New York’s cannabis regulator is expanding its licensing program for recreational marijuana, potentially paving the way for large public companies to enter a market dominated by illicit sellers and a few small entrepreneurs.
(Bloomberg) — New York’s cannabis regulator is expanding its licensing program for recreational marijuana, potentially paving the way for large public companies to enter a market dominated by illicit sellers and a few small entrepreneurs.
The Office of Cannabis Management voted Tuesday in Albany to open up the application process for “adult use” marijuana dispensaries, as well as cultivators, processors and distributors, starting in October. The new rules accelerate the timeline for big companies such as Curaleaf Holdings and Green Thumb Industries to enter the market. The decision stirred outcries from small entrepreneurs who begged the state to keep big competitors out while they struggle to open enough stores to compete with illegal dispensaries.
“Demand is not the issue in this market, retail access is,” said John Kagia, the OCM’s director of policy.
The change means that companies with current medical licenses in New York can potentially open a recreational dispensary next to one of their medical dispensaries around the end of this year. They still need to pay a $20 million fee to apply, and meet other criteria. But prior rules had held them back. They can still only open a maximum of three recreational dispensaries, with the additional two locations being barred from operating until July of next year, according to Katie Neer, a lawyer at Dickinson & Avella PLLC who works with a group of medical license holders.
The state’s program has so far been tightly restricted because it sought to promote social equity after a legacy of disproportionate arrests of Black and Brown people for marijuana possession. The first licenses were given to those previously convicted of marijuana-related offenses.
That move was criticized by large companies that hold medical licenses in the state and wanted to participate in the recreational market. Because social equity licensees were slow to open their businesses amid scant funding and red tape, the state’s strategy has also been blamed for the explosion of hundreds of illicit dispensaries that have come to dominate the market.
At the end of Tuesday’s meeting, dozens of small entrepreneurs called on officials to slow the entry of large companies with measures such as restricting how many square feet of cannabis they can grow. The new regulations state that licensed operators shouldn’t have more than 100,000 square feet of canopy, unless otherwise authorized. It keeps the cap on three co-located dispensaries — maintaining the state’s original plan that aims to let small businesses thrive.
Many who spoke out at the meeting said they’ve already been stymied by a recent legal challenge that has prevented new retail locations from opening. Unused product, meanwhile, is languishing in their storehouses.
‘Squeeze Out’
The New York Medical Cannabis Industry Association said the move will be a positive for the state because it will help quash the illicit market.
“Once up and running, this market will help squeeze out illicit operators putting consumers at risk, provide growers with more opportunities to sell their products, and generate tax revenue for communities disproportionately impacted by the cannabis prohibition,” the group said in a statement.
NYMCIA’s members include Columbia Care, Cresco Labs, Curaleaf, Green Thumb, Ascend Wellness Holdings and others. Another medical license holder in the state, Etain, was recently bought by RIV Capital, an investment arm of Scotts Miracle-Gro.
Separately, New York’s regulator said enforcement it’s continuing to crack down on the illegal cannabis dispensaries that have undercut legal competitors. It will give a more comprehensive update in its next meeting.
Axel Bernabe, the office’s chief of staff and senior policy director, announced his resignation. He has been an architect of the state’s regulations since their inception.
(Updates with quotes, details of meeting and company names.)
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