One-Hit Wonders

Prince Lobel: OCM Issues Due Diligence and Application Process Checklist

Published

2 years ago

February 27, 2023

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The New York Office of Cannabis Management (“OCM”) recently released a comprehensive document that encapsulates many of the components that the OCM reviews during the application process, and that may be of particular interest to local municipalities, including New York City Community Boards.

In the document, the OCM sets forth the information it reviews for all adult-use applicants, including retail dispensaries, on-site consumption locations, cultivation locations, and more. The Office looks specifically at nine categories of information:

1. Plans

2. Dispensary Approval

3. Store Interior

4. Outdoor Signage

5. Adult-Use Advertising and Marketing Prohibition

6. Security Plan and Storage of Cannabis

7. Security System

8. General Storage

9. Incident Reporting

1. Plans

An adult-use applicant must have (i) a Site Plan; (ii) an Energy and Environmental Plan, and (iii) a Business Continuity plan, among others. Each of these plans contain different pieces of information, and all of them should be complete and comprehensive. For example, the Site Plan should include the location of the premises, the activities performed in each area of the premises, and the entrances and exits to both the property and the general premises.

2. Dispensary Approval

The licensed premises of the dispensary will only be approved if the dispensary is in a location consistent with “public convenience” and “advantage standards,” as determined by the Cannabis Control Board.

As part of the approval process, the OCM and CCB look at a range of factors including, (i) a demonstrable need for such a license in the specific neighborhood; (ii) the effect of the grant of the license on pedestrian or vehicular traffic and parking in proximity to the location; (iii) the possible noise and potential nuisance level that may be a byproduct of the licensed location, and (iv) the “classes and character” of other licenses in proximity to the location and in the particular municipality or subdivision.

3. Store Interior

Licensees must post inside the store, in a manner plainly visible to all customers, the following information: (i) the licensee’s physical retail dispensary license, (ii) the hours of operation, and (iii) public health and safety notifications.

4. Outdoor Signage

Licensees are severely limited in what signage they can create, use, and promulgate when advertising outdoors. First and foremost, licensees are limited to two outdoor signs or placards, and these signs must be affixed to a building or a permanent structure. Thus, licensees cannot place advertisements on vehicles, trucks, arenas, stadiums, or other sports venues. Furthermore, the advertisements are limited to the following information only: (i) the licensee’s name, entity name, or “doing business as” name; (ii) dispensary address, phone number, email address and website URL; and (iii) the nature of the business.

5. Adult-Use Advertising and Marketing Prohibition

All advertising and marketing campaigns must conform to the requirements prescribed in the NY cannabis law. These include ensuring that the advertisements and marketing campaigns (i) are not attractive to individuals under the age of 21, (ii) are not false or misleading, including any health claims or a representation that use of cannabis has curative or therapeutic effects, and (iii) do not include use of coupons, price reductions or customer loyalty programs. This list is far from exhaustive — for a more complete understanding of the Adult-Use Advertising and Marketing prohibitions, please contact an attorney from the Prince Lobel Cannabis Team.

6. Security Plan and Storage of Cannabis

The licensee must create, implement, and maintain a security plan. Included in this security plan is a description of how the licensee is going to (i) prevent access to the licensed premises by unauthorized persons and protect the physical safety of all individuals on the premises; (ii) deter theft or loss of cannabis products; (iii) prevent loitering and ensure that only individuals engaging in legal cannabis activity on the premises of the licensee; (iv) lock all perimeter doors and windows; (v) provide for safe cash storage, handling, and transportation to financial institutions; and (vi) secure all entrances to the licensed facility to prevent unauthorized access.

7. Security System

Licensees are required to have a security system at the dispensary that utilizes commercial grade equipment to prevent and detect diversion, theft, or loss. The system, at a minimum, must include: (i) video cameras that are directed at safes, vaults, sales areas, entry and exit points, and at each point-of-sale area and any other areas where cannabis products are stored, handled, transferred; (ii) a failure notification system that provides an audible, text or visual notification of any failure in the security system (e.g. an alarm or silent alarm) and (iii) a perimeter alarm that communicates with an internal designee and a third-party commercial central monitoring station when intrusion is detected.

