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Gov. Kathy Hochul announced her administration will restructure New York’s Office of Cannabis Management – including the exit of the agency’s current leader – following an investigation that found inefficiencies and mismanagement have slowed the state’s legal marijuana rollout.
Hochul, on Friday, said her administrations’ most pressing goals are to speed up the pace of licensing – especially for retailers – and crack down on illicit weed shops that have proliferated statewide. The action comes after a report by Office of General Services investigators – led by Commissioner Jeanette Moy – released a report detailing issues within the OCM.
“There are deep seeded issues at OCM, issues that have limited its ability to fulfill its licensing role,” Hochul said in an afternoon press conference. “I want you to know we’re starting to fix this right now.”
The governor said OCM Executive Director Chris Alexander will not continue as the agency’s leader after his term ends in September. Hochul appointed Alexander, a former state Senate legislative staffer and advocate for cannabis legalization, as the OCM’s inaugural leader in late 2021.
Alexander’s tenure at OCM has been a decidedly mixed bag of accomplishments and setbacks. Under Alexander’s watch, regulators licensed hundreds of cannabis businesses, midwifing New York’s current legal cannabis infrastructure into existence.
Achievements notwithstanding, the agency has operated in a persistently opaque and inefficient manner, which played a role in slowing the industry’s rollout. For years the OCM has released conflicting information about its own rules and licensing processes, and hasn’t responded to applicants and licensees in a timely manner.
Some of their missteps have resulted in a dizzying number of lawsuits against the OCM – some of which the agency is still litigating.
Moy’s findings from OGS’ 30-day investigation into OCM’s processes include that the agency has invented its own systems of operating, rather than adopting existing processes used by other state agencies. Moy’s report found the OCM’s senior staffers have limited professional experience with regulatory agencies – leading to struggles prioritizing important tasks – and that the licensing process the agency developed is overly complicated and lacks transparency.
“The findings in this report do show … there are ways that we can shore up their operations,” Moy said during Friday’s press conference.
The OCM must centralize its licensing process and ensure applicants have an accurate understanding of how it works, Moy said. Her investigation found license applications are reviewed by a mishmash of different units operating under an unclear hierarchy, with little to no accountability.
At least five different groups – which all report directly to the executive director – review each license in a seemingly oblique way, Moy’s report found. Currently, there don’t appear to be staffers in charge of handling the entirety of any single license, so few can answer applicants’ questions about the process.
Hochul’s most important goal in shaking up the OCM is to unclog the bottleneck of license applications and speed up the approval process, she said. In coming days her staff will be more closely involved with OCM operations, and intends to increase the agency’s licensing staff by 40%.
The governor also announced that on Monday, an enforcement task force led by Christopher West – New York State Police Department’s second in command – will begin an intensive 90-day effort to shut down and padlock as many illicit cannabis shops across the state.
Hochul acknowledged that injunctions stemming from two lawsuits have slowed the Empire State’s legal weed retail rollout, which she said were outside the agency’s control. But some cannabis regulators appeared to have a different take on Friday.
During a Cannabis Control Board meeting that was in progress when Hochul announced the OCM’s restructuring, board member Adam Perry excoriated the OCM for the wide array of lawsuits that litigants have filed against the agency.
“As a business litigator for 30 years and as a public authority board member for 20 years … I have never seen the volume and breadth and types of lawsuits that the office has faced in this short period,” said Perry, who added that he thinks the lawsuits have interfered with operations.
In fact, the lawsuit originally filed by service-disabled veterans who applied for cannabis licenses – which held up the Conditional Adult-Use Retail Dispensary program for months – was predictable. NY Cannabis Insider ran a story about a year before plaintiffs filed suit in which some legal experts warned that language in the MRTA makes the CAURD program – which the OCM created – vulnerable to legal challenges.
Perry, on Friday, also noted the OCM doesn’t have enough employees and that the CCB has approved measures to expand the agency’s authority without providing them with the staff necessary to implement policy.
During a press conference, Hochul said the lag time in general licensing prompted the review of OCM. The governor’s office was under the impression that most hopefuls who applied in November and December would be either approved or denied by January, and were surprised when the number of applications provided to CCB for final approval were a fraction of their expectations.
“It was this most recent fall to spring class of applications where I found a lot of inaccuracies and inefficiencies,” Hochul said. “I wanted to send in someone who had an eye toward organizational management, who understood the capabilities of government, and could find out what we’re missing.”
Hochul specifically mentioned the need to help applicants who are currently paying rent for locations where they intend to operate their businesses and have been waiting for months – or years, in some cases – for an approval or denial of their applications.
That includes Jayson Tantalo, a CAURD applicant who operates Flower City Hydroponics in Rochester, and co-founded the New York Cannabis Retail Association. Tantalo applied for a CAURD license in 2022 and still hasn’t received an approval or denial. He and his wife Britni – also his business partner – also applied for a retail license when the general licensing application period began.
It took Tantalo about 18 months to find real estate for a prospective dispensary, and already put down a deposit. As he’s waited for news on the CAURD application and general license, regulators have licensed hundreds of other applicants, Tantalo said. While people’s hearts may be in the right place, it’s unclear that New York’s cannabis regulators – as they’ve been operating – are capable of successfully overseeing the market, he said.
“When OCM was built out, was it built out for advocacy? Of course,” Tantalo said. “Was it built out by people who understand the industry? I don’t know.”
Shanduke McPhatter also applied for a nonprofit CAURD license in 2022 – for the Brooklyn-based nonprofit Gangstas Making Astronomical Community Change – and for a general retail license in November. He’s lost two different locations he planned to use as storefronts while he’s waited for either license, he said.
The last McPhatter heard from the OCM regarding either license was a 2022 email notifying him that an injunction stemming from a lawsuit filed by Variscite NY One prevented the OCM from issuing licenses in Brooklyn, where he intends to operate. That lawsuit was settled nearly a year ago.
It’s been frustrating for McPhatter to see so many people get licensed ahead of him, especially cases in which, he said, licensees had also operated illicit stores – which he avoided in order to remain in compliance with OCM’s rules.
“Why were we not making sure that the people waiting respectfully, following the rules, get an opportunity?” McPhatter, a former legacy operator, said. “We’ve paid attention to the fact that there are people who are running illicit stores that have been granted licenses.”
McPhatter said that based on how things have gone so far, the OCM restructuring announcement doesn’t inspire much confidence. At the same time, he doesn’t necessarily blame staff at the OCM or CCB members for the dysfunctional way cannabis licensing has played out.
“I don’t want to point the finger at the [OCM] entirely, as if the people who are there haven’t been doing their job,” McPhatter said. “It’s the governor’s job to make sure that they have the resources and everything they need to make sure that [licensing problems] would not happen.”
Moy’s report didn’t mention or hold accountable the state’s Dormitory Authority, which played a key role in the plagued rollout of the CAURD program, nor did it scrutinize the CCB, which is the five-member board charged with overseeing the OCM.