New York’s cannabis retail program expands yet again. Here’s what industry stakeholders are saying.

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To prolonged applause, the New York Cannabis Control Board on Wednesday nearly doubled the amount of Conditional Adult-Use Retail Dispensary licenses awarded statewide, bringing the new total to 463.

“This expansion is necessary to help prepare New York’s market for the next phase of adult-use cannabis,” said Office of Cannabis Management Executive Director Chris Alexander.

The original plan for CAURD, proposed last summer, included a total of 150 potential licenses (with an additional 25 allocated for nonprofits). That changed in March, when the OCM doubled the number to 300.

Wednesday’s announcement further expanded the program to “help ensure the retail market is robust enough to sell the cannabis grown by New York farmers and accelerate the transition of New York consumers from the illicit to the illegal market,” Alexander said.

NY Cannabis Insider reached out to 10 cannabis industry stakeholders in New York for their thoughts on the program’s expansion, including whether the move is a good or bad thing for the overall marketplace, any long-term effects of the decision, and possible legal repercussions.

Responses have been lightly edited for length and style.

Scheril Murray Powell is an attorney and COO for the NY-based JUSTÜS Foundation, a nonprofit that supports legacy operators as they transition into the legal cannabis industry.

This expansion is definitely a good thing. We have just created access to equity in a way that has not been seen in any other jurisdictions.

The application for the CAURD license was a short form which did not allow for much narrative to distinguish between applicants. This really focused the selection criteria on factors related to repairing the harm caused by the criminalization of cannabis and the ability to run a business. The JUSTÜS Foundation has had successful applicants in every wave of issuance of CAURD licenses. I know my JUSTÜS fellows, and after what they have been through, they deserve this opportunity.

The long-term effects of this decision include:

1) The creation of new diverse cannabis business executives

2) Precedent has been set foundationally for the adherence to the MRTA language around social equity and repairing the harm caused by the criminalization of cannabis.

I see only positive outcomes of giving underserved communities an opportunity to participate in an equitable way. I think taking a different approach and arbitrarily distinguishing between applicants to meet a certain number would have been way more problematic. I think the OCM did the most responsible thing in order to avoid potential litigation and protect the state’s resources.

Now, I would like to see funding going to help these new business owners and cannabis business executives to build their cannabis businesses.

I also want to note the absence of the Rastafari community from this initial CAURD license cycle. The Rastafari community in New York had such a tremendous contribution to building the infrastructure for this legal cannabis business. This is a glaring gap in having a representative licensee pool.

The good news on this front is that the OCM has done a great job initiating outreach to the Rastafari community through their “Faith-Based Conversations” regular meetings. I am encouraged, and look forward to more Rastafari representation going forward.

Jeff Schultz is a partner at Foley Hoag where he represents cannabis industry operators, investors and ancillary businesses. He is an expert in the legal issues related to cannabis capital markets and has advised stakeholders on the local, state and federal level on the adoption and implementation of medical and adult-use cannabis policy.

Only time will tell if this move is ultimately good or bad for the industry, but it’s certainly good for the large number of applicants who’ve been harmed by the War on Drugs. It’s good news for the supply tier in New York, as well.

However, this also means that the hundreds of other prospective retail applicants (women-owned businesses, veterans, and other minorities who technically didn’t qualify for CAURD because they have a federal or out-of-state charge), will face even stiffer competition in winning a license and getting their doors open.

The sobering reality is that many of the 463 CAURD-licensed operators will never open their doors. Between the lack of access to capital, further limited by the TPI regulations (per the OCM’s own admission), local zoning laws, a limited number of landlords who will take cannabis tenants, and mostly because of the 1,000-foot buffer zone between stores, I’m not sure it’s mathematically possible to fit more than 175-200 stores statewide.

Is this move legally problematic in any way? That is ultimately for the courts to decide. However, I do think OCM likely avoided a wave of potential litigation by not acting as kingmaker between several hundred qualified candidates as it appears they simply awarded licenses to everyone who qualified and paid the application fee.

Damien Cornwell is a CANY board member and the operations manager at Just Breathe, one of the first CAURD dispensaries to open in New York.

I think any investment into the cannabis infrastructure is a good thing on face value. Be that as it may, I think we can all agree that the “devil is in the details.” So, unfortunately, today’s news is bittersweet.