8. General Storage

Cannabis and cannabis products must be stored in a secure and locked safe, vault, or other approved equipment or location within the licensed premises, to prevent diversion, theft, or loss. They must also be stored in such a manner as to protect against physical, chemical, and microbial contamination, and deterioration of the cannabis and cannabis products.

9. Incident Reporting

A licensee must notify OCM in a manner prescribed by the Office of any breach of security or other incident immediately and, in no instance, more than 24 hours following discovery of the security breach or incident.

In addition to these nine factors, OCM confirmed that as part of the application process, municipalities (and in the specific case of New York City, Community Boards) play a monumental role in the acceptance or rejection of an applicant’s license. These Community Boards and municipalities may express an opinion in support or against the granting of licenses for adult-use cannabis dispensaries and/or on-site consumption sites. The expressed opinion of the municipality will become part of the official application record upon which the OCM makes its recommendation to the Cannabis Control Board (“CCB”) to either grant or deny a license.

If you are looking to start a cannabis business in New York, or have any questions regarding New York’s cannabis laws or any of the information contained in this alert, please contact, Andrew Schriever, Doug Trokie, James K. Landau, David C. Holland, or any other member of the Prince Lobel Cannabis Team.

With thanks to Alexander Hymowitz for his work on this alert.

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One-Hit Wonders

Kentucky Bills Would Tax and Strictly Regulate Hemp-Infused THC Beverages Like Alcohol

Published

2 weeks ago

March 19, 2025

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In the years since the 2018 Farm Bill became federal law, a burgeoning industry of hemp-infused THC beverages has proliferated throughout the country, including in Kentucky. The 2018 Farm Bill legalized the domestic production of hemp and protected hemp and hemp products in interstate commerce. Likewise, Kentucky law has—for years—broadly allowed retail sales of hemp products, including food and beverages with hemp-derived THC.

Some states, however, perceive the 2018 Farm Bill to have created a legal loophole that allows hemp products with intoxicating amounts of THC to be sold, despite the 2018 Farm Bill’s restriction that hemp may not contain more than 0.3% delta-9 THC on a dry weight basis. To close the loophole, states have enacted laws or implemented regulations banning certain hemp products with intoxicating amounts of THC or restricting such products to adult-use channels like licensed alcohol stores or cannabis dispensaries.

Kentucky appeared poised to do the same when state Senator Julie Raque Adams introduced Senate Bill (SB) 202, which would have placed a one-year moratorium on the sale of hemp-infused THC beverages while the state developed a regulatory regime. Hemp beverage manufacturers and other hemp industry stakeholders loudly and quickly voiced opposition, arguing for narrower means than banning all sales. The next day, Senator Adams filed a floor amendment that removed the moratorium and instead imposed the three-tiered regulatory system that exists for alcohol.

The three-tiered regulatory system that will apply if the bill becomes law has robust requirements, including licensing, shipping, and signature-on-delivery requirements. Additionally, hemp beverages will be limited to five milligrams of intoxicating cannabinoids per serving and may only be sold or consumed by persons 21 years of age or older. Beverages that exceed the cannabinoid limit could be legally sold until May 1, 2025.

The Senate approved the floor amendment. The House passed a committee substitute retaining the Senate floor amendment’s provisions but that extends the sell-through provision until June 1, 2025, and makes the five-milligram per serving limit applicable per every 12-ounce serving. The House committee substitute allows hemp beverages to be sold at fairs, festivals, and similar events. The Senate concurred with the House’s version, and Governor Beshear received the bill to sign into law or veto.

Although SB 202 eschews a ban against hemp-infused THC beverages, it creates strict regulations that differ significantly from the current regulatory regime for hemp beverages, while also directing state agencies to develop further regulations. Ongoing compliance by manufacturers, distributors, and retailers will be critical.

In addition to SB 202, the House and Senate passed House Bill (HB) 775, which sets tax rates for hemp-infused THC beverages. The taxes must be paid and reported by both manufacturers and distributors. Among other provisions, the bill requires manufacturers to obtain a food manufacturer permit from the Department for Public Health and to register with the Department of Revenue, and requires sellers to obtain a retail package, distributor, or direct shipper license. HB 775 is headed to Governor Beshear’s desk.

As a nationally preeminent and leading firm for hemp legal and regulatory services, Frost Brown Todd is well positioned to assist hemp manufacturers, distributors, and retailers in navigating applicable federal and state laws. For more information about SB 202 or HB 775, or their implications for hemp beverages sold in Kentucky, please contact the author or any other attorney with Frost Brown Todd’s Consumable Goods Team.

