisremainsaScheduleIsubstanceunderfederallaw,240institutionsstudyingitshealthimpactsandmedicinalbenefitsoftenstruggletoconductreliableandrigorousresearch.241In2016,WashingtonStatecreatedaresearchlicensecategorytohelpaddressthatgap.242Massachusettsalsoallowsspeciallydesignatedcannabisresearchfacilitiesto cultivate, purchase, or otherwise acquire cannabis for research purposes,243 and OregonallowsprivateandpublicentitiestoapplyforresearchcertificationthroughtheState’scannabislicensing authority.244 Permitting and regulating cannabis-related researchwould allowNewYorkStatetooccupyaleadingpositioninthefieldofcannabisresearchandprovidecriticaldataonthepublichealthandsocialimpactsofcannabis,asthetypesofproductsandusesofcannabisevolveinalegalizedcontext.

Second,theCityadvisesreviewofalicenseforindividualsworkinginthelegalcannabisindustry,akintolicensesinthefoodserviceindustryforfoodhandlers.245Coloradoissuesoccupationallicensestostaffwhoworkinorhaveaccesstorestrictedareasoflicensedcannabisfacilities.246Theselicenseswouldhelpestablishanynecessarysafetyandtrainingstandardsforworkersintheindustry—includingoccupationalsafetyregardingexposureandfoodhandling(foredibles)—andaknowledgebaseforconsumereducation.Additionally,theselicensescouldalsofacilitatethecreationofanyequitypreferenceforemployeeswithapriorhistoryofjusticeinvolvement

238

SeeS.3040-C,sec.31§169.239

SeeS.3040-C,sec.31§169(10).240

SeeU.S.DrugEnf’tAdmin.,DrugScheduling,https://www.dea.gov/drug-scheduling.241

SeeRobertGebelhoff,GoodScienceonMarijuanaIsSoHardtoFind,Wash.Post(Mar.15,2017),https://www.washingtonpost.com/news/in-theory/wp/2017/03/15/good-science-on-marijuana-is-so-hard-to-find;EricKillelea,WhyIsItSoHardtoStudyPot?,RollingStone(Feb.8,2018),https://www.rollingstone.com/culture/culture-features/why-is-it-so-hard-to-study-pot-124767.242

SeeWash.Admin.Code§314-55-073;seealsoMelissaSantos,Washington’sPlansforPotResearchGoingForward,DespiteFederalRules,NewsTrib.(Aug.21,2016),https://www.thenewstribune.com/news/politics-government/article96791752.html.243

SeeMass.CannabisControlComm’n,GuidanceonTypesofMarijuanaEstablishmentLicenses,https://mass-cannabis-control.com/wp-content/uploads/2018/04/Guidance-License-Types.pdf.244

SeeOr.Rev.Stat.§475B.286.245

SeeN.Y.C.Dep’tofHealth&MentalHygiene,FoodProtectionCertificate,https://www1.nyc.gov/nycbusiness/description/food-protection-certificate.246

SeeColo.Rev.Stat.§44-12-401(1)(e).

52

withcannabis.Additionaltrainingonde-escalationmightalsobeuseful,giventhepsychoactivenature of cannabis products and the associated impacts on behavior that might occur forconsumers.

Third,theCitysuggestsanadditionallicensecategoryforpurposesofindustryevents,especiallytradeshowsandconferences,asCaliforniahasdone.247Specialrestrictionsshouldbeplacedonthislicensetypetolimitthepotentialforaneventtobecomeamassiveconsumptionvehicle,ratherthanaplacetoconductbusiness,whichwastheimpetusbehindCalifornia’stemporaryeventlicense.248

11. Allow Only Sole-Purpose Cannabis Businesses

The City supports a model where all cannabis retail businesses are sole-purpose cannabisbusinesses, so that only businesses with a cannabis license could sell cannabis, and thosebusinesseswouldberestrictedintheirabilitytosellotherproducts.Thus,restaurantsandstoreswouldnotbeabletoacquireanadditionallicensetobeginsellingorservingcannabisasoneoftheirproducts. Similarly,processorsanddistributorswouldnotbeabletoacquireacannabislicenseasanadditional license. Thiswouldmean thatnoexisting foodprocessoror foodorconveniencestorecouldsellcannabisproducts(smokableorconsumable).

ManyCityestablishmentsalreadysellCBDproducts,whicharelegalinNewYorkState,asCBDisminimally psychoactive and believed not to carry significant health risks. 249 However,consumablecannabisproductsthatcontainbothCBDandTHC(thepsychoactivecomponentincannabis)posemoresignificantpublichealthconcerns.250

GiventhepresenceofthepsychoactivecompoundTHCincannabisproducts,itisimportanttolimit, tothegreatestextentpossible,anymixingofcannabisandproducts thatcontainotherintoxicants,especiallyalcohol.Thus,establishmentsthatsellalcoholshouldnotbepermittedtosellcannabisproducts.Cannabisestablishmentsmaybepermittedtosellfoodandnon-alcoholicbeverages,withproperregulations.Itisimportanttonote,however,thattheserestrictionsneednot apply to businesses selling CBD-only products (though, of course, there should be basicregulationsofCBD-onlyproductsinkeepingwithanyfoodordrug).

247

SeeCal.BureauofCannabisControl,CannabisEventFactSheet,https://www.bcc.ca.gov/about_us/documents/18-003_cannabis_factsheet.pdf.248

Seeid.249

WorldHealthOrg.,ExpertComm.onDrugDependence,Cannabidiol(CBD)Pre-ReviewReport,AgendaItem5.25,7(Nov.2017),http://www.who.int/medicines/access/controlled-substances/5.2_CBD.pdf(notingthatCBD“isgenerallywelltoleratedwithagoodsafetyprofile”and“exhibitsnoeffectsindicativeofanyabuseordependencepotential,”andthatthereisnosubstantiveevidencethatCBDislikelytocauseTHC-likepsychoactiveeffects).250

THC,unlikeCBD,ispsychoactive,andtheonsetofitseffectsaredelayedwhenitisingestedcomparedtowhenitisinhaled,whichcanleadtoover-consumption.DanielG.Barrusetal.,TastyTHC:PromisesandChallengesofCannabisEdibles,MethodsRep.RTIPress3,7-8(2016),https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5260817(notingthatthedelayedonsetofeffectsfromconsumingediblecannabisproductscontainingTHCcancausebothexperiencedandinexperienceduserstoover-consumeoroverdose).

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WashingtonandColoradohaveadoptedrestrictedcannabissalemodels.251Giventheneedforconsumereducationaroundcannabisproductsandtheintoxicatingnatureoftheproduct,thereisastrongpublichealthrationaletomaintainasingle-purposecannabisbusinessstructure inNewYorkaswell.Indeed,thispolicyisparticularlyimportantinNewYorkCity’senvironment,where a highly competitive real estate market creates a risk that uneven concentrations ofcannabisactivitywilloccurintheretailcontext.Allowingnon-sole-purposecannabisbusinessesmay also indirectly incentivize the growth of unregulated non-traditional services or sustaindemandfortheillegalmarket.

It is important that localities be given the authority to regulate the goods that cannabisbusinessesmaysellaswellasthebusinessesthatmayholdcannabislicenses.

12. Give No Preferential Treatment to Existing Registered Organizations for Medical Cannabis

Legislation should not give preferential treatment to existing medical cannabis registeredorganizationsinthenewlicensingscheme.Additionally,existingregisteredorganizationsshouldbe independently regulated. Requirements for adult-use and medical cannabis businessesshould align so as to prevent business owners from seeking a licensewith lower barriers orcosts.252

Decadesoflegalizedmedicalcannabishasledtoawell-developedandwell-capitalizedmedicalmarketpopulatedbyverylargeentities.253Ofcourse,thisexistingstructurecouldbeamarketforce behind ancillary businesses (i.e., legal andmanufacturing assistance) that will need totransitiontosupportingbothmedicalandadult-usecannabisindustries.

On the other hand, it is important to mitigate the advantages that existing registeredorganizationsholdsothattheydonotdominatethenascentadult-usecannabisindustry.Giventhe capital required to launch and operate cultivation, processing, and manufacturingbusinesses,254existingmedical cannabis companieswill be themost likely sourceofavailablecannabisproductsintheearlyperiodoflegalization.Forexample,inMassachusetts,allthirtyof

251

SeeWash.Admin.Code§314-55-079(“Amarijuanaretailerlicenseallowsthelicenseetosellonlyusablemarijuana,marijuanaconcentrates,marijuana-infusedproducts,andmarijuanaparaphernaliaatretailinretailoutletstopersonstwenty-oneyearsofageandolder.”);seealsoWash.StateLiquor&CannabisBd.,FrequentlyAskedQuestionsonMarijuana,https://lcb.wa.gov/mjlicense/marijuana-licensing;Colo.Rev.Stat.§44-12-402(“Alicensedretailmarijuanastoremayonlysellretailmarijuana,retailmarijuanaproducts,marijuanaaccessories,non-consumableproductssuchasapparel,andmarijuanarelatedproductssuchaschildproofpackagingcontainers....”).252

DiscussionwithJimBurack,MarijuanaEnf’tDiv.,Denver,Colo.(Oct.2018).253

See,e.g.,NickMeyers,SowingSuccess:HarvestofArizonaAimstoBetheLargestU.S.CannabisCompany,Phx.NewTimes(Sept.14,2018),https://www.phoenixnewtimes.com/news/harvest-of-arizona-cannabismedical-marijuana-dispensary-10823477(discussingthescaleandexperienceadvantagesofearly-adoptingmedicalcannabiscompanies);MarciaHerouxPounds,PotBusiness:TorontoMedicalMarijuanaCompanytoOpenU.S.HeadquartersinFortLauderdale,SunSentinel(Sept.10,2018)(discussingthe“deeppockets”andtechnical,capital,andbrandingexpertiseofthe“emergingcorporatecannabisindustry,”whichhasitsrootsinthemedicalcannabismarket).254

SeeJackKaskey,AsPotPricesPlunge,GrowersScrambletoCutTheirCosts,Bloomberg(Jan.17,2017),https://www.bloomberg.com/news/articles/2017-01-17/as-pot-prices-plunge-growers-scramble-to-cut-productioncosts;LesterBlack,LegalWeedIsn’ttheBoonSmallBusinessesThoughtItWouldBe,FiveThirtyEight(Dec.29,2017),https://fivethirtyeight.com/features/legal-weed-isnt-the-boon-small-businesses-thought-it-would-be.

