Can Foreign Nationals Invest in New York’s Cannabis Market?

By Andrew Kingsdale

May 17, 2023

New York State’s cannabis market offers numerous opportunities for entrepreneurs and consumers alike, but legal restrictions apply.  This post summarizes the statutory restrictions on foreign nationals interested in applying for a cannabis license or investing in a licensed cannabis business. In general, foreign nationals (persons neither citizens nor permanent residents of the United States) may participate in New York’s licensed cannabis industry, but certain legal restrictions should be factored.

As we previously explained here, NY does not have a per se residency requirement (i.e. requiring licensees to reside or have resided in New York state), but does require a certain nexus to the state to qualify as a cannabis license applicant.  

Additionally, New York cannabis license applications will ask for the citizenship and permanent resident status of all “true parties of interest,” which include most investors, officers, and other persons with control over the applicant.  Foreign national status can have two important limitations under New York’s cannabis rules.

First, NY’s Cannabis Law restricts the number of foreign nationals who may serve on corporate boards of, or be partners in, licensed cannabis businesses.  Section 137 of New York’s Cannabis Law (enacted under the Marijuana Regulation and Taxation Act of 2021) states:

137. Persons forbidden to traffic cannabis; certain officials not to be  interested  in  manufacture  or  sale  of  cannabis products. 1. The following are forbidden to traffic in cannabis except  in  extraordinary circumstances as determined by the board:

  (c)  A  partnership  or  a  corporation,  unless  each  member  of the partnership, or each of the principal  officers  and  directors  of  the corporation, is a citizen of the United States or a person lawfully admitted for permanent residence in the United  States, not  less  than twenty-one  years  of  age;  provided  however  that a corporation which otherwise conforms to the requirements of this section and  chapter may be licensed if each of its principal officers and more than one-half of its directors are citizens of the  United  States  or  persons  lawfully admitted  for  permanent  residence  in  the United States; and provided further  that  a  corporation organized   under   the   not-for-profit corporation  law  or  the  education law which otherwise conforms to the requirements of this section and chapter may be licensed if each of  its principal  officers  and directors are not less than twenty-one years of age; and provided, further,  that  a  corporation  organized  under  the not-for-profit  corporation  law or the education law and located on the premises of a college as defined by section two  of  the  education  law  which otherwise conforms to the requirements of this section and chapter may  be  licensed  if  each  of its principal officers and each of its directors are not less than twenty-one years of age; 

(New York Cannabis Law, §137, italics added)

Therefore, with respect to for-profit corporations that apply for cannabis licenses 100% of their “principal officers” and at least 50% of all directors must be U.S. citizens or permanent residents.

The second limitation pertains to New York’s social and economic equity rules.  License applicants looking to qualify as “minority-owned businesses” must be majority owned and controlled by “minority group members” (in other word, members of minority groups must own at least 51% of the applicant business’s voting shares).  And “minority group members” are defined as including only United  States  citizens or permanent resident noncitizens.

87. Social and economic equity, minority and women-owned businesses, distressed  farmers and service-disabled veterans; incubator program.

[ . . . ]

5. For the purposes of this section, the following  definitions  shall apply: . . . (b) “Minority group member” shall mean  a  United  States  citizen  or  permanent  resident  noncitizen who is and can demonstrate membership in one of the following groups: . . .

(i) black persons having origins in any of the  black  African  racial groups;

(ii)  Hispanic  persons  of  Mexican,  Puerto Rican, Dominican, Cuban, Central  or  South  American of either Indian or Hispanic origin, regardless of race;

(iii)  Native American or Alaskan native persons having origins in any of the original peoples of North America; or

(iv) Asian and Pacific Islander persons having origins in any  of  the far  east  countries,  south  east  Asia, the Indian subcontinent or the Pacific islands.

(New York Cannabis Law, §87, underline added)

The same is true for “women-owned business” applicants: 

(c) “Women-owned business” shall mean a business enterprise, including a sole proprietorship, partnership, limited liability company or  corporation that is:  (i)  at  least  fifty-one  percent  owned by one or more United States  citizens or permanent resident aliens who are women; . . . 

(New York Cannabis Law, §87, underline added; see also proposed New York cannabis regulation §121.1(f) – (g), also requiring qualifying minority-own and women-owned applicants to be owned by United States citizens or permanent resident aliens.)

​​In summary, under New York law, foreign nationals may participate in New York cannabis licensed businesses, but may not be majority owners of license applicants seeking to qualify as minority-owned or women-owned social or economic equity applicants.

Lastly, in addition to these New York Cannabis Law limitations, any foreign national investing or participating in cannabis licenses anywhere in the United States must consider federal immigration and admissibility issues.  

Under federal immigration statutes, involvement in trafficking controlled substances—which includes “marijuana,” which is classified as a Schedule 1 drug under the Controlled Substances Act—can be a basis for denying a visa stamp application or entry to the U.S. following a trip outside.

A federal statute on “inadmissible aliens” states:

Any alien who the consular officer or the Attorney General knows or has reason to believe-

(i) is or has been an illicit trafficker in any controlled substance or in any listed chemical (as defined in section 802 of title 21), or is or has been a knowing aider, abettor, assister, conspirator, or colluder with others in the illicit trafficking in any such controlled or listed substance or chemical, or endeavored to do so; or

(ii) is the spouse, son, or daughter of an alien inadmissible under clause (i), has, within the previous 5 years, obtained any financial or other benefit from the illicit activity of that alien, and knew or reasonably should have known that the financial or other benefit was the product of such illicit activity,

is inadmissible.

(8 U.S.C. § 1182(2)(C), titled “Controlled substance traffickers.”)

Persons seeking naturalization should be especially cautious. Last year, a Washington federal district court held that a co-owner of a state-licensed cannabis dispensary was “statutorily barred from a finding of good moral character, making her ineligible for naturalization” on that basis. (Reimers v. United States Citizenship & Immigr. Servs., 584 F. Supp. 3d 936, 946 (E.D. Wash. 2022)). 

The Reimers decision follows a 2019 U.S. Citizenship and Immigration Services policy alert stating that violations of federal controlled substances law is generally a bar to establishing “good moral character” for naturalization, “even where the conduct would not be a violation of state law.” (USCIS Policy Alert,“Controlled Substance-Related Activity and Good Moral Character Determinations,” April 19, 2019.)  

What about potential passive investors who are not interested in seeking admission to the United States?  That is a more nuanced question that should be evaluated by consulting an immigration attorney before investing or otherwise participating in a New York cannabis-related business.

In summary, New York allows foreign nationals to participate in New York’s legal cannabis market, but state law limits the extent of that participation, and federal immigration law should factor into any decision making as well.