You can also visit our Hemp Legally Speaking Blog for more insight into the legal and operational issues unique to the industrial hemp, CBD, and hemp-derived THC marketplaces.

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One-Hit Wonders

State Cannabis Banking Laws: Where Equity & Lending Access Stand Today – Eric Foster

Published

3 weeks ago

March 13, 2025

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By Eric Foster |

Cannas Capital Holdings

The Patchwork of State Cannabis Banking Laws

As federal cannabis banking reform remains stalled, states have begun taking independent action to address the capital access crisis for cannabis businesses. While some states like Illinois, Maryland, New York, and Virginia have created state-backed cannabis lending programs, others have taken different approaches, ranging from self-administered programs with no external banking involvement to state protections for financial institutions but no direct state capital support. This mishmash of approaches leaves both Social Equity Cannabis businesses vulnerable to predatory lenders and financial instability and Corporate Cannabis businesses without debt-financed lending options.

This article breaks down state cannabis banking laws, highlighting:

Which states provide structured lending and financing support.
How different states approach social equity financing.
Key differences in state banking statutes and what needs improvement.

1. How States Approach Cannabis Banking & Lending

Since federal banks and credit unions remain hesitant to lend, state governments have adopted various models to facilitate financial access for cannabis licensees.

Four Common Models of State Cannabis Banking & Lending

✅ Model 1: State-Backed Cannabis Lending Programs (Best Practice) These states use cannabis tax revenue to fund capital access programs, creating low-interest or zero-interest loan funds and encouraging banks to participate through loan guarantees and risk-sharing mechanisms.

Examples: Illinois, Maryland, New York, Virginia
Best for: Social equity and minority-owned cannabis businesses needing fair access to financing.

✅ Model 2: State Self-Administered Loan & Grant Programs Without External Bank Partnerships Some states allocate funding for social equity applicants but do not involve external banks, credit unions, or CDFIs in the process. These programs:

Provide a limited total amount of funding per year, which must be replenished through annual appropriations.
Cap the maximum funding available per business.
Do not address the need for long-term lending partnerships that could expand financing options.
Examples: Connecticut, Michigan, Massachusetts, Colorado, New Jersey, New York
Best for: Short-term relief but not a scalable lending solution for long-term business growth.

✅ Model 3: State Legal Protections for Banks Without Direct State Capital Support These states allow banks, credit unions, and CDFIs to serve cannabis businesses without fear of state-level penalties, but they do not provide direct state financial backing for loans or banking relationships. As a result:

Banks must still manage all compliance risks independently, limiting participation.
No state-backed loan guarantees, lending facilities, or grant programs exist to make cannabis lending more attractive.
Only the most risk-tolerant financial institutions choose to engage with cannabis businesses.
Examples: California, Pennsylvania, Arkansas, Rhode Island, Texas, Oklahoma, West Virginia, Ohio, Missouri, South Dakota
Best for: Encouraging some legal banking relationships but fails to ensure broad financial access for cannabis businesses.

✅ Model 4: No State-Level Banking Protections for Cannabis Businesses Some states have legalized cannabis but have not enacted statutory protections for banks or credit unions working with marijuana-related businesses. As a result:

Financial institutions in these states face higher risks when serving cannabis businesses.
No clear legal framework exists to shield banks from potential enforcement actions.
Cannabis businesses in these states remain almost entirely cash-based, increasing security risks and limiting growth.
Example: Louisiana
Worst for: Any cannabis business seeking financial services.

2. State-by-State Breakdown of Cannabis Banking & Lending Programs

Illinois: The Gold Standard for State Cannabis Lending

Best for: Social Equity & Minority-Owned Cannabis Businesses Banking Model: State-Backed Lending & Capital Access Program

The Community Invest – Cannabis Banking Services Program provides state-backed capital to banks and credit unions, enabling them to offer low-cost banking services to cannabis businesses.
The Cannabis Social Equity Loan Program offers low- or no-interest loans to social equity applicants, helping minority businesses establish themselves in the market.

The Illinois Finance Authority administers state-funded loans and subsidizes loans through qualified Banks, Credit Unions and CDFI’s, prioritizing businesses in disproportionately impacted areas.