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the state’s initial “provisional” licenses went to medical businesses, which were alreadypositionedtoapply.Theyhadthecapital,werefamiliarwiththeapplicationprocess,andwerealreadyincompliancewithmedicalcannabisregulations.255

Means topreventmarketdominancebymedicalcannabiscompanies includea tiered licensesystemthatallocatesanumberof licenses to smallbusinesses. Anothermeasuremaybe topermit targeted business support and assistance to licensees operating on smaller tiers.Moreover, the transition from medical to adult-use cannabis production will require majorchangestoamedicalcannabiscompany’sbusinessmodel.Thisadaptationmaynaturallyreducethe advantages that existing medical cannabis businesses hold for entry into the adult-usecannabis industry, particularly in New York State, which has a restricted medical cannabisindustry.256

13. Applicants with Prior Drug-Related Convictions Should Be Eligible for Licenses

Legalizationshouldprovidethatindividualswithpriordrug-relatedconvictionswillnotbebarredfrom obtaining a cannabis license solely on that basis. Furthermore, previously illegalbusinesses—whether or not formally convicted—should not be penalized when applying forsupportservicesandtechnicalassistance.

Californialegislationprovidesthatapplicantscannotbedeniedalicensesolelyonthebasisofapriorconvictionrelatedtoacontrolledsubstance,andsuchaconvictionmaynotbeconsideredsubstantially related to grounds for denial of a license. 257 This type of provision in Statelegislationwouldsignifyanenormousstepforwardincorrectingthenegative impactofdrug-relatedoffenses,aswellasarecognitionoftheofteninequitableconditionsunderwhichsuchoffensesoccurandareenforced. With respect toprior convictionsnot related to controlledsubstances,licensesmaybedeniedonthebasisofsuchconvictionswhenrelatedtoowningandoperatingabusiness,suchasforfraudortaxevasion.

Additionally, NYCwould benefit from the flexibility to provide agency and nonprofit supporttowards the unique needs of individuals affected by prior cannabis-related arrests andconvictions.258

255

DiscussionwithMass.CannabisControlComm’n(Oct.2018).256

MedicalcannabisisdistributedinNewYorkStatethroughfive“RegisteredOrganizations,”designatedbytheStateDepartmentofHealth,thatarepermittedtobeinvolvedinallphasesofproductionanddistribution,fromcultivationtoretailsales.Additionally,medicalcannabiscanonlybesoldincapsule,liquid,oroilform.SeeGeoffreyA.Mort&DesireeGustafson,NewYork'sMedicalMarijuanaLawComesofAge,N.Y.L.J.(Apr.3,2018),https://www.law.com/newyorklawjournal/2018/04/03/new-yorks-medical-marijuana-law-comes-of-age.Becauseofthedifferencesbetweentheexistingmedicalregimeandtheproposedadult-useregime—whichwouldlimitverticalintegrationandallowsamuchbroaderrangeofproducts—existingmedicalcannabisbusinessesmaystruggletoeasilyadapttotheadult-usemarket.257

SeeAdultUseofMarijuanaAct,2016Cal.Legis.Serv.Prop.64,sec.6,§26057(b)(5).258

Forexample,theLosAngelesCountyWorkingAdvisoryGrouprecommendedrequiringthatcannabisbusinessesadoptCBAsandelementsincludingpercentagecontributiontocommunityorganizations,servingasanincubatortoanequityapplicant,communityclean-ups,andothersupportoptions.SeeL.A.Cty.AdvisoryWorkingGrp.onCannabisRegulation,RecommendationsReport,13,48,214-216(Oct.2017),http://

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14. Provide Targeted Workforce Development

TheCitywillseekauthorizationandfundingnecessaryfortherecruitmentandtrainingneededto sustain the new industry and support the City’s equity goals for creating employmentopportunitiesforthosedisparatelyimpactedbycannabiscriminalization.

TheCityneedstobepreparedtohelpwiththechallengesofsupportingnewjobsthatcomewithanynewindustry—forownersandemployeesalike—aswellasthemorenovelchallengesuniquetothecannabisindustry,suchasprotectingworkerswithinafederallyprohibitedindustryandtrainingthemforthenewanduniqueskillsrequiredwhenworkingwithcannabis.Jobsdirectlycreatedbythenewindustrywillincludecultivation,distribution,andretailoperations.Further,workersatalllevelsinexistingrelatedprofessionswillrequiresupplementaltrainingtotransitiontothecannabisindustry.

Inadditiontocompliancetraining,workerswillrequireindustry-specificsafetytraininggiventhebiological and chemicalhazardsof the industry. Forexample,Coloradoprovided trainingonfederal OSHA requirements, state regulations, and a best practice guide to ensure workersafety.259Workersmayalsorequirede-escalationtrainingfordefusingconflictsituations(asaresultofincreasedsecurityandpossibleburglaryrisks).

Further,certainexistingindustriesmaymoveintothecannabisspaceforindirectemploymentopportunities. 260 Scientists and chemists will be needed to conduct product safety tests.Attorneys will be needed for questions of compliance. Public relations professionals andadvertiserswillbeneededtoassist thepublic faceof the industry. Other industriesaffectedincludemanufacturing,constructionanddesign,distribution,andtruckinganddelivery.Alloftheseindustrieswillneedaccurateinformationtoassistthemincomplianceinanewregulatoryenvironment.Healthcareworkersandsubstanceusecounselorsmayalsoneedtrainingtobetterunderstandnewchallenges.261

Inordertopromoteequity,theCitywillseekStatesupporttoincentivizeownerstohireacertainpercentage of employees from target populations. The program could provide incentives forbusiness applicantswhoprovidehiring plans for hiring, training, and advancingminority and

cannabis.lacounty.gov/wp-content/uploads/2017/10/2017-10-24-FINAL-AWG-Recommendations-Report.pdf.GreatBarrington,Massachusettsalsolevieda3%taxandrequiredcannabisshopownerstomakea$10,000donationtoalocalnonprofitdedicatedtoeducatingthepopulationoncannabis.SeeZoeChevalier,RecreationalMarijuana:ABusinessBoonforStates?,U.S.News&WorldRep.(Aug.1,2018),https://www.usnews.com/news/best-states/articles/2018-08-01/the-legalization-of-recreational-marijuana-an-economic-opportunity-for-states.InMaryland,stakeholdersproposedthatbusinessesmakeafinancialcontributiontoprogramsforindividualswithpriorcriminaljusticesysteminvolvementforcannabis-relatedoffenses.SeeRushernBaker,Let’sTalkAboutEconomicJusticeBeforeWeLegalizeMarijuana,Phila.Trib.(June26,2018),http://www.phillytrib.com/commentary/columns/let-s-talk-about-economic-justice-before-we-legalize-marijuana/article_96127b7a-1e11-5e04-9347-79ec6d90caf9.html.259

SeeN.Y.Dep’tofHealth,AssessmentofthePotentialImpactofRegulatedMarijuanainNewYorkState,at25.260

SeeChristopherGavin,WantaJobinMassachusetts’sMarijuanaIndustry?Here’sWhattoKnow,Bos.Globe(July17,2018),https://www.boston.com/news/local-news/2018/07/17/marijuana-jobs-massachusetts.261

SeeN.Y.Dep’tofHealth,AssessmentofthePotentialImpactofRegulatedMarijuanainNewYorkState,at22.

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women applicants as well as incentives for businesses to provide living wages above theminimumwage.

Othermunicipalitieshaveexploredsimilarmodels. Forexample, inLongBeach,California,allcannabis businesses, regardless of application type,must ensure that 40% of employees areeither low-income or have had convictions for cannabis-related crime. 262 The Los Angelesadvisoryworkinggrouprecommended30%localhiringforcannabisbusinesses.263

V. Recommendations to Afford Local Governments Authority over Land Use Determinations

1. Localities Should Have Authority to Determine Cannabis Use and Area Restrictions

Legislationshouldallowlocalitiestoadoptthesamebasicrestrictionsforcannabisbusinessesthat already exist for alcohol and tobacco businesses, including distances from schools,playgrounds,andplacesofworship. Localitieswouldbenefit frommaximumauthority tosettheirowngoalswithregardtowherelicenseesmaylocate.NewYorkCitywillneedtheabilitytoregulate thesevarious restrictions through local legislativeand landuseprocesses,especiallygiventheCity’sdensity.

