New Yorkers Vent Frustrations over Adult-Use Cannabis Program

May 22, 2023 · Green Market Report

From sparse enforcement to lack of transparency, program participants are frustrated.

The New York adult-use cannabis program has been fraught with challenges, and many stakeholders are willing to express their frustrations. But a conference hosted in Albany, New York, by NY Cannabis Insider sought to add another element to that discussion: solutions.

Here are some highlights from the conversations that took place last week.

Unlicensed Enforcement

One of the most prominent persistent issues in the New York market is how slow regulators and enforcers have been to shut down unlicensed operators.

For comparison, the group pointed out how quickly liquor stores and bars get shut down when they aren’t compliant, but these cannabis shops are allowed to proliferate. Part of the issue could be lack of staff to enforce the rules: The Office of Cannabis Management has only five enforcers with no guns going after an estimated 1,500 stores.

The group also took umbrage with legacy operators being lumped together with unlicensed stores, which they say are the number one threat to CAURD applicants.

“They just keep popping up. It’s not legacy it’s organized crime,” noted one attendee.

CAURD applicants also complained about the lengthy delays in getting licenses while watching that unlicensed market take hold.

Suggested Solutions

One participant suggested that Gov. Kathy Hochul should ask California to provide better enforcement before legal products are diverted from there, including taking away the licenses for companies that divert product.

Another said that once the tax revenues grow in the state and the state realizes how much money is being lost, it will crack down harder. In other words, time will resolve the problem.

DASNY

The Dormitory Authority State of New York, which is tasked with helping the CAURD applicants secure real estate locations and fund those buildouts, faces continued complaints around lack of transparency.

Stakeholders said that DASNY was forcing them into loans without knowing the terms and running up the costs of the buildout to make the loans bigger.

They also said that the rents being offered were well above market rate. One person said the rent price quoted to them for a location in Schenectady was more than the price of buying an actual building.

“It’s Schenectady – come on,” they said to much knowing laughter in the room.

There were also complaints of flip-flopping positions. For example, the OCM told CAURD applicants they could use locations outside of the DASNY choices, but then DASNY rejects those locations, saying they were too close to anticipated locations.

Conflict of interest concerns were also raised about DASNY President and CEO Reuben McDaniel serving on the OCM board.

Possible Solutions

Many of the solutions suggested for DASNY wouldn’t require much more than will and time.

Many of the issues, according to stakeholders in attendance, could be resolved simply with better communication and more transparency about the social justice fund.

Another suggestion involved decoupling the the OCM from DASNY and having McDaniel resign from the OCM board.

Some also suggested an audit of DASNY to account for the $50 million designated by the state for CAURD applicants.

Anticipated Timeline

May 31: Current package of proposed rules and regulations posted to NYS Register, launching a 45-day public comment period.

July 15: Comment period closes. The OCM will review the comments received and decide whether any further amendments are needed.

August-September: Adoption of final rules is anticipated to take place at a board meeting.

October-November: Application period opens.

The OCM believes the first general licenses will be awarded at the beginning of 2024.

True Parties of Interest

In addition to the topics listed above, stakeholders expressed concern about the True Parties of Interest rule. TPI is immensely complicated, and it was pointed out that the revised rules had some discrepancies that are being attributed to typos.

However, the biggest point of discussion was around vendors potentially being named TPIs. Anyone who receives compensation above a certain number – $250,000 or 50% of net profits or 10% gross revenue from a cannabis operator – can throw a vendor into the TPI zone.

Regulators, however, did carve out landlords, lawyers, comp-based sales, and financial institutions from the rule.

As long as passive investors own less than 20% in an operation, they can invest in as many stores as they want. (Full Story)

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