Out-of-state cannabis operators have been clamoring to enter New York’s market for adult-use marijuana. However, the regulators of New York designed this program in order to keep out large multi-state operators and protect residents’ market opportunities.
But a new license – the Adult-use Processor Type 3 Branding License – opens the door for some of those out-of-state operators, so long as they can work with other authorized licensees.
What is Type 3 License?
Type 3 permits brands to sign white label agreements to manufacture cannabis products with state-licensed processors. The licensee does not have to be physically located in the state.
It does not authorize any type of direct contact with plants by the Type 3 licencee.
The New York Office of Cannabis Management can “better regulate the cannabis brand activities” by capturing True Parties of Interest. This also assures the agency that licensees of cannabis brands will adhere to “all regulations regarding undue control and influence, ownership limitations and tier violation.”
OCM said Green Market Report The agency stated that they have received 204 Type 3 License Applications, of which some already resulted into licensure, but did not specify how many. The number of licenses that it can issue is unlimited.
New York’s legal marijuana industry has taken another major step forward with the launch of the Processor Type 3 Branding License. This license provides new opportunities for brands of cannabis to partner with licensed processors and develop products together, all while complying with strict rules on control, ownership and influence.
The Office of Cannabis Management has reaffirmed its commitment to an equitably regulated industry that puts consumer safety first.
What is the Type 3 License?
Type 3 licensing allows an existing edible brand to enter into an agreement with a producer of edibles in New York for production and sales in New York.
A fictional Massachusetts company, THC Brownie, wants to market its product in New York. Signing a Type 3 agreement, it signs with NY Brownies. THC Brownie provides intellectual property such as recipe and standard operating procedure for production to NY Brownies. NY Brownies will then produce and distribute THC Brownie within the state.
It is similar to the arrangement of a bottler who can produce and package multiple soda brands on the same production line.
Jason A. Little, who leads the cannabis practice at Uniondale-based Farrell Fritz said: “We have around 476 or so brands in New York.” You can see that now we’re getting more retailers online, and the medical people are contributing about 12% to the sales. “This makes total sense.”
New Yorkers could produce products from states other than their own. This gives the processors an opportunity to grow their businesses by producing someone else’s product.
Little continued, “Now they can get this into the New York Market.” OCM still has the ability to claim that this is regulated by New York’s “all-inclusive goal” upfront, if they require type 1 or type 2 processors in New York. The final manufacturers and sellers of this product are our New York firms.
Licenses also open up opportunities to people who have good ideas, but lack the necessary operational knowledge. Little stated that, for example, a cultivator might use this kind of license to bring a certain strain onto the market.
He said that he could “theoretically” use a license of this kind to give this brand to a firm with the capability to produce it and sell it to the public. “He does not have the ability to manufacture or market the product, but people who do now have the capability to produce.” This is the steppingstone that allows intellectual property owners to put their products on the market by using type 1 or 2 processing.