Otherstatesexplicitlyvesttheabilitytodecidetheseissueswithlocallegislativebodies.Nevadaspecifiesthatalocalitymayadoptandenforceitsowncannabiscontrolmeasurespertainingtozoningandlanduseforcannabisestablishments.264Similarly,Washingtonallowsmunicipalitiesto adopt laws and regulations, including zoning legislation, to govern location of cannabisoperations in their cities, so long as the limits imposed are consistent with the overarchinglegislative scheme and the State Liquor Control Board’s cannabis-specific regulations. 265Massachusetts and Oregon also require prospective licensees to demonstrate to the statelicensingauthoritycompliancewithlocalzoningrules.266

Theactivitiesassociatedwiththelegalcannabisindustrygenerallyfitwithintheexistingzoninguse groups; major structural changes to the basic zoning system are unnecessary toaccommodatemostcannabis-relatedactivities.267Suchactivitiesasretailing,warehousingand

262

SeeChrisHaire,LongBeach’spioneeringmarijuanasocial-equityprogramaimstotackleracial,economicinjustice,PressTelegram(June22,2018),https://www.presstelegram.com/2018/06/22/long-beachs-pioneering-marijuana-social-equity-program-aims-to-tackle-racial-economic-injustice/.263

SeeL.A.Cty.AdvisoryWorkingGrp.onCannabisRegulation,RecommendationsReport4(Oct.2017),http://cannabis.lacounty.gov/wp-content/uploads/2017/10/2017-10-24-FINAL-AWG-Recommendations-Report.pdf.264

SeeNev.Rev.Stat.§453D.400.265

SeeWash.InitiativeI-502,sec.6.266

SeeMedicinalandAdult-UseCannabisRegulationandSafetyAct,S.94-B,sec.61,§26070.5(Cal.2017);935Mass.CodeRegs.500.101(1);Or.Rev.Stat.§475B.063.267

SeeNewYorkCityPlanning,TheZoningResolution,https://www1.nyc.gov/site/planning/zoning/access-text.page.

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distribution, testing, and cultivation are allowed broadly in areas where such activities areconsideredappropriateforotheragriculturalproducts.268

To theextent that limitationson the locationornumberof establishments conducting theseactivitiesmustbedesignated,thisshouldoccurthroughregulationoflicensestoconductthesebusiness activities. Land use limitations, including distance from schools, parks, or places ofworship, as well as limits on presence in multi-use buildings or proximity to residentialpopulations,wouldbebestaddressedbylocalgovernmentalbodies.

2. Local Authority to Set Restrictions on Cannabis Business Density

NewYorkCityshouldhavetheauthorityto imposeother locationrestrictionsasappropriate,includingplacingdensitylimitswithindefinedgeographicareas(i.e.,communitydistricts),andrestrictionsonthenumberofstoresperCityblock(“blockface”restrictions).

Suchrestrictionsareimportantastheyrelatetoconsumer-facingcannabisbusinesses,namelyretailandon-siteconsumptionlicensees,andalsotoproductionbusinessesborderingresidentialareas.TheTaskForceseekstopreventover-concentrationsofcannabisoutletsintheCityandensurethatthelocationofthesebusinessestakesintoaccountbroadercommercialstorefrontactivityonCitystreetscapes,forreasonsrelatedtopublichealthandlocaleconomiccompetition.GiventhecompetitiveandscarcenatureoftheNewYorkCityrealestatemarket,concentrationsof cannabis businesses would likely develop without proactive and intentional densityrestrictions.

TheNewYorkStateLiquorAuthority includessomeof theserestrictions in its regulations forliquorlicenseapplicants,butbecauseofgeneralwaiverprovisions,concentrationsofeitheron-siteorretaillicensesareatlevelsthatwouldlikelybeproblematicforlegalcannabis,particularlygivenpublichealthconcerns.269

InNewYorkCity,communityboardreviewcanofferameaningfulprocesstosolicitinputfromthe local community on decisions about the location and operation of such facilities, withdecision-makingauthorityvestedintheCitytodeterminedensitycriteriaforlicenseelocationsandapproveon-siteconsumptionlicenses.

268

Seeid.269

SeeN.Y.Alco.Bev.Cont.Law.

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VI. Recommendations to Support Access to Financial Resources and Services

1. To Reduce Barriers to Entry for Small Business Owners, Legislation Should Expressly Provide that Banking and Professional Services for Cannabis-Related Businesses Do Not Violate State Law

Providing financial services to cannabis businesses is complex and uncertain due to currentfederalrestrictions,reducingthewillingnessoffinancialinstitutionstoprovidecriticallyneededbankingservicestocannabis-relatedbusinesses.270Thishas,inturn,resultedincannabis-relatedbusinesses having to operate mostly in cash, 271 thereby becoming more vulnerable tocriminality—bothastargetsandasactors—inareasincludingtaxandregulatoryevasion272androbbery.273 Additionally, the lack of traditional banking services exacerbates the racial andsocioeconomicdisparitiesinaccessingreliableformsoffinancingandcapital.274

Forthesereasons, it is imperativethattheCityandStateworkwith financial institutionsandcannabis-relatedbusinessestoprovideaccesstobankingandotherfinancialservices.NewYorkCity,theworldleaderincapitalforbankingandfinancialservices,hastheopportunitytoprovideleadershipincannabis-relatedbusinessbankingaswell.

Federalandstateregulatorsmaintainoverlappingoversightandlegalauthorityoverbanks.275ThefederalControlledSubstancesActmakesitacrimetoconspiretomanufacture,distribute,or dispense cannabis, including offering aid as an accessory after the fact. 276 The MoneyLaunderingControlActmakesitacrimetoconductafinancialtransactioninvolvingtheproceedsofcertainspecified illegalactivity(includingcannabisproductionandsales),knowingthatthetransactionintendstoconcealtheillegalactivityfromreportingunderstateorfederal law.277

270

SeeTheEconomist,MostBanksWon’tTouchAmerica’sLegalPotIndustry(Apr.20,2018),https://www.economist.com/graphic-detail/2018/04/20/most-banks-wont-touch-americas-legal-pot-industry.271

See,e.g.,JeremyBerke,MarijuanaStartupsHandlingMillionsofDollarsAreForcedtoHideCashandUseSecureVaultsBecauseThey’reShutOutoftheBankingSystem,BusinessInsider(Sept.4,2018),https://www.businessinsider.com/marijuana-startups-shut-out-banking-system-2018-8.272

See,e.g.,PressRelease,U.S.Attorney’sOfficefortheN.Dist.ofCal.,NorthBayMarijuanaDistributorPleadsGuiltytoTaxFraud(May25,2018),https://www.justice.gov/usao-ndca/pr/north-bay-marijuana-distributor-pleads-guilty-tax-fraud(“Woodsdepositedmorethan$1millionintonumerousbankaccountsunderhiscontrolinamountslessthan$10,000.Combined,Woodsfailedtoreportmorethan$1.1millioningrossreceiptsfromhismarijuanadistributionbusiness,whichresultedinataxlossof$466,707totheUnitedStates”).273

See,e.g.,ChrisKudailis,LasVegasMarijuanaDispensaryShuttersAfterRobbery,LasVegasSun(June30,2018),https://lasvegassun.com/news/2018/jun/30/las-vegas-marijuana-dispensary-shutters-after-robb/(notingsevendispensaryrobberiesintheLasVegasareaover18months).274

SeeTracyJarrett,SixReasonsAfricanAmericansAren’tBreakingIntoCannabisIndustry,NBCNews(Apr.19,2015),https://www.nbcnews.com/news/nbcblk/6-reasons-african-americans-cant-break-cannabis-industry-n344486;seealsoTracyJan&FenitNirrapil,BattlingtheRacialRoadblockstoJoiningtheLegalizedMarijuanaTrade,Wash.Post(June2,2017),https://www.washingtonpost.com/business/economy/battling-the-racial-roadblocks-to-joining-the-legalized-marijuana-trade/2017/06/02/7321de02-416f-11e7-9869-bac8b446820a_story.html?noredirect=on&utm_term=.7d54e243c52f.275

SeeJulieAndersonHill,Banks,MarijuanaandFederalism,65CaseWesternReserveL.Rev.597,605-07(2015).276

See21U.S.C.§801etseq.277

See18U.S.C.§§1956,1957.

