New York Governor Vetoes Bill That Would’ve Let Growers Sell Bulk Marijuana To Tribal Retailers

December 23, 2023 · marijuanamoment.net

New York’s governor has vetoed legislation that would have allowed licensed marijuana growers to sell products to tribal retailers.

The bills, sponsored by Sen. Michelle Hinchey (D) and Assemblywoman Donna Lupardo (D), who respectively chair the state Senate and Assembly agriculture committees, would have given a release valve to hundreds of cannabis farmers who have been sitting on surpluses without any place to sell their products.

“We offered a way for some of the oversupply of cannabis grown by NY’s farmers to be sold to NY’s Tribal Nations,” Hinchey and Lupardo said in a statement reacting to the veto. “Given the fact that this temporary measure would have expired on December 31st anyway, the veto is hardly a surprise.”

The bills were passed by both chambers of the legislature in June, but were only formally transmitted to Gov. Kathy Hochul (D) this month. On Friday, she vetoed them.

“Meanwhile, many of our farmers remain financially ruined by circumstances beyond their control,” the sponsors said, “We remain committed to helping the farmers and processors that NY’s legal cannabis industry depends on in any way possible.”

Hochul’s did not immediately respond to Marijuana Moment’s email on Saturday seeking comment on why she vetoed the legislation.

In September, sixty-six members of the legislature—about a third of all state lawmakers—sent a letter urging the governor to sign the measure.

“Right now, there are over 200 cannabis farmers trying to sell their crops but only 23 dispensaries open statewide,” the bipartisan Senate and Assembly members wrote in the open letter to Hochul. “This has resulted in more than 250,000 pounds of unsold cannabis. Farmers who took out loans and leveraged all their assets to cultivate these crops are demoralized and facing financial disaster unless we act quickly to provide them with an alternate market.”

S.7295/A.7375, titled the “Cannabis Crop Rescue Act,” would have provided growers with another legal avenue to offload products amid lawsuits and other delays that have caused a bottleneck in the legal market, which officially opened last December.

“Regulatory delays, lawsuits, and logistical and financing challenges have caused the state to miss its timelines and targets,” the letter said. “However, cultivators are the group paying the steepest price.”

Among those who signed the letter were Assembly Majority Leader Crystal People-Stokes (D) and Senate Finance Committee Chair Liz Krueger (D), who together sponsors New York’s legalization law. Also listed was Sen. Jeremy Cooney (D), who chairs the Senate subcommittee on marijuana.

“New York’s cannabis farmers, who went out on a limb to help get the state’s legal market off the ground, should not be facing financial ruin because of regulatory delays,” the lawmakers said. “We should be giving them every possible opportunity to stay afloat while they await the development of the market they were promised.”

That letter came just weeks after four key lawmakers issued a separate public statement calling on Hochul to sign the bill. That was signed by Hinchey and Lupardo—along with the ranking members of the agriculture panels, Sen. George Borrello (R) and Assemblyman Chris Tague (R). All four lawmakers also signed the new letter.

“While lawsuits are being litigated and illegal stores are flourishing, NY’s cannabis farmers are suffering,” those lawmakers said in the earlier statement. “Crops were grown last year with the understanding that there would be a legal market for them to sell it… We are urging the governor to quickly sign this short-term solution, one that will help provide some measure of relief to what is quickly becoming an agricultural emergency.”

The state has seen a rocky rollout of the recreational market, with litigation preventing more licensed retailers from opening. Several lawsuits were recently settled this month, however, with Hochul and other officials saying that additional cannabis stores would be opened this month and in the new year.

With few retail outlets operating at this point, however, growers and processors have struggled to move millions of dollars in marijuana products. During a meeting of the state’s Cannabis Control Board (CCB) in September, some growers said they’d poured nearly all of their money into their cannabis farms only to watch surplus product rot. One even referenced suicide.

A sponsor memo attached to the now-vetoed bill acknowledges that conditional cultivation licenses were originally issued “with the understanding that growers would not be permitted to sell their product outside of state lines, but that a robust state market would exist during the conditional license timeframe.”

“Due to a variety of circumstances beyond the control of New York’s cannabis farmers,” it continues, “many licensees are unable to sell their finished products or afford to process their cannabis.” As a result, “crops are losing potency, color, and terpene profile in storage, greatly reducing their value. Without the ability to sell their product, many are in severe financial distress and will be unable to afford to plant a crop this growing season.”

Allowing growers and processors to sell to retailers licensed by tribal nations “protects New York’s cannabis industry, including distressed growers, to ensure a healthy local cannabis economy into the future,” the sponsor memo says.

Tribal governments have been ahead of New York regulators since the state legalized marijuana in March 2021. The first adult-use license applications were accepted by the Saint Regis Mohawk Tribe later that year.

As part of the state’s effort to speed consumer access to legal marijuana while helping producers find ways to legally offload products, regulators at New York’s Office of Cannabis Management (OCM) also launched a program known as the Cannabis Growers Showcase that allows licensed growers and processors to sell directly to consumers.

Regulators voted to approve that program in July and quickly began accepting applications. The first pop-up event kicked off in the Hudson Valley on August 10, and another was held just down the road from this year’s state fair.

In September regulators also approved a plan to open the state’s adult-use marijuana market to more business participants. Changes will also allow the state’s handful of large medical marijuana providers to begin selling adult-use cannabis two years earlier than initially planned.

While that move could ultimately accelerate the market rollout, it also sparked outcry from small business owners and social equity licensees, who said they were promised a period of time to get up and running before having to compete with large, multistate operators with far more financial resources.

In October, the New York Senate Cannabis Subcommittee, which was established in April and is being chaired by Sen. Jeremy Cooney (D), heard from witnesses and discussing potential legislative solutions to the state’s ongoing cannabis legalization implementation problems.

Hochul recently signed legislation that attempts to make it somewhat easier for financial institutions to work with state-licensed cannabis clients.

She also signed a separate bill that’s meant to provide tax relief to New York City marijuana businesses that are currently blocked from making federal deductions under an Internal Revenue Service (IRS) code known as 280E.

While Hochul signed a an earlier budget bill last year that included provisions allow state-level cannabis business tax deductions—a partial remedy to the ongoing federal issue—New York City has its own tax laws that weren’t affected by that change. The new measure is meant to fill that policy gap.

However, the governor vetoed a pair of bills this month that would have allowed hemp seeds to be included in animal feed for pets, horses and camelids such as llamas and alpacas—citing a lack of information about the safety of such uses, which she wants the state to study in an “expeditious manner.”

Meanwhile, tribal governments in a handful of U.S. states have entered the marijuana business as more jurisdictions legalize. Notably, in Minnesota, where state lawmakers passed an adult-use marijuana program earlier this year, tribes are leading the way.

The White Earth Nation voted in July to authorize marijuana sales and has since opened an adult-use cannabis shop. And the Red Lake Nation, which also began sales in August, recently announced plans to launch a mobile marijuana retailer—effectively a cannabis “food truck” that can travel and do business on tribal land throughout the state. Another tribe located within the state, the Leech Lake Band of Ojibwe, is also moving to legalize.

Under Minnesota’s marijuana laws, the state’s governor can also enter into compacts with tribal governments, allowing them to operate on non-tribal land within the state. Many have seen that option as a way to allow the sale of legal cannabis in Minnesota ahead of state licensing, which isn’t expected until 2025. Cannabis regulators have said “several” tribes have expressed interest in the arrangement so far.

In North Carolina, meanwhile, the Eastern Band of Cherokee Indians voted in September to legalize adult-use cannabis even as the state itself continues to prohibit all forms of marijuana. (Full Story)

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