Budding Opportunities: Cannabis Consumption Lounges in New York State

Written by Melissa Greenberg and Courtney Barnes

New York’s soon to be implemented on-site consumption licensing program provides a fresh and potentially lucrative opportunity for entrepreneurs and independent businesses to enter the state’s blossoming cannabis industry. Although regulations to implement the program have not yet been adopted, the Marihuana Regulation & Taxation Act (MRTA) provides the framework for what an adult-use on-site consumption license could offer, explained in the paragraphs below. This article is the first of three parts, in which we will summarize potential opportunities and legal considerations applicable to pursuing an on-site consumption license in New York State, including the nexus between the cannabis and wellness industries as they relate to this area of licensing.

What is an on-site consumption license?

An on-site consumption license, as authorized by MRTA, will allow license holders to sell cannabis products to adults twenty-one years of age and older as well as provide space for adults to consume the cannabis they purchase on the same licensed premises. Put simply, while a dispensary can be thought of as a liquor store, an on-site consumption lounge will operate akin to a cocktail bar – without the corresponding hangover. Users will be able to stay on the premises to enjoy their purchase as well as engage in an (almost) limitless variety of other activities traditional businesses currently offer sans cannabis. From bookstores to yoga studios, acupuncture facilities, spas, and fitness centers, given the flexibility contained in the statute with respect to the types of businesses that may hold these licenses, the consumption lounge program has the potential to transform the way New Yorkers are able to experience health, wellness, and leisure.

What makes this license a great opportunity for health and wellness centers and independent business owners new to cannabis?

New York’s on-site consumption program is an exciting opportunity for health and wellness centers and independent business owners to enter into the state legal cannabis industry because the MRTA prohibits most types of current licensed cannabis businesses (i.e., cultivators, manufacturers, and distributors) from simultaneously holding one of these retail-type licenses. Accordingly, on-site consumption lounge licensees will not be competing with vertically integrated cannabis businesses and the majority of current license holders for market share. Examples of the types of non-cannabis businesses prohibited from applying for an on-site consumption license include those where alcoholic beverages are sold, gambling is allowed, or fireworks are displayed, making it easier for on-site consumption licensees to focus on the cannabis as an accoutrement to a wellness business and distinguish themselves from other enterprises not focused on health and wellbeing. As introduced above, examples of “wellness spaces” could include yoga studios, fitness facilities, meditation studios, acupuncture centers, massage centers, and more.

This license type is also ideal for smaller, independent business operators because state law provides that one may only obtain three on-site consumption licenses, which may help reduce the likelihood that large chains will try to adopt this type of service into their business model. Both existing companies in the wellness industry, as well as new companies seeking to enter the space, will have the opportunity to integrate cannabis into their New York business model via consumption.

Will my business be eligible? What else do we know so far?

In addition to the restrictions on the types of businesses that may hold an on-site consumption license outlined above, businesses who currently serve patrons of all ages may have to change their model to participate in the program. While there is potential that state regulations could allow for the partitioning of the licensed premises from other areas of the establishment (so long as there is a separate entrance and exit), MRTA prohibits the licensed premises from being accessible to anyone under the age of twenty- one and requires that all ingress and egress to the licensed premises be monitored and controlled. On- site consumption license applicants will also have to demonstrate that they have authorization from the owner of the property where the lounge is to be located to operate a consumption lounge, in addition to local government approval. The types of documents and substantiation required to demonstrate compliance with these requirements is yet to be determined and the adoption of regulations to implement the program will answer many of the current unknowns.

Nonetheless, the openness and flexibility of the already established framework could help New York establish itself as a leader in normalizing and responsibly promoting the use of cannabis as a component of self-care; an integral part of maintaining work-life balance. There is a synergistic connection between these modalities and the benefits of cannabis on both a physical and mental level, and we’re at the precipice of this momentous change and development here in New York. Stay tuned!