Dear reader,
It was two years ago at the end of March that New York State legalized adult use of marijuana for recreational purposes, and one year ago Advance Media New York, which publishes Syracuse.com and The Post-Standard, launched New York Cannabis Insider, a content and marketing events endeavor aimed at keeping an eye on the emerging industry.
After two years, you might be wondering why you haven’t seen more retail shops open up around Central New York. I asked Brad Racino, editor of Cannabis Insider, to share his expertise on the rollout of legal marijuana in New York and why it has been so rocky.
Trish: It has been two years since Gov. Cuomo signed the law that legalized cannabis in New York. Why have so few dispensaries opened since then?
Brad: There are several reasons why New York’s cannabis industry has taken so long to get off the ground.
First, while Cuomo did legalize cannabis for recreational use in March of 2021, he did nothing else to get the market started for the remainder of his tenure – which allowed for the proliferation of thousands of illicit stores to pop up across the state (though they’re concentrated primarily in Manhattan).
Then, when Kathy Hochul became governor, she set out appointing members to the state’s cannabis regulatory agency – the Office of Cannabis Management – along with its oversight body, the Cannabis Control Board. However, the agency took a very long time to get staffed up (it’s still only at about half-staff today), and it continued to miss milestones and mess up the timelines that it had promised early-on – like having the entire cannabis “ecosystem” up and running in New York within 18 months of the agency’s formation.
Then, the OCM decided to create an entirely new type of license for “justice-involved” entrepreneurs as part of its effort to make up (in part) for the effects of the War on Drugs. That resulted in a lawsuit, which stopped the agency from awarding licenses in five regions across the state. Only recently were four of the five regions lifted from the injunction.
Finally, the state chose to involve the Dormitory Authority of the State of New York in its plans to get justice-involved licensees up and running. DASNY’s job was to find a fund manager to raise $150 million from private investors, and then use that money to find and secure real estate for these first-round licensees. However, DASNY’s fund manager hasn’t raised any of the money to-date, leaving many of the licensees hanging.
Trish: Who is the slow rollout hurting the most?
Brad: It’s primarily hurting the state’s hundreds of licensed cannabis farmers, who were told early last year to grow their crops in preparation for the market opening in Q4 of 2022. Today, these farmers are sitting on an estimated $750 million to $1 billion worth of crop that has nowhere to be sold. And it’s got a limited shelf life.
The slow rollout is also hurting everyone and anyone with any financial interest in the legal cannabis industry, from attorneys to consultants to lobbyists to real estate agents. Many of these people planned according to the state’s timeline, and as that timeline continues to get pushed back, they’re bleeding money. Some are taking second jobs to make ends meet, others are pulling out entirely.
Trish: What has happened to the medical marijuana industry in the midst of all this?
Brad: The medical marijuana program in New York State has suffered quite a bit since the focus shifted to the recreational market. Registered patient counts across the state have been in constant decline. There are still the same number of medical dispensaries across the state as there were years ago, and they’re often so far apart geographically that it makes the experience of purchasing legal medical products prohibitive for patients.
And since the state’s medical cannabis companies are banned from participating in the recreational market for quite some time, they’re now laying off employees and reconsidering their involvement with New York State. Oh, and half of the medical cannabis companies in New York are also suing the regulatory agency for the slow rollout.
Trish: How is the illicit market impacting the businesses that have been able to open?
Brad: They’re strangling these businesses. The illicit market doesn’t have to abide by any of the rules imposed on the legal market – rules around advertising, labeling, packaging, delivery … you name it. These illicit businesses are also importing products from across state lines from markets like California that have tanked, and therefore, they can sell cannabis at a much lower price than the legal stores.
Much of the illicit market also isn’t abiding by tax law, further driving down the cost of their products. All in all, it’s extremely difficult right now for the legal businesses to stay competitive.
Trish: What are your predictions for this year and beyond? How long will it take for New York to have this industry truly up and running?
Brad: It depends on how you define “up and running.”
I think by the end of 2023 there will be at least a few dozen legal stores open, some offering delivery. By that point, there will probably be a good number of new licenses issued for the rest of the license types – like micro businesses, nurseries, distributors and cooperatives.
However, I have no idea how the state is going to effectively tackle the illicit market. There are an estimated 1,400 illicit stores in New York City alone, and even some law enforcement agencies (like the NYPD) are concerned they don’t have the legal authority to shut these stores down. District Attorneys across the state are also divided on whether to classify these stores as illegal operations.
Until that gets sorted out, and the state comes up with something other than its “whack a mole” approach to enforcement, this market and its participants are in a bad spot.
It will probably be several years before the state has a fully functioning cannabis industry that’s generating significant tax revenues and jobs.
Trish: Anything else you think our readers would be interested in knowing?
Brad: Whether you’re a cannabis consumer, bystander or have no interest in the plant or the industry at all, it’s still important you keep a watchful eye on what’s happening because the state’s cannabis regulators and agencies are funded by your tax dollars. We make that a key mission at NY Cannabis Insider – government accountability – and if you want to keep tabs, I suggest you sign up for our free newsletter.
If you have a question or story idea for Brad, you can reach him directly at: bracino@syracuse.com
Recent Comments