This opinion was written by the co-founders of The Pantheon Collective.
As the summer creeps in, 203 cultivators have been awarded conditional licenses and now prepare to grow what will literally be New York’s first taste of cannabis from its new regulated market.
Until then, the rest of us await further guidelines on the other 11 license types outlined in the MRTA to be finalized. A common thread for all of these licenses is the Social Equity and Economic Plan (SEEP), which aims to establish the New York cannabis industry as the nation’s most progessive to date by enabling entrepreneurs from the communities that have been disproportionately and negatively impacted by cannabis prohibition to pursue opportunities in the legal market.
One crucial goal of SEEP is having at least 50%of all licenses issued to applicants from these communities. Additionally, the microbusiness license type will promote social equity applicants, allowing companies to cultivate, process, distribute, and sell adult-use cannabis products. This business model, known as vertical integration, allows participation in each part of the supply chain, from seed to sale, of a cannabis product directly to the consumer.
Currently, the registered organizations (ROs) in New York’s medical marijuana program freely operate vertically integrated models and under the MRTA, these ROs will be able continue as vertically integrated operations. Now, at first glance that seems relatively fair. The existing ROs, owned by large, multistate operators, will continue business as usual, and microbusiness licenses would seem to allow for the tipping of the scale to balance these large corporate entities with business owners from minority communities.
What is noteworthy, however, is that ROs do not currently have canopy size restrictions, meaning they can grow as much adult-use cannabis as they can afford to produce. Whereas restrictions imposed on microbusiness licensees will create a new glass ceiling, from which social and economic equity applicants are shut out while affluent MSO executives, consisting of primarily cisgender heteronormative white males, are encouraged to again thrive without limitations.
Proposed regulations for microbusinesses could limit their canopy size to just 10,000 square feet or less, which can allow for a business to survive – but never actually thrive. And survival for many of these businesses will still be a challenge, seeing as many legacy and new operators will have a learning curve in producing within that space while maintaining appropriate attention to compliance requirements in an industry that poses more hurdles than virtually any other.
Compliant nutrient mixes, integrated pest management systems, and product testing are just a few of the issues that will inevitably lead to lesser yields and finalized viable products for most new regulated cannabis operators.
Across the regulated market in the US, an industry standard for the canopy size of small independent cannabis businesses is approximately 30,000 square feet. A larger canopy size closer to this standard would equip New York’s microbusinesses to mitigate reduced cultivation yields and catastrophic loss caused by potential environmental issues, infestation, microbial contamination, processing snafus and other unforeseen factors.
Thirty thousand square feet of canopy would also enable microbusinesses to generate enough product to ensure they are adequately stocked in their own dispensary and with any luck, have enough product to distribute to other microbusinesses and dispensaries operated by fellow social equity entrepreneurs. More thoughtful and informed canopy size regulations would foster a sustainable model for New York’s microbusinesses to create a thriving ecosystem with ample inventory, and a robust distribution and sales network.
Microbusiness license types are allowed in California, Michigan, Massachusetts, New Jersey, and New York. Many, if not most, regulators from these states view microbusiness as a way to create a “hedge” against multistate operators, like New York’s ROs.
Although state regulators have restricted this license type by varying degrees through canopy size, plant count, residency, and number of employees, none have yet developed a sustainable program for this business type.
Since 2019, California has seen a drop in microbusiness licensing, largely due to imposed canopy size restrictions. These limitations on microbusinesses will never create an effective “hedge” against the state-sanctioned monopolies of ROs and incoming multistate operators.
The fate of New York’s adult-use market and its ability to fulfill the MRTA’s commitment to and vision for those most impacted by the prohibition and its enforcement will ultimately be determined by one of two things. Either the state imposes limitations on the ROs vertical integration capabilities or extends the option of vertical integration to the state’s up and coming cannabis entrepreneurs.
Thoughtful regulations will allow for New York’s adult-use market to become a thriving ecosystem where diverse, locally-owned cannabis businesses can co-exist and prosper alongside established multistate organizations. New York’s newest generation of entrepreneurs should be able to scale their cannabis businesses according to their funding and ambitions without being hindered by limited canopy sizes or unnecessary regulatory limitations.
This topic must be at the forefront as regulators and cannabis industry groups seek to avoid an adult-use program dominated by ROs and MSOs and remove formidable barriers for the program’s social equity applicants and local entrepreneurs.
Tyme Ferris (he/him) is a cannabis consultant and co-founder and CEO of The Pantheon Collective. He is a member of the LGBTQ+ community and the former Director of Operations for The Farm Co. (Colorado) and Mayflower Medicinals (Massachusetts).
Thomas Kupiec (he/him) is a licensed acupuncturist who believes in the medicinal benefits of cannabis. He is also a member of the LGBTQ+ community and co-founder of The Pantheon Collective.
The Pantheon Collective is a LGBT majority-owned cannabis start-up working towards LGBT equity and inclusion in New York’s adult-use cannabis market. If you or someone you know are interested in finding out more about entering the cannabis industry please reach out to our leadership team at info@thepantheoncollective.com.
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