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Otherlaws,includingtheBankSecrecyAct,278requirebankstoimplementcomplianceprogramstopreventmoneylaunderingandrequirefilingofSuspiciousActivityReports(“SARs”)withtheDepartment of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) for, verygenerally,279anytransactionthatinvolvesmorethan$10,000incashorismorethan$5,000andappearstoderivefromillegalactivitiesorevadefederallaw.280

EventhoughformerAttorneyGeneralSessionsdirected localU.S.AttorneystofollowgeneralDepartmentofJusticeguidanceregardingthedecisiontoprosecutecannabis-relatedcrimes,281theguidancefromtheTreasury’sFinancialCrimesEnforcementNetwork(“FinCENGuidance”)still remains in effect. The FinCEN Guidance282 provides that a bank may give services tocannabis-related businesses, consistent with the bank’s obligations under the Bank SecrecyAct.283Todoso,abankmustconductduediligenceonthecannabis-relatedcustomer,andfileoneofthreenewtypesofSARswithFinCENaswellasissuecurrencytransactionreports(“CTRs”)consistentwiththelaw.284A“MarijuanaLimitedSAR”indicatesthecustomerdoesnotviolatestatelawortheprioritiesoftheColeMemo.285A“MarijuanaPrioritySAR”indicatesaviolationofstatelawortheColeMemo.286Anda“MarijuanaTerminationSAR”indicatesthebankneededtoterminatethebankingrelationshipwithacannabis-relatedbusinessinordertomaintainaneffectiveanti-money launderingcomplianceprogram.287TheFinCENGuidanceoffersa listof“red-flags”whichcouldtriggera“Priority”or“Termination”SAR.288

TheimpactofrescissionoftheColeMemoontheFinCENGuidancehascreateduncertainty.289The FinCENGuidance explicitly references the ColeMemo,290making it difficult to know forcertainifcontinuingtofollowtheFinCENGuidancehasanyeffect,andiffollowingtheguidancewould (at least in practice) immunize a bank from federal investigation or prosecution for

278

See31U.S.C.§5311etseq.279

Thespecificrequirementscanbefoundin31C.F.R.§1020.320.280

SeeJulieAndersonHill,Banks,MarijuanaandFederalism,65CaseWesternReserveL.Rev.597,613-17(2015).281

SeeJeffersonB.Sessions,III,AttorneyGen.,MemorandumforAllUnitedStatesAttorneys:MarijuanaEnforcement(Jan.4,2018),https://www.justice.gov/opa/press-release/file/1022196/download.282

SeeU.S.Dep’toftheTreasury,Fin.CrimesEnf’tNetwork,Guidance:BSAExpectationsRegardingMarijuanaRelatedBusinesses(Feb.14,2014),https://www.fincen.gov/sites/default/files/shared/FIN-2014-G001.pdf.283

Seeid.at2-3.284

Seeid.at6.285

Id.at3-4.286

Id.at4.287

Id.at4-5.288

Id.at5-7.289

AletterfromtheDepartmentoftheTreasuryinresponsetocongressionalinquiriesontheimpactoftheColeMemorescissionstatedonly“...wewillnotifythefinancialsectorandsupervisoryauthoritiesofanychanges[tocomeasaresultoftherescission]”,deferringtheissuetoalaterdate.LetterfromDrewMaloney,AssistantSec’yforLegislativeAffairs,U.S.Dep’toftheTreasury,toU.S.Rep.DennyHeck(Jan.31,2018),https://dennyheck.house.gov/sites/dennyheck.house.gov/files/documents/Treasury%20Response%201.31.18_Heck.pdf.290

See,e.g.,“Aspartofitscustomerduediligence,afinancialinstitutionshouldconsiderwhetheramarijuana-relatedbusinessimplicatesoneoftheColeMemoprioritiesorviolatesstatelaw.”U.S.Dep’toftheTreasury,Fin.CrimesEnf’tNetwork,Guidance:BSAExpectationsRegardingMarijuanaRelatedBusinesses3(Feb.14,2014),https://www.fincen.gov/sites/default/files/shared/FIN-2014-G001.pdf.

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cannabisbanking.291However,testimonyfromDepartmentoftheTreasuryofficials, includingTreasurySecretaryMnuchin,indicatestheFinCENguidanceremainsineffect.292

Asaresultofthefederallawsandshiftingenforcementlandscape,banksareextremelycautiousin doing business with cannabis-related businesses, inmany cases refusing entirely.293 Still,accordingtoFinCENstatistics,asofJune2018,some441depositoryinstitutionswereactivelybanking cannabis-relatedbusinesses in theUnited States.294Whileone front for reformandincreasedcertaintyhasbeenapushonthefederalleveltolegalizebankingforcannabis-relatedbusinesses, 295 another front has been efforts by some states to ease their own regulatoryburdensonbankstofurtherfacilitatecannabis-relatedbusinessbanking.296

291

ComplyingwiththeFinCENguidanceshouldavoidcomplicationswiththeDepartmentoftheTreasury,asFinCENisacomponentofthatdepartment.292

AtaFebruary6,2018meetingoftheU.S.HouseofRepresentativesFinancialServicesCommittee,SecretaryMnuchinstated“[t]heintentisnottotake[theFinCENGuidance]downwithoutareplacementthatcandealwiththecurrentsituation.”TomAngell,TrumpTreasurySecretaryWantsMarijuanaMoneyinBanks,Forbes(Feb.6,2018),https://www.forbes.com/sites/tomangell/2018/02/06/trump-treasury-secretary-wants-marijuana-money-in-banks/#6163a2753a53.293

See,e.g.,NickLindsey,CannabisTestingLabinAlaskaShutDownDuetoBankingRegulations,HighTimes(Apr.2,2018),https://hightimes.com/news/cannabis-testing-lab-alaska-shut-down-banking-regulations/(recountingWellsFargothreateningalandlord’smortgageuntilthelandlordagreedtoevictastate-legalcannabistestinglaboratory).Nonetheless,thereisevidence—atleastpriortoSessions’sactioninJanuary2018—thatmajorbanksareactuallydoingsomebusinesswithcannabis-relatedenterprises,despitetheirdenialsandoccasionalshutdowns:“[t]heanalysisfoundthatoutof84applicantstooperatemedicalmarijuanadispensariesinMassachusetts,29reportedhavingaccesstofundsinatleastoneaccountat[amajorbank].”KevinWack,BigBanksWorkedwithPotIndustry,DespiteDenials,RecordsShow,Am.Banker(Jan.11,2017),https://www.americanbanker.com/news/big-banks-worked-with-pot-industry-despite-denials-records-show.294

SeeFinCEN,MarijuanaBankingUpdate2(June2018),https://www.fincen.gov/sites/default/files/shared/3rd%20Q%20MJ%20Stats.pdf.295

ThemostrecentattemptwastheSAFEActof2017,H.R.2215,115thCong.(2017),https://www.congress.gov/bill/115th-congress/senate-bill/1152,whichfailedtopassoutoftheHouseAppropriationsCommitteeinJanuary2018.AssummarizedbytheCongressionalResearchService,thelawwouldhave:“prohibit[ed]afederalbankingregulatorfrom(1)terminatingorlimitingthedepositinsuranceorshareinsuranceofadepositoryinstitutionsolelybecausetheinstitutionprovidesfinancialservicestoalegitimatemarijuana-relatedbusiness;(2)prohibitingorotherwisediscouragingadepositoryinstitutionfromofferingfinancialservicestosuchabusiness;(3)recommending,incentivizing,orencouragingadepositoryinstitutionnottoofferfinancialservicestoanaccountholdersolelybecausetheaccountholderisaffiliatedwithsuchabusiness;or(4)takinganyadverseorcorrectivesupervisoryactiononaloanmadetoapersonsolelybecausethepersoneitherownssuchabusinessorownsrealestateorequipmentleasedorsoldtosuchabusiness.”Asspecifiedbythebill,adepositoryinstitutionshallnot,underfederallaw,beliableorsubjecttoforfeiturefor“providingaloanorotherfinancialservices”toalegitimatemarijuana-relatedbusiness.Id.AletterfromnineteenstateAttorneysGeneraltoCongressionalleadership,urgingpassageofthebill,describedthe“needforCongressionalActiontogetthecashgeneratedby[thecannabis]industryintotheregulatedbankingsectorevenmoreurgent”followingrescissionoftheColememo.LetterfromNineteenStateAttorneysGeneraltoCongressionalLeadershipat2(Jan.16,2018),https://oag.ca.gov/system/files/attachments/press_releases/Final%20Banking%20Letter%20to%20Congress.pdf.296

Forexample,Oregonlawprovidesthatafinancialinstitutionprovidingcustomaryfinancialservicestoastate-licensedcannabis-relatedbusinessis“exemptfromanycriminallawofthisstateanelementofwhichmaybeprovenbysubstantiatingthatapersonprovidesfinancialservicescustomarilyprovidedbyfinancialinstitutions...toapersonwhopossesses,deliversormanufacturesmarijuanaormarijuanaderivedproducts,”decriminalizingbankingforcannabis-relatedbusinesses.H.R.4094-B,78thLeg.Assemb.,2016Reg.Sess.,§2(Or.2016).Afewstateshavegonetheotherway.See,e.g.,AnthonyC.Kaye,BankingandMarijuana,Redux:UtahDepartmentofFinancialInstitutionsCommissionerDeclaresOppositePositiontoNewYork’sEncouragementofBankingServicesforMarijuanaBusinessesLicensedUnderStateLaw,BallardSpahrLLPMoneyLaunderingWatchBlog(Aug.21,2018),https://www.moneylaunderingwatchblog.com/2018/08/banking-and-marijuana-redux-utah-department-of-financial-institutions-commissioner-declares-opposite-position-to-new-yorks-encouragement-of-banking-services-for-marijuana-businesses-license/(notingthatUtah’sCommissioneroftheDivisionofFinancialServicesindicatedthat“ifanyexaminationconductedbyUDFIidentifiesevidenceofcannabis-relatedbankingactivities,UDFIwillcitetheconductasanapparentviolationoffederallaw”).

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Adoptingexplicitprotectionsforbankinginstitutionsandprofessionalserviceproviderswouldhelpalleviateconcernsarisingfromuncertaintyatthefederallevelaboutprovisionofservicestocannabis-relatedbusinesses.297

In a manner similar toWashington’s law,298legislation should provide that offering bankingservicestocannabis-relatedbusinessesisnotastate-levelcrime.