At CANY, we are excited for those receiving the opportunity of licensure, but it raises more questions of how those folks can navigate the pitfalls of starting each business. Financial investment still continues to pose significant hurdles, and that – accompanied by other problems – continues to impact the entire supply chain.

I am not so sure this helps the battle. I feel like we have more guns when in fact we could really use more bullets for the ones that already exist.

Joe Rossi is the Cannabis Practice Group Leader at Park Strategies, a statewide lobbying firm. He has pushed for and helped craft some of the biggest cannabis laws and reforms in New York over the past several years.

There will now be 463 CAURD licenses, and each of those licensees can apply for up to three dispensary licenses.

These would all be considered social equity licensees, however the MRTA says 50% of adult-use licenses must be social equity. So does that mean there will be an opportunity for 463 non-social equity applicants to get a dispensary license in New York State?

The MRTA has a stated goal for 50% of each adult-use license type to be issued to social equity applicants. I hope and pray that going forward, the state uses a “one for one” model of balancing their social equity goals. Meaning, for every non-social equity license they give, they give one to a social equity applicant. Because if they continue with schemes like this, the state will be inundated with lawsuits every step of the way.

This pool of CAURD applicants were given until September 26th, 2022, to apply and were told the state would give them a location and funds to get started. That has not materialized yet, which is why there are currently 250 CAURD licensees and only 20 active CAURD retailers.

Britni Tantalo and Jayson Tantalo are co-founders of the NY CAURD Coalition, a group formed earlier this year to provide entrepreneurs in the emerging legal cannabis market with resources, training and networking opportunities. The two operate Flower City Hydroponics and are seeking a CAURD license – but haven’t received one to-date.

Britni: The news of the expansion comes with happiness and joy for all of the CAURD applicants who will be awarded a license this round. I know many of these applicants personally and not only are they very deserving but they have waited a long time to have their number called. I am honored to know them and excited to watch them accelerate legal cannabis here in New York.

However, as a qualified applicant myself, I can’t lie – it was disappointing to not see application 317 show up on OCM’s licensee list. The question now becomes, ‘Why?’ The lack of transparency around scoring really leaves me and others that were not awarded no clear reasoning for not being chosen thus far. It would only seem fair to allow everyone to see where they fall.

With as many licenses as have been released thus far for CAURD, I don’t see why this would be an issue. My hope is that, in the next round, I will be given the opportunity to continue to help contribute to my community in the Finger Lakes region.

Jayson: With the news of the expansion of the CAURD program, I find myself appreciating the opportunities it brings to others, yet questioning the intentions of the regulators in regards to my wife and me.

Exclusion from being awarded has left me specifically pondering why our concrete qualifications are being disregarded. This is in addition to the hundreds of people questioning why application 317 was NOT chosen. As two justice-involved individuals with a qualifying business that was profitable for eight years consecutively, with a 54% DTC ratio, leads me to question why we were denied this opportunity as of now.

The regulators themselves confirmed our application’s efficiency was in good standing, so we know our application has been looked at. But, due to lack of transparency, we have no idea if we have even been graded. Our community relies on us to deliver safe, regulated cannabis, and their trust is at stake.

My wife and I co/own and operate multiple businesses, one being a hydroponic store in our local community where we could have easily chosen to sell unregulated cannabis, but didn’t! It’s now a matter of how much longer we will survive and not go bankrupt over the chase of New York legal cannabis.

We know without a shadow of a doubt that people in the Office of Cannabis Management are not fond of us, but yet we don’t understand why? We’ve never done anything to destroy the integrity of the program – if anything, we uplifted the program with our marketing strategies and our community outreach initiatives. We can only hope to be chosen in the next round, to cease financial losses and finally lead in the path they have paved.

Jeffrey Hoffman is an attorney with a practice focused on cannabis industry clients, including licensees in the adult-use market, practitioners in the medical cannabis space, and cannabis-adjacent product and service providers. He also hosts a weekly “Ask me anything” on LinkedIn.

My big takeaway is that I don’t see how they couldn’t do it. I said as much in one of my AMAs. The fact that CAURD was vulnerable to legal challenges resulted in someone that wouldn’t have otherwise qualified getting a license due to the settlement. The entire purpose of CAURD was as a signal about New York’s historical anti-cannabis enforcement. To give the Variscite folks a license and then leave justice-involved folks on the sidelines would simply have been untenable.