Maryland: A Strong Model with Loan Loss Reserve Protection

Best for: Small & Medium-Scale Cannabis Businesses Banking Model: State Loan Loss Reserve & Lending Program

Maryland’s Capital Access Program (Subtitle 14, Chapter 26 of 2022) provides loan loss reserve accounts for banks that lend to social equity cannabis businesses.
The state allows dispensaries to apply for loans up to $500,000 and growers/processors up to $1 million, reducing financial barriers.
Maryland’s cannabis tax revenue partially funds these lending programs, ensuring sustainability.

New York: Social Equity-Focused Cannabis Lending

Best for: Justice-Impacted & Minority Entrepreneurs Banking Model: State-Facilitated Loan Fund & Private Investment Pool

New York’s Social Equity Cannabis Fund is structured to provide financial backing to social equity licensees.
The state works with private financial institutions and impact investors to co-fund cannabis business loans.
Loan repayment structures are designed to minimize early financial strain, helping startups succeed.

Virginia: A Developing State Banking Model

Best for: New Market Entrants & Small-Scale Cannabis Businesses Banking Model: State-Led Lending Initiative

Virginia’s State Cannabis Lending Initiative is has not started due to obstruction from Governor Youngkin rejecting the second State legalization bill in 2024 and 2025 but is modeled after Illinois & Maryland.
The state intends to offer cannabis business loans backed by state funds both directly and through Community Development Financial Institutions and Banks, supporting social equity businesses.

3. Where Other States Are Falling Short

Model 2 States: Self-Administered, Limited Loan & Grant Programs

Connecticut, Michigan, Massachusetts, Colorado and New Jersey provide funding for cannabis businesses but do not involve financial institutions, creating short-term solutions but no long-term lending structures.

Colorado self administers their lending program through the Office of Economic Development & International Trade

Model 3 States: State Protections Without Capital Support

California, Pennsylvania, Arkansas, Rhode Island, Texas, Oklahoma, West Virginia, Ohio, Missouri, South Dakota have legal protections for banks working with cannabis businesses but no direct lending or grant programs.

Model 4 States: No Legal Banking Protections

Louisiana has no banking protections for financial institutions, making cannabis businesses in the state almost entirely cash based.

4. The Path Forward: Expanding State-Level Lending Programs

As more states legalize cannabis, the best way to ensure equitable access to capital is to create structured lending programs that involve banks, credit unions, and CDFIs. States that only provide self-administered grants or legal protections for banks are not doing enough to ensure sustainable cannabis financing.

By following the models set by Illinois and Maryland, states can:

✅ Create state-backed cannabis lending facilities using cannabis tax revenues.

✅ Offer loan guarantees to banks and credit unions to reduce lending risks.

The Illinois Cannabis Capital Investment eco-system

✅ Adopt compliance & underwriting frameworks like the Bank Black Initiative & Cannabis Compliance Banking Solution to support financial institutions.

How Bank Black & Cannabis Compliance Banking Can Help

Cannas Capital’s Bank Black Initiative and Cannabis Compliance Banking & Capital Solution offer: ✅ AI-driven underwriting to de-risk cannabis loans. ✅ Regulatory compliance monitoring for banks & state agencies. ✅ Social equity-focused lending frameworks to ensure minority-owned businesses have fair access to capital.

Final Thoughts: Why State-Led Action is Necessary

The federal government isn’t moving on cannabis banking reform anytime soon. That means states must take the lead in creating sustainable, scalable lending programs for cannabis businesses. Expanding access to capital is not just about financing cannabis businesses—it’s about ensuring that social equity applicants and minority-owned companies have the same opportunities to succeed as well-capitalized corporate players.

With models like Illinois, Maryland, and New York, we already see effective solutions that prioritize social equity financing. The next step is expanding these programs to more states—and integrating compliance-driven solutions like the Bank Black Initiative to make them even stronger.

Citations & Key References

Source

Key Information Referenced

Link or Document

Illinois Finance Authority Act (20 ILCS 3501/801-5)

Illinois state-backed cannabis banking program

Illinois Finance Authority Act

Maryland Chapter 26 of 2022 & Chapter 254/255 of 2023

Maryland’s cannabis loan loss reserve and capital access program

Chapter 254/255 of 2023

New York Social Equity Cannabis Fund

State-backed cannabis investment fund