Legislationshouldsimilarlyincludeprovisionsgivingcomforttoaccountants,lawyers,andotherprofessionalserviceprovidersthatrenderingservicestocannabis-relatedbusinessesdoesnotviolateapplicablelicensingorprofessionalrequirements.299

2. The State Department of Finance Should Expand Guidance on Banking Services for Cannabis-Related Businesses

Stateshaveissuedguidancetoenableandencouragefinancialinstitutionstoprovidefinancialservicestocannabis-relatedbusinesses.300Similarly,theStateDepartmentofFinancialServicesshould build on guidance encouraging banking institutions to provide financial services tomedicalcannabisbusinessesissuedin2018.301TheguidancedeclaredthattheDepartmentofFinancial Serviceswouldnot impose regulatoryactionsonanybank“solely forestablishingabanking relationship with a medical [cannabis]-related business that operates a compliantbusiness in New York,”302 if the institution (i) complies with the 2014 FinCEN Guidance forfinancialinstitutionsprovidingfinancialservicestocannabis-relatedbusinesses,(ii)complieswithguidance andpriorities set forth in theColeMemo (despite theMemo’s rescission), and (iii)evaluates therisksassociatedwithofferingproductsandservicesand itsability toeffectivelymanagethoserisks.TheDepartmentofFinancialServicesshouldexpandthisguidancetoadult-use cannabis-related businesses simultaneously with State legislation legalizing cannabis,297

AmodelprovisioncanbefoundinOregon’sHouseBill4094.SeeH.R.4094-B,78thLeg.Assemb.,2016Reg.Sess.,§2(Or.2016)(providingthatafinancialinstitutionprovidingcustomaryfinancialservicestoaState-licensedcannabis-relatedbusinessis“exemptfromanycriminallawofthisstateanelementofwhichmaybeprovenbysubstantiatingthatapersonprovidesfinancialservicescustomarilyprovidedbyfinancialinstitutions...toapersonwhopossesses,deliversormanufacturesmarijuanaormarijuanaderivedproducts,”decriminalizingbankingforcannabis-relatedbusinesses).298

SeeS.5928,65thLeg.,2018Reg.Sess.(Wash.2018)(providingthatafinancialinstitution“doesnotcommitacrime[underanyWashingtonlaw]solelybyvirtueofreceivingdeposits,extendingcredit,conductingfundstransfers,transportingcashorotherfinancialinstruments,orprovidingotherfinancialservicesfor”acannabis-relatedbusinessauthorizedunderWashingtonLaw).299

SeeS.5928,65thLeg.,2018Reg.Sess.(Wash.2018)(decriminalizingtheprovisionofaccountingservicestocannabis-relatedbusinessesforcertifiedpublicaccountantsandtheirfirms);DavidC.Spellman,2018WashingtonStateComfortLegislationfortheFinancialIndustryandAccountantsDealingwithLicensedMarijuanaBusinesses,ThePipeline,LanePowellPCCannabisLawBlog(Apr.12,2018),https://www.cannabislawadvisor.com/2018/04/12/2018-washington-state-comfort-legislation-financial-industry-accountants-dealing-licensed-marijuana-businesses/#_ftnref2.300

Forexample,theMassachusettsDepartmentofBankinghasstatedthat“adherenceto[FinCEN]guidelinesandrecommendationswillsatisfytherequirementsoftheDivisionofBanksforinstitutionsunderitssupervisoryjurisdiction.”Mass.Div.ofBanks,BankingforMarijuanaRelatedBusinessesinMassachusetts(Mar.27,2018),https://www.mass.gov/news/banking-for-marijuana-related-businesses-in-massachusetts.301

SeeMariaT.Vullo,N.Y.StateSuperintendentofFin.Serv.,GuidanceonProvisionofFinancialServicetoMedicalMarijuanaandIndustrialHemp-RelatedBusinessinNewYorkState(July3,2018)[MariaT.Vullo,GuidanceonProvisionofFinancialServicetoMedicalMarijuanaandIndustrialHemp-RelatedBusinessinNewYorkState],https://www.governor.ny.gov/sites/governor.ny.gov/files/atoms/files/New_York_Online_Lending_Survey_Report.pdf.302

Id.at9.

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including the development of robust exam procedures303 and other guidance and technicalassistanceforbanksenteringthecannabisspace.

3. The State Should Provide, and Permit Localities to Provide, Technical Assistance with Banking Services and Access to Capital Services, Including a Loan Fund, to Promote Economic Opportunity

RegulationsshouldprovideforandpermitlocalitiestoprovidetechnicalassistanceandaccesstocapitalservicesforeasingcompliancewithfederalandStateguidelines,withafocusonsmall-sizedcannabis-relatedbusinessesandbusinessesownedbyequityapplicants,suchasminorityandwomen-ownedbusinessesandcannabis-relatedbusinessesaffiliatedwiththosepreviouslyarrested,convicted,orincarceratedforuse,possession,orsaleofcannabis.Locally-administeredequity initiatives in partnership with community nonprofits will most effectively allow localjurisdictionstoreachcommunitiesmostinneedofhistoricalredress.

Giventhatnewbusinesseswillneedassistancenavigatingtheregulatoryregime,localitieswillbenefit from the flexibility toprovideotherprograms that promoteequityby enabling smallbusinesses toopen. Forexamples, localitiescouldconsider institutingprogramsthatprovidetechnicalassistancetocannabis-relatedbusinessesseekingbankingandotherfinancialservices,aswell as programs that allowCity agencies and community nonprofits to provide legal andtechnicalsupportforsmallbusinesses,includingguidancerelatedtoissuesoffederalillegality(suchasaccesstocapitalandtaxconsequences),safetystandards,compliance,qualitycontrol,inspections,meeting licensingrequirements,andpathwaysfromthe illicitmarkettothe legalmarketforpreviouslyillegalbusinesses.

State-supported loanswill be essential to promote racial, ethnic, and gender diversity in thecannabis industry. Inaddition, localities shouldbeallowed to leveragea revolving loan fundthroughpublic-privatepartnershipsorbypartneringwithcreditunionsto implementaco-opmodel to fill theneed for banking services. A fundof at least $10million supporting equityentrants to the field will be needed to make real the promise of equitable access to theburgeoningindustry.

4. Foster City-State Regulatory Information Sharing

It is imperative that the City and State engage in information sharing and utilization ofstandardizedformsbycannabiscontrolauthoritiesontheStateandlocallevels,includingbytheNewYorkStateDepartmentofFinancialServicesandanyotherapplicableStateregulators,tofacilitatestreamlinedcompliancerequirementsandenforcement.

303

SeeWash.Dep’tofFin.Inst.,ProvidingBankingServicestoMarijuanaRelatedBusinessesunderI-502(June23,2014),http://www.dfi.wa.gov/documents/banks/marijuana-faqs.pdf.

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5. Conduct a Feasibility Study with Respect to Financial Services for Cannabis Businesses

A feasibility study should be conducted on whether to establish a State-chartered financialinstitutionthatprovidesfinancialservicestocannabis-relatedbusiness.ThestudyshouldalsoevaluatehowtheStatecaneasetheprocessforincorporationofprivatebanksorcreditunionswithacannabis-relatedbusinessfocus.

Whilesomestateshaveconsideredlicensingorestablishingstate-charteredbankinginstitutionsfor the provision of banking services to cannabis-related businesses, 304 others have beendeterredbysignificantobstacles, includinglackofprotectionforstatebanksfromfederal lawenforcement.305 Still others have attempted to establish close-looped systems,whichwouldallow for cannabis-related businesses to transact business within the state and for financialinstitutionstoprovidefinancialservices inacontainedbankingsystem.306Similarly,Coloradopermitstheestablishmentofcannabisfinancialservicescooperatives,knownas“cannabiscreditco-ops,”which restrictmembership to licensed cannabis-relatedbusinesses that can interactonlywithotherco-opsandtheirmembers.307However,asexemplifiedbyFourthCornerCreditUnion,astate-charteredcreditunionbasedinColorado,308duetouncertaintyatthefederallevelregardingenforcementandproblemswithadministrationandfunding,stateshaverecognizedthesignificantlimitationstotheseplansandcontinuetoevaluatetheirfeasibility.309

304

See,e.g.,H.R.376,30thLeg.,Reg.Sess.(Al.2017);Cal.SenateComm.onBankingandFin.Inst.,AnalysisofFinancialInstitutions:CannabisS.B.930,2017-2018Reg.Sess.(2018)(proposingthecreationofastate-charteredbankstoprovideservicestocannabis-relatedbusinesses).305

See,e.g.,CaliforniaDecidesAgainstState-CharteredBankingforMarijuanaIndustry,MarijuanaBus.Daily(Aug.17,2018),https://mjbizdaily.com/california-decides-against-state-chartered-banks-to-help-marijuana-industry(notingthatCaliforniadecidednottopursueitsplantoestablishaState-charteredbankinginstitutionforcannabis-relatedbusinesses).306

SeeH.R.376,30thLeg.,Reg.Sess.(Al.2017);seealsoCal.SenateComm.onBankingandFin.Inst.,AnalysisofFinancialInstitutions:CannabisS.B.930,2017-2018Reg.Sess.(04/16/18–SenateBankingAndFinancialInstitutions),https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201720180SB930#.307

SeeH.R.14-1398,69thGen.Assemb.,Reg.Sess.(Colo.2014)(enactingtheMarijuanaFinancialServicesCooperativesAct).Aco-opisempoweredtobehavelikeanordinarycreditunion,butmembershipisrestrictedtolicensedcannabis-relatedbusinesses,andaco-opcanonlyinteractwithotherco-opsandtheirownmembers.Theco-opsareexemptedunderColoradolawfromcompliancewithcertainfederallaws,allowingthemtooperatelegallyunderColoradolawregardlessoftheirfederalstatus.SeeColo.LegislativeCouncilStaff,MarijuanaLegislation2014,https://leg.colorado.gov/sites/default/files/14_marijuanalegis.pdf.308

