There’s a lot of hype around the coming market in New York State because it’s home to the nation’s biggest city, it’s a big state overall, and whatever market presence a company has in New York, will likely become national media and marketing fodder.
But exactly what’s going on there? The Grown In team has been working to figure that out for the last couple of weeks. Tomorrow afternoon we’ll host a webinar with three local experts and this afternoon my colleague Cynthia Fernandez will report some data insights. Meanwhile, I’ve been talking with lobbyists, advocates, and other stakeholders to learn what they think the big issues are on cannabis. Here’s what I found.
- There’s lots of confidence in the Office of Cannabis Management (OCM) leadership.
Numerous people I spoke to, unprompted, showered Chris Alexander, the executive director, and Axel Bernabe, his chief of staff, with praise. Most recently Alexander was counsel on the State Senate Central Staff, which is really the majority leader staff, where he was the policy point person for cannabis as the state legislature wrestled with passing the adult-use law, the Marijuana Regulation and Taxation Act (MRTA). Before that he put in three years at the Drug Policy Alliance, which played a major role in passing the medical cannabis law, so Alexander’s got most of the stakeholder bases covered.
- OCM is having big staffing issues.
Turns out that when New York State passed MRTA, they forgot to pass an appropriation to staff OCM and its oversight board, the Cannabis Control Board (CCB). OCM and CCB have been stealing positions from other agencies to fill the gaps, legislators and lobbyists tell me, but they are far from fully staffed. This has cast a lot of doubt on how fast they’ll be able to get things done.
- Nobody’s sure when they’ll have draft regulations – or active licenses.
When asked, OCM leadership are telling people that draft regulations will be out by March 2022, but advocates and lobbyists say that getting all the details done by then will be hard. Watch for this date to slip. Once regulations come out there will be a 90 day review period, and then likely a month or so before the application process is officially announced. There’s tremendous pressure in Albany to get the first licenses out the door by early 2023, but stakeholders who have seen other state processes have doubts that can be done.
- There’s a gubernatorial primary in June 2022.
Right now it looks like Governor Kathy Hochul won’t have serious competition in the June 28 Democratic primary. You may recall she was the Lieutenant Governor swept into office to replace Gov. Mario Cuomo following his exploding MeToo problems. Gov. Cuomo had been slow-walking implementation of MRTA, and Gov. Hochul made expediting cannabis one of her first initiatives. She needs to show tangible progress on the license application process by election time.
- There’s 10 existing medical cannabis providers and they have a pretty good deal.
Ten companies, known as “Registered Organizations”, have a vertically-integrated system of four medical cannabis dispensaries, a processor and a cultivation site. Once adult-use sales are legalized, they get to keep those facilities, they get to build four more medical dispensaries, and they can co-locate three adult-use retail sites with their medical dispensaries. In return, they’ll need to pay some annual fee that will go to social equity programs. CCB still needs to determine exactly how big that fee will be.
- Everyone else is limited to three dispensary licenses or one cultivation site – but that’s about all we know.
Vertical integration is verboten in New York, except for the ten Registered Organizations. CCB still needs to decide the rules for how the licenses will be distributed, what kind of application scoring there will be – if any – and how fast the state will create new licenses. The general wisdom seems to be that the ceiling on licenses is 700. But it would take a while to stand all those up.
- When exactly will licenses come on line?
Nobody knows that either. Assuming the first adult-use licenses are awarded in early 2023, some time after that for sure. But it’s unclear if the state will allow Registered Organizations to start selling adult-use some time before that, or if they’ll have to wait until other adult-use licenses come online.
- State law calls for 50% of new adult-use licenses to go to social equity applicants. How does that work?
Nobody knows. This is one of those big, thorny questions that OCM needs a staff to figure out.
- Municipal opt-out is becoming a major issue, especially on Long Island.
If a city or town wants to ban retail sales from their boundaries (but not cultivation), they need to make the determination by Dec. 31, 2021. So far, about 400 localities have opted out. While there’s about 1,500 in the whole state, in places like Long Island, where there’s geographic limitations, there’s a growing concern that it’s going to be hard to site dispensaries.
- The underground market looms over everyone’s head.
If you’ve been to New York City lately, you’ve maybe seen the very open market in Washington Square Park where you buy a trinket for $20 and then they gift you some weed. As one its first actions in October, the CCB clarified that “gifting” was illegal, but that hasn’t really slowed down the market in Washington Square and elsewhere. Everyone it seems, knows a dealer in the NYC area, and there are plenty of others doing business very openly. Because the underground market is so pervasive, and it’s able to offer cut rate prices, nobody’s really sure how the legal market is going to thrive and survive, especially around New York City.
- Nobody’s sure what Native American tribes will do.
New York has eleven American Indian Reservations that are totally sovereign from U.S. and state laws. So, they can do practically anything they want. The Shinnecock, on Long Island, have partnered with TILT Holdings to build an vertically integrated company. But there are plenty of othertribe-owned dispensaries and cultivation doing gangbusters business throughout the state. Exactly how all this will fit into the state’s legal cannabis market is unclear.