The move is legally problematic. CAURD is still vulnerable to the state lawsuit related to CCB/OCM not opening the first retail dispensary license application period to everyone at the same time. The state is racing to get the licenses out the door before there are actual hearings in that case, but there still may be a problem. As I’ve noted previously, it was the move from 150 to 300 that was the hurdle, and this further expansion is just icing on the cake. My read is that this was a substantive change to the regulations, but CCB/OCM just did it without going back through the regulatory review process.

There may be some concern now about the number of licenses going to CAURD folks. How many licensed dispensaries will there be in New York? After the latest batch, we’ll have north of 460 licenses in the wild, and it’s clear that there are more coming. What percent of the overall market will that end up being?

It’s also clear that, with Variscite settled, CCB/OCM is going back to letting folks into their second, third, fourth or fifth choice regions. So let’s say someone now getting a license had Long Island as their first choice, but now CCB/OCM moves them to Mid-Hudson. It’s going to be next to impossible for most CAURDs to open on Long Island in any reasonable kind of time frame given the opt-outs and (probably illegal) zoning rules. So how happy will the Long Island folks that got their licenses back in November or January be when these new licensees open before they do?

Renata Serban is an accountant and the vice-chair of the Cannabis Committee of the NYS Society of CPAs.

I think granting so many CAURD licenses is a negative thing for the New York cannabis market in the long run. While there are certainly many eligible applicants, I think it is not fair to cannabis operators who are trying to get off the ground and run a profitable business.

Just think about it with simple math: there are about 995 towns and cities in New York State and as of July 10, there were about 725 that are officially opted out from allowing retail operations within their borders (I pulled the opt-out list from OCM’s website found here).

With only 270 municipalities allowing retail cannabis operations, I think granting over 400 CAURD licenses will be economically unfeasible. The regulations are very strict about the location of cannabis dispensaries (i.e. being away from schools, churches, etc), so I just can’t see how all those approved licensees will be getting the real estate and their operations off the ground.

Of course, more cannabis dispensaries will drive legal cannabis prices down, which is good for consumers. But with 280E, being profitable will be very difficult. Oversaturation is a known fact and essentially killed the market in other states, such as California.

I can understand that for New York State, more cannabis dispensaries means more tax dollars coming in. Just think about the 13% cannabis product tax that every consumer will have to pay. That’s a good source of income for localities and the state. It is possible, of course, that more towns and cities will be opting in, but I just think granting so many additional CAURD licenses needs to be spaced out to allow other businesses to get off the ground. The adult-use regulations are close to being finalized and the expectation is that more retail license applications will be submitted and more approvals given.

From the investor’s standpoint, it is also not really positive since more licenses means less profit.

New York already struggled with getting the social equity fund funded. Another piece of simple math – they are approving more CAURD licenses but there is no corresponding increase in the Social Equity fund.

Bryan Murray is the EVP of government relations and communications at Acreage Holdings, one of New York State’s licensed Registered Organizations that plans to expand into the adult-use market.

Acreage had done some analysis together with a consulting firm earlier this year, and what we realized was that New York would need about 900 dispensaries around the state in order to meet what we projected to be the demand for cannabis.

So I think today’s news is encouraging from the goal of the MRTA to cut into the illicit market. Our position is that New York has great potential, but that potential will be largely unmet with an illicit market as burgeoning as it is.

We expected this. We do wish we would have been a part of it, naturally. We are still very enthusiastic about entering into this market and our goal is to help it stabilize.

Mike Doyle is a consultant, adjunct professor, and the founder of Cannasigliere, an upstate NY consulting firm that advises individuals, groups, municipalities, and institutions of higher education on post-prohibition opportunities

New York’s newly licensed CAURD operators have every right to celebrate the CCB’s decision after months of living in limbo. Yet, as with most things, there are two edges to this particular sword.

The hurdles faced by existing CAURD licensees remain for newly licensed operators, including identifying suitably zoned and compliantly setback locations for their storefronts, acquiring operating capital sufficient to succeed while avoiding predatory deals, and possessing the operational wherewithal to successfully compete in NY’s market.

There is also the question of the impact that a vastly expanded CAURD program will have on the prospects of non-CAURD social equity applicants who have been patiently waiting since legalization for their shot at the net.

Still, from a bowl-half-full perspective, there’s joy in the air and these approvals serve as a once-in-a-lifetime opportunity for many entrepreneurs who’ve been negatively impacted by the War on Drugs. Here’s to them and their prospects of success.