FourthCornerCreditUnion(“FCCU”)wasformedin2014underColorado’sco-oplaw,andappliedfortwokeyfederalprograms:aFederalReserveMasterAccount(essentiallyabankaccountforbanks,allowingFCCUtomaketransferstootherbankswithintheFed’ssystem)anddepositinsuranceunderthefederalNationalCreditUnionAdministration.SeeNathanielPopper,BankingforPotIndustryHitsaRoadblock,N.Y.Times(July30,2015),https://www.nytimes.com/2015/07/31/business/dealbook/federal-reserve-denies-credit-union-for-cannabis.html.Initiallydeniedaccesstobothfederalprograms,FCCUbroughtsuit,includinganappeal(andreversal)ontheMasterAccountissuebeforetheTenthCircuit.SeeBoardofGovernorsoftheFederalReserveSystemAmicusBr.inSupp.ofDef.-Appellants,FourthCornerCreditUnionv.Fed.Res.BankofKansasCity,No.16-1016(10thCir.June27,2016).FCCUrecentlywasgrantedaconditionalapprovalbytheFederalReserveBankofKansasCity,whichrequiredthecredituniontonotservicedispensaries,buttoprovidebankingservicesforcannabis-linkedbusinesses,suchasaccountants,landlords,andlawyers.However,litigationregardingthedepositinsurancecontinues.LalitaClozel,FedBanksMarijuana-FocusedCreditUnion,WallSt.J.(Feb.5,2018),https://www.wsj.com/articles/fed-backs-marijuana-focused-credit-union-1517870188.309

SeeJohnChiang,Cal.StateTreasurer,BankingAccessStrategiesforCannabis-RelatedBusinesses:AReportfromtheStateTreasurer’sCannabisBankingWorkingGroup18-19(2017),https://www.treasurer.ca.gov/cbwg/resources/reports/110717-cannabis-report.pdf.

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AfeasibilitystudycanevaluatetheissueaswellasotherpossibleapproachestoNewYorkStateinvolvementwithfacilitatingbankingservicesforcannabisbusinesses.310

6. Eliminate a Surety Bond Requirement

Thelegislationshouldeliminateanysuretybondrequirement.Asuretybondiscostlytomaintainandaparticularly challenging requirement in the cannabis industrybecause insurers are lesswilling to issue bonds given the federal cannabis ban. Other jurisdictions have faced similarchallenges andhaveeither removed the requirement altogetheror created a flat bond. Forexample,Coloradoremoveditsinitialrequirementtoobtainasuretybond311aftermanysuretybond companies decidednot to issuebonds out of concernwith being chargedwith federalracketeeringlawsundertheRICOAct.312Ontheotherhand,Californiarequiresaflatbondof$5,000 payable to the State.313 In February 2018, Continental Heritage Insurance CompanybecameCalifornia’sfirstapprovedinsurertooffersuretybondstolegalcannabisbusinesses.314Likewise,Oklahomaisconsideringaflat$50,000bondformedicalcultivationoperations.315

Suretybondsalsocreatepracticalchallenges,evenifaninsureriswillingtoissuethem.Aretaillicenseecouldnotreasonablyknowtheanticipatedtaxobligationofthecultivator. Indeed,aretailerandacultivatormaynotevenbeindirectcontactifthereisalongsupplychain.Itisalsounclearwhatthesuretybondwillbeusedtoinsureandwhether,shouldtherebeaviolation,theStateregulatorswill fileagainsttheretailerorthecultivator. Thesefactorsposeasignificantchallengeforaretailerwhowouldbetaskedwithdeterminingtheproperamounttobond.Thisuncertaintymakesitdifficultforaretailertoadequatelyplanforpermittingandlicensingcosts.Italsomakesitdifficultforaretailertoensureitscompliancewithlaw.

Therefore, surety bond requirements should be eliminated tominimize unforeseen costs forsmallbusinessesandnotexacerbatetheobstaclestocreatingnewbusinesses.

310

Forexample,Hawaiihaspartneredwithprivatesectoractors,CanPayfortransactionsandSafeHarborPrivateBanking,tosetupaccounts,toprovidecertainbankingservicestocannabis-relatedbusinesses.SeePRNewswire,SafeHarborandCanPayLaunchStatewideCannabisBankinginHawaii(Sept.13,2017),https://www.prnewswire.com/news-releases/safe-harbor-and-canpay-launch-statewide-cannabis-banking-in-hawaii-300518656.html.311

SeeActRepealingBondingRequirementMarijuanaBusinesses,H.R.16-1041,71stGen.Assemb.,Reg.Sess.(Colo.2016).312

SeeLucindaHoneycutt,ChangestotheColoradoMarijuanaBusinessMakeitEasiertoParticipate,HuffingtonPost(Apr.17,2017),https://www.huffingtonpost.com/lucinda-watrous/changes-to-the-colorado-m_b_9711040.html.313

SeeCal.BureauofCannabisControl,CommercialCannabisLicenseeBondForm(Apr.2018),https://cannabis.ca.gov/2018/04/16/bureau-of-cannabis-control-commercial-cannabis-licensee-bond-form;Cal.BureauofCannabisControl,CommercialCannabisLicenseeBond(Apr.2018),https://www.bcc.ca.gov/clear/licensee_bond.pdf.314

SeePressRelease,Cont’lHeritage,CaliforniaApprovesContinentalHeritageCannabisSuretyProgram(Feb.21,2018),https://continentalheritage.com/california-department-of-insurance-approves-continental-heritage-insurance-company-cannabis-surety-program/.315

SeeTitle310OklahomaStateDepartmentofHealth,Chapter681MedicalMarijuanaControlProgram§310:681-5-3(e)(9)(June26,2018)(WorkingDraftversion1.5),http://omma.ok.gov/Websites/ddeer/images/REVISED.MMR.WorkingDraft.JE06262018.pdf.

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VII. Recommendations for Tax-Related Policy and Revenue Use

1. Local Authorities Should Have Authority to Impose a Sales Tax on Adult-Use Cannabis

Thetaxframeworkforlegalcannabis-relatedactivityshouldfocusonkeygoalsoflegalization:creatingaviablelegalmarketthatsupplantstheillicitmarket,promotingonlysafecannabisuseamongof-ageindividuals,andbuildingeconomicopportunitiesfordisadvantagedcommunities.

Towardstheseends,theCitywouldseekauthoritytoestablishanoptionforanadd-onlocalsalestaxonretailsalesofadult-usecannabisappropriaterelativetoStatetaxlevels.NewYorkneedstobesensitivethatthetotaltaxburdenimposedoncannabisactivitynotraiselegalcannabispricestoalevelthatincentivizesillicitmarketorillegalcross-bordersales.Thesetaxratesshouldbecompetitivewithsurroundingjurisdictionsinordertodiscouragetraffickingorreducemarketopportunities for New York City businesses. But the total tax levy adopted should establishbalancebetweenNewYorkStateandNewYorkCitytaxestoensurefairdistributionofrevenuesandthatrevenuestreamsareavailableforneededcannabis-relatedprogramsatthelocallevel.

TheenforcementneedsoftheCity,withitshighpopulationdensityandproximitytoNewJerseyandConnecticut,whichareconsideringlegalization,316arelikelytobesignificant,aswillbetheresourcesrequiredforlocallyfundedcannabis-relatedhealth,economicopportunity,andotherpublicservicesinNewYorkCity.

Noadditional localexcise taxon cannabis transactions shouldbeaddedasa funding source,however,eventhoughCityexcisetaxesarecurrentlyimposedoncigaretteandalcoholsalesinthe City. 317 A sales tax is preferred to an excise tax because of the relative simplicity ofadministration,enforcement,andcollection,althoughthepossiblehighpercentageoftaxesthatwillbepaidincashduetothelimitedfinancialservicesavailabletocannabisvendorswillcreatechallenges.Thesalestaxinfrastructureisalreadyinplace.318Allretailvendorsarerequiredtofilesalestaxreturnsunderexistinglaw,319andthereforetheadditionalburdenonthevendorandtheStatewillbemodest.ThesalestaxwouldbeadministeredandenforcedbyNewYork

316

SeeSandraGomez-Aceves,ConnecticutLegislativeCommitteePassesRecreationalMarijuanaBill,HartfordCourant(Apr.5,2018),http://www.courant.com/politics/hc-pol-marijuana-legislation-hits-committee-deadline-20180405-story.html. NewJerseyhasrecentlyintroducedarevisedbilltolegalizeadultuseofcannabis.SeeNewJerseyCannabisRegulatoryandExpungementAidModernizationAct,S.2703,218thLeg.(N.J.2018).TheNewJerseybillprovidesforatax“attherateof5.375percentuponthereceiptsfromtheretailsaleofcannabisitemsbyacannabisretailertoretailcustomerswhoare21yearsofageorolder.”Id.§18(a).Underthebill,thetaxwillescalateovertime:“Toencourageearlyparticipationinanddevelopmentofmarijuanaestablishmentsandtounderminetheillegalmarketplace,thetaxshallescalateasfollows:inyearonefollowingtheenactment[thisbill],theexcisetaxshallbe10percent;inyeartwo,thetaxshallbe15percent;inyearthree,thetaxrateshallbe20percent;andinyearfourandbeyond,thetaxshallbe25percent.”Id.317

Largelocalitiesareregularlygranteddifferentstatusandauthorities.See,e.g.,N.Y.Tax.Law§1301(authoritytoimposelocalincometaxes).318

See,e.g.,N.Y.TaxLaw§§1250;1105,1111.The2018ProposedBillcontemplatesusingthisinfrastructure.SeeS.3040-C,sec.33§§447-A,449.319

SeegenerallyN.Y.TaxLaw§§1105-1107.

