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This guest column is from Paula Collins, EA, Esq., a tax attorney dedicated to the cannabis industry, a co-founder of the NY Consortium of Cannabis Accountants, and an adjunct professor at Pace University’s Elisabeth Haub School of Law, where she teaches Cannabis Law and Policy. She can be contacted at paula@paulacollinslaw.com. The views and opinions expressed in this article are those of the author, and do not necessarily reflect the views or positions of NY Cannabis Insider.
Oct. 4, 2023 will be the 917th day since Gov. Andrew Cuomo signed the MRTA into law. On that day, New Yorkers will finally be able to apply for a license to operate a cannabis business.
If you know the show “Rent,” you know the song, “Five hundred twenty-five thousand six hundred minutes.” Sadly, I don’t think a song for the Office of Cannabis Management’s 1,320,480 minutes would win a Tony Award.
What I saw on my iPad on Sept. 12, 2023, was oddly surreal. The zip through the agenda without mentioning the “i” word (shhhhh – don’t mention the injunction!) caused a certain rose-colored glasses tinge to the discussion of the items on the agenda. We barreled right on through the awkward moments.
Maybe I didn’t time my gummy right, but I feel some element of dissociation from the timeline right now. It’s been way too long since the MRTA passed, and now, suddenly, the time to Oct. 4 seems way too short. What’s my problem with Oct. 4? Well, there are those pesky 30-day rules. (Did they give us a 30-day notice? We’re all so dazed in this market, we can’t even tell.)
There’s the subset getting considered at 30 days after Oct. 4 (maybe THAT’s the 30-day period they were thinking about!), and then the reality that the ROs are now entering the market in December, just as the Oct. 4 applications are coming due, but not with enough time for anyone applying in October to actually open.
I still don’t quite get how they will have 50% representation of general licenses and social equity licenses. Will we pull one social equity license out of the hat, and then immediately pull one general license out of the hat? If not, how will they implement the rule for a 50/50 split?
There’s the whole issue of the ROs’ carefully planned entry into the market. That went out the window. (Quick, someone tell the folks at OCM that it’s glass ceilings we are supposed to be shattering, not glass windows.)
And then there’s the canopy rule. It’s fine, really. Keep digging a hole for yourself, OCM. Indoors or outdoors. No, maybe just stop talking amongst yourselves and start really listening. You’re literally putting farmers’ lives at risk.
Alas, we carry on. Just don’t grow at home. Keep waiting for that one, unless you are an RO and you live at your corporate headquarters. Then 100,000 square feet is the limit.
Not sure that you can get your license application ready in the 60-day window after Oct. 4? No worries. I’m not 100% sure we’ve seen the last of the lawsuits. I’m not even 100% sure we will make it to the end of 2023 without yet another injunction.
The state reported $4.4 million in cannabis sales by 23 licensed operators during the week of August 20-26. Hmm. Just imagine if we had the revenues from even 10% of the unlicensed shops in New York City.
I estimate that we have 8,740 shops in NYC. (Oh wait, two more shops opened in Gale Brewer’s district. We should now put it at 8,742 shops.) Even if they did the same sales volume as the licensed shops (most do quite a bit more on a regular basis), 10% of that volume in sales would be $167,200,000. The 13% cannabis tax on that would be $2,173,600 earned in one week.
Annualized, that’s $113,027,000 in cannabis tax revenue, just from 10% of the unlicensed shops in New York City. With 4% of that pumped back into the community, that would send $4,521,088 back to The Big Apple, right when they are contemplating budget cuts. With checks like that, you can afford to “light up,” Mayor Adams.
Even in mature markets, a very conservative estimate of two-thirds of all marijuana that is consumed comes through the unlicensed market. In their book, “Can Legal Weed Win?,” two California-based economists say that 85-90% of all marijuana sold is through the unlicensed market. In the northeast, the figure is bound to be even higher than it is on the West Coast since there are comparatively fewer licensed dispensaries available.
A lofty goal of eradicating 100% of the unlicensed market was tossed out at the Sept. 12 OCM meeting. Why wouldn’t a regulator want, instead, to find some creative, out-of-the-box, progressive, never-before-thought-of solution for regulating that part of the industry that accounts for two-thirds of all of the marijuana that is sold? Or do they only want one-third of all sales to be regulated?
If the problem is testing, then test. If the problem is out-of-state diversion, then address that as a separate issue. Better yet, foster connections between the so-called “distressed farmers” and the thriving unlicensed cannabis dispensaries. Win-win. (I’d say the farmers are “beyond distressed” at this point, but that’s not the term that was written into state law under the MRTA.)
We can no longer persist in this binary, in or out, licensed or unlicensed mindset. We need gradations of licensure. Some consumers want to continue to buy weed at their local bodega while others want to hit up the hip, slick and cool licensed dispensary with high-gloss packaging, a drive-up window, and an armed guard outside. Why not develop a license framework that tolerates both, and then some, all with products bought from New York State farms?
While you ponder the range of consumer interests alongside the vastness of the market (I’ll remind you of that figure – two-thirds of all marijuana that is sold is through the unlicensed market), please remember that the state’s 36,207 unlicensed cannabis business owners are not the people to blame for the delay in licensure.
Be very mindful that not a single unlicensed shop owner caused the jagged implementation of the MRTA. Grasp the fact that the blinking neon pot leaves did not cause the rocky rollout of the regs that impacted someone else’s plan to open up a licensed shop.
Not one single unlicensed cannabis business owner has caused the double-speak and confusion that we have endured in New York cannabis. Each and every misstep was due to some force beyond or irrelevant to the unlicensed market.
We won’t get to it by Oct. 4. We probably won’t get to it in the upcoming 917 days. But someday I sincerely hope that we come to the realization that we can’t simply ignore or eradicate two-thirds of the market. And the unlicensed market is really not the problem in New York cannabis.
Enforcement does not work.
The government lost the War on Drugs.