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State(asisthecurrentlyimposed8.875%aggregateNewYorkState/NewYorkCitysalestax),320althoughtheCityshouldhavearoleinNewYorktax-relatedandlicensingenforcement,whichshouldbebolsteredinthecannabiscontextwithaccessforlocalagenciestorelevantseed-to-salesystemdata.

An excise tax could be “upstreamed” to distributors, potentially decreasing the number ofbusinessentitiesthetaxauthoritieswouldhavetomonitor.However,alocalexciseinadditiontoalocalsalestaxwouldbemorecomplextoadministerandenforceandcouldhaveunwantedtaxcascadingeffects—theexcisetaxcouldbecomepartofthesalestaxbase.Distributorscouldbe located outside the taxing locality, making enforcement (even with seed–to-sale systemaccess)moredifficultforlocalregulators. Giventhelargeagriculturallandorgrowhousespacesrequired for cannabis cultivation, in the medium- and long-term, cannabis production andprocessingwill likely takeplaceprimarilyoutsideofNewYorkCity. Thereareadministrativeadvantagestofocusingontaxingattheretaillevelwherevendorsarelocated,orfordeliveredcannabiswheretheconsumerislocated.

Foreitherasalesorexcisetax,anadvaloremtaxonconsumptionispreferred,andwouldbeinadditiontothecurrentCitysalesandusetaximposedonmostretailsalesoftangiblegoodstoconsumerswithinNewYorkCity.Thistransactionvalue-basedapproachfollowsthatadoptedinseveral other states andmajor cities. A consumption tax basedonpotencyor other unit ofmeasurewouldrequiremonitoringandenforcementofanadditionaltestingregime.321

2. Establish Mechanisms to Study and Set Tax Rates

Mechanisms,suchasaState-localadvisorybody,willbenecessarytoallowforbiennialreviews,reports,andpossibleadjustmentoftaxratesonthebasisofshiftingmarketconditions,demandelasticity,andchangingcross-borderlegalizationandtaxationregimes.

Themostefficienttaxrateispresentlyunknown.Demandforalcoholandtobaccohavebeenshown to be moderately elastic to price—and therefore tax rates. 322 In Washington andColorado,thestateswiththemostmatureadult-usemarkets,taxrevenuesbeganrelativelylowasthemarketdeveloped.Thismayhavebeendrivenbytheinitialneedtoresolveregulatoryandenforcementissues,andthetransitionofcannabisbusinessoutoftheillicitmarketswith

320

Seegenerallyid.321

SeeRichardPhillips,Inst.onTaxationandEcon.Policy,IssueswithTaxingMarijuanaattheStateLevel3(2015),https://itep.org/wp-content/uploads/marijuanaissuesreport.pdf.However,atcultivationitisappropriatetoassessaunittaxperplant,orbyweightofrawplantmaterial.Forexample,Alaskacurrentlychargesa$50perouncetax,seeid.,andCaliforniahasa$9.25perouncetaxonfloweranda$2.75perouncetaxonleaves,seeCal.Dep’tofTaxandFeeAdmin.,TaxGuideforCannabisBusiness:CannabisCultivationTax,http://www.cdtfa.ca.gov/industry/cannabis.htm#Cultivators.322

SeeMatthewC.Farrelly,et.al.,TheConsequencesofHighCigaretteExciseTaxesforLow-IncomeSmoker,7PLOSONEE43838(2012);ScottDrenkard,TaxFound.,FiscalFactSheetNo.565:CigaretteTaxesandSmugglingbyState,2015(Nov.2017),https://taxfoundation.org/cigarette-tax-cigarette-smuggling-2015/.

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adjustment of tax rates. 323 However, New York should be aware that, as happened inWashington, 324 as the legal market develops, cannabis prices can decline, and there is noconsensusonpredictionsoflong-termcannabisconsumptionratesorhowdecliningpricesmayaffectconsumption.325

3. Provide State and City-level Deductions of Business Expenses for Cannabis-related Businesses

TheCityrecommendsthatStateandCity-leveldeductionsofbusinessexpenses forcannabis-related business be provided, notwithstanding the non-deductibility of those expenses forfederaltaxpurposes.

Giventhatcannabis-relatedbusinessesareunabletodeductordinaryandnecessarybusinessexpensesfromtheirfederaltaxableincome,326andfederaltaxableincomeisthestartingpointfordeterminingtaxableincomeforNewYorkStateandCitybusinessincometaxpurposes,327aconsiderable additional economic burden will be placed on cannabis-related businesses ascomparedtootherlegalbusinessesoperatinginNewYork.Inlinewithlegislationinseveralotherstates, especially for medical cannabis businesses, 328 the 2018 Proposed Bill permits thedeductionofordinaryandnecessarybusinessexpensesforStatetaxpurposes.329

The Task Force endorses this provision, and recommends that legalization legislation permitcannabis-relatedbusinessestodeductordinaryandnecessarybusinessexpensesforNewYorkCitytaxpurposesaswell.

323

SeeJosephHenchman&MorganScarboro,TaxFound.,SpecialReportNo.231:MarijuanaLegalizationandTaxes:LessonsforOtherStatesfromColoradoandWashington(May2016),https://taxfoundation.org/marijuana-taxes-lessons-colorado-washington/.324

SeeBDSAnalytics,MarijuanaPricesinSeattleandWashington:Fall2017Update(Jan.24,2018),https://potguide.com/pot-guide-marijuana-news/article/marijuana-prices-in-seattle-and-washington-fall-2017-update/(reportinga77%dropinthepre-taxpricepergramofflowerfromJuly2014toOctober2017).325

SeeRichardPhillips,Inst.onTaxationandEcon.Policy,IssueswithTaxingMarijuanaattheStateLevel3(2015),https://itep.org/wp-content/uploads/marijuanaissuesreport.pdf.326

Section§280EoftheInternalRevenueCode,26U.S.C.§280E,prohibitsabusinessthatengagesintraffickinginanysubstanceonthelist,suchascannabis(21U.S.C.§812,ScheduleI(c)(10)),fromreducinggrossincomebyanydeductionsorcredits,includingstateandlocaltaxes,normallyavailableundertheInternalRevenueCode.327

SeeN.Y.StateDep’tofTax.andFin.,DefinitionsforArticle9-ACorporations(lastupdatedMar.14,2018),https://www.tax.ny.gov/bus/ct/def_art9a.htm#eni.328

See,e.g.,H.R.13-1042,Gen.Assemb.,Reg.Sess.(Colo.2013)(enacted)(permittingmedicalcannabisbusinesstodeductbusinessexpensefrombusinessincometaxforStatetaxpurposes).ButseeMikeMaharrey,CaliforniaGovernorVetoesBilltoAllowMarijuanaBusinessOwnerstoDeductExpensesfromStateTaxes,TenthAmendmentCtr.(Sept.24,2018),https://blog.tenthamendmentcenter.com/2018/09/california-governor-vetoes-bill-to-allow-marijuana-business-owners-to-deduct-expenses-from-state-taxes/(Californiagovernorvetoedthebilltoallowmarijuanabusinessownerstodeductbusinessexpensesfromstatetaxes).329

SeeS.3040-C,sec.33§447-B.

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4. Maintain Current Tax Treatment of Medical Use Cannabis Under the Compassionate Care Act

TheCityproposesthattheCompassionateCareAct,330whichregulatesmedicalcannabisinNewYork,includingwithrespecttotaxation,remainunchangedbyadult-uselegalization.

NewYorkgenerallyhasnotsubjectedprescriptionmedicinetosalestaxation.331 In2014,theCompassionateCareActestablishedamedicalcannabisprogram,whichincludesanexcisetaxof7% on the sale of medical cannabis by registered organizations to certified patients orcaregivers332and exemptsmedical cannabis sales from sales tax.333 The 2018 Proposed Billproposestoexemptmedicalcannabisfromthecontemplatedtaxregimeonadult-usecannabisandleavethemedicalexcisetaxinplace.334

ThemedicalcannabismarketcreatedbytheCompassionateCareActshouldnotbemodified,atleast through the initial adult-use legalization period, consistent with other states that havelegalizedadult-useandmedicalcannabisprograms.335Theeffectsofthenewadult-usemarketinconcertwiththeexistingmedicalusebusinessaredifficulttopredictandshouldbestudiedastheyunfold.TheCompassionateCareActexpiresin2021andcanberenewedorrevised,atthattime,toadjusttomarketchangesresultingfromlegalizationofadult-usecannabis.

330

SeeA.6357-E,2013-2014Reg.Sess.,Gen.Assemb.(N.Y.2013);N.Y.Pub.HealthLaw§3360et.seq.331

SeeN.Y.StateDep’tofTax.&Fin.,Publication840:AGuidetoSalesTaxforDrugstoresandPharmacies7(Aug.1998),https://www.tax.ny.gov/pdf/publications/sales/pub840.pdf(“Salesofdrugsandmedicinesareexemptfromsalestaxifthedrugormedicineisintendedforuse,internallyorexternally,inthediagnosis,cure,mitigation,treatment,orpreventionofillnessesordiseasesinhumanbeings.”).332

SeeA.6357-E§4;N.Y.TaxLaw§490et.seq.;seealsoN.Y.Dep’tofTax.&Fin.,ExciseTaxOnMedicalMarijuana(lastupdatedJuly18,2018),https://www.tax.ny.gov/pubs_and_bulls/tax_types/med_marijuana_tax.htm.Theexcisetaxisallocatedtothe“MedicalMarihuanaTrustFund”heldinjointcustodybytheStatecomptrollerandthecommissioneroftaxationandfinance.SeeA.6357-E§4.NewYorkStatethenallocates22.5%oftheexcisetaxrevenuetocountieswherethemedicalcannabiswasmanufacturedandanother22.5%tocountieswherethemedicalcannabiswassold.Seeid.Inaddition,5%oftherevenueistransferredtotheOfficeofAlcoholismandSubstanceAbuseandanother5%istransferredtotheDivisionofCriminalJusticeServices.SeeN.Y.StateFin.Law§89-H.InFY2018,NewYorkStatecollectednearly$2millioninmedicalcannabisexcisetaxes.SeeN.Y.StateDiv.oftheBudget,FY2019EnactedBudgetFinancialPlan77(May2018),https://www.budget.ny.gov/pubs/archive/fy19/enac/fy19enacFP.pdf.NewYorkCityreceivedapproximately$150,000inFY2018.SeeN.Y.C.Mayor’sOfficeofMgmt.&Budget,TheCityofNewYorkExecutiveBudgetFiscalYear2019:MessageoftheMayor(Apr.2018),https://www1.nyc.gov/assets/omb/downloads/pdf/mm4-18.pdf.333

SeeA.6357-E§4;N.Y.TaxLaw§490et.seq.334

SeeS.3040-C,sec.33§446(1)(excluding“MedicalMarihuanaActivitiesprovidedforinTitleFive-AofArticle33ofthePublicHealthLaw”).335

Forexample,inColorado,medicalcannabisisnotsubjecttotheStateRetailMarijuanaExciseTaxbutissubjecttotheColoradosalestaxof2.9%.Adult-usecannabisissubjectonlytothe15%Stateexcisetaxbutnottheregularsalestaxof2.9%.SeeColo.Dep’tofRevenue,Sales93:SalesTaxonMarijuana(July2017),https://www.colorado.gov/pacific/sites/default/files/Sales93.pdf.InMassachusetts,prescriptioncannabissalesareprovidedwithanexemptionfromtheexcisetaxandthesalestax.See830Mass.CodeRegs.§64N.1.1.WashingtonStateexemptsmedicalcannabisfromtheStatesalestaxbutstillchargesthe37%excisetax.SeeWash.StateDep’tofRevenue,SpecialNotice:SalesandUseTaxExemptionsforMarijuanaRetailerswithaMedicalEndorsement(May2016),https://dor.wa.gov/sites/default/files/legacy/Docs/Pubs/SpecialNotices/2016/sn_16_med_endorsement.pdf.

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5. New York City Tax Revenues Should Be Deposited and Directed Through the City

TheCitywillpursuelegislativeauthoritytoallocatecannabistaxrevenuesintheCity’sgeneralfundtobeusedtoproperlyregulateandprovidenecessarycannabiseducation,publichealth,technical assistance and access to capital services, other equity initiatives, and safety andenforcementprograms.

6. State Tax Revenues Should Be Fairly Distributed to Local Governments, Which Can Promote Local Priorities

TheCityrecommendsthattaxrevenuescollectedattheStatelevelandallocatedforspendinginlocalcommunitiesbefairlydistributedamonglocalgovernments,anddisbursedinlinewithlocalpriorities. Therefore, should a fund similar to the New York State Community GrantsReinvestment Fund as suggested in the Proposed 2018 Bill be established,336New York Cityprogramsshould receivea fair shareof the fundsandCityauthoritiesshouldhave input intoproject-selectionprocessforCityprograms.

TheCityrequeststhatrevenuegeneratedfromStateadult-usecannabistaxesbeallocatedtoassistlocalitiesinthearrayofexpendituresthatwillbeneededtoadministerlegalization,ensureequityopportunities,andmitigateagainstrisks.Thesewillinclude,amongothers:

o developing licensing programs, regulations governing cannabis consumption inpublicplaces,andregulationsforhomeandcommercialcultivation;

o enhancing public safety and enforcement resources needed to respond to thedemandsoflegalizedcannabis;

o developing and implementing youth education campaigns focusing on the risksassociated with cannabis use and abuse for adolescents, including potentialadversehealthconsequences,limitsoneducationalattainment,andexposuretothecriminaljusticesystem;

o developinganddistributingguidancearoundbestpracticesfortheintegrationofcannabis in locally-funded primary care, psychiatric, pain management, andsubstanceusetreatmentsettings;

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SeeS.3040-C,sec.32§99-HH.Ascurrentlydrafted,theNewYorkStateCommunityGrantsReinvestmentFundwillbeawardedbyanExecutiveSteeringCommitteetocommunity-basednonprofitsforthepurposeofreinvestingincommunitiesdisproportionatelyaffectedbypastfederalandstatedrugpolicies.Thegrantsaretobeusedtosupportjobplacement;jobskillsservices;adulteducation;mentalhealthtreatment;substanceusedisordertreatment;systemnavigationservices;legalservicestoaddressbarrierstoreentry;andlinkagestomedicalcare,women’shealthservices,andothercommunity-basedsupportiveservices.TheExecutiveSteeringCommitteewillconsistof13membersfromtheOfficeofChildrenandFamilyServices,withrepresentativesfromotherexecutivedepartments,aswellasappointeesofthemajorityandminorityleadersoftheSenateandAssembly,theComptroller,andrepresentativesoflocalgovernmentandcommunity-basedorganizationsappointedbytheAttorneyGeneral.

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o disbursingtargetedaidtolicenseesandpotentialemployeesoperatingonsmallertiers,includingworkforcedevelopmentandtechnicalassistanceprograms;

o other business supportive services, potentially including access to capital andcomplianceandapplicationassistance;

o workforce development training and recruitment for disparately impactedcommunities,includingthoseformerlyinvolvedwiththecriminaljusticesystem;

o developingacannabisdashboardsimilartothatprovidedbyWashingtonState;337and

o reinvestmentincommunitiesdisproportionatelyimpactedbycannabiscriminalization.

In general, the Task Force recommends that funding bemade available to support cannabisbusinessowners,includingequityapplicantsandsmallbusinessowners,andworkersimpactedbydecriminalization,boththoseservinginnewlycreatedoccupationsandexistingoccupationsimpacted by decriminalization, as well as for other community reinvestment goals. Theseservicesshouldbeprioritizedfortargetpopulationsanddevelopedwithcommunityinput.Someresources may be provided by non-equity applicants, potentially in the form of workforcedevelopment commitments, in-kind donations, and linkage fees, and used for the benefit oftargetpopulations.

Such a community reinvestment program would provide workforce development training,business support for equity applicants and small businesses, and cross-pollination of bestpracticesbetweennon-equityandequityapplicants.

TheNewYorkCity cannabismarketwill simultaneously providenewbusiness andworkforceopportunities,aswellasanewindustrywithattendantregulatory,legal,financial,andresourcechallenges,particularlyfornewentrepreneurs.TheCityshouldthereforeprovidesmallbusinessowners and jobseekerswith capacity building and technical assistance, aswell as regulatory,capital,andlegalresourcestomeetthesecomplexneeds.TheseresourceswillensurethattheCityhasmeaningfullyandrealisticallysupportedoursharedgoal increatingopportunities fornewentrepreneursandworkforcetrainingfornewoccupationalcategories.

Conclusion

Legalization of adult-use cannabis will place the State and the City at a crossroads, withchallengesandopportunitiesahead.Wecanbestnavigatealegalizedenvironmentthrougha

337

SeeWash.StateLiquor&CannabisBd.,MarijuanaDashboard,https://data.lcb.wa.gov/stories/s/WSLCB-Marijuana-Dashboard/hbnp-ia6v/.

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strongStateregulatoryinfrastructurebalancedwithbroadautonomyforlocalgovernmentstomeettheneedsoftheircommunities.TheCityenvisionsregulationtrainedonprotectingpublichealthandsafety,particularlyfortheCity’syouth.Critically,legalizationcanrelievetheburdensofpastcriminalizationthathavedisproportionatelyimpactedpeopleofcolor. Goingforward,legalizationmust seek tominimize, not perpetuate, those disparities. The advent of a newcommercial industry also opens doors to economic opportunities for communities mostimpactedbycriminalization.ItwilltakecoordinatedplanningandresourcestoseizethischancetobuildasafeandmoreequitablenewindustryinNewYork.NewYorkCityhopesthisreportwillhelpbuildasoundframeworkthatadvancesthesegoals.

Stay connected. For updates on cannabis and other criminal justice initiatives follow us on Twitter at: CrimJusticeNYC and visit: nyc.gov/criminaljustice

About the Mayor’s Task Force on Cannabis LegalizationThe Mayor’s Task Force on Cannabis Legalization convened in July 2018 to identify the goals and challenges that should guide the City’s preparations for potential legalization of adult-use cannabis. The following considerations led the group’s work: protect health and safety, redress impacts of past criminalization, and drive economic opportunities to diverse participants. The Task Force is coordinated by the Mayor’s Office of Criminal Justice and includes representatives of relevant City agencies.