A look into New York’s cannabis market, its journey towards legalization and the challenges it is facing.
The Empire State has become the 15th regulated recreational market in the US on March 2021, when New York state lawmakers voted towards legalization and Gov. Andrew Cuomo signed the bill into law.
While New York is poised to be a potential $4.2 billion industry that could become one of the nation’s largest markets, it is still unclear when will legal sales will begin to push the state’s industry forward.
ALMOST A DECADE-LONG JOURNEY TOWARDS RECREATIONAL LEGALIZATION
Back in 2014, Gov. Andrew Cuomo signed the Compassionate Care Act to permit the use of cannabis for medical purposes (non-smoked methods as consumption), making New York the 23rd state to allow medical cannabis in some form. The legislation awarded 5 contracts to private growers who would each be allowed to operate four dispensaries. Between the years 2016 and 2018, legal medicinal uses were expanded to include chronic pain, as a treatment for PTSD, and as a therapy for treating opioid addiction.
In 2018, Gov. Cuomo encouraged the Legislature in his 2018 State of the State address to fund a comprehensive study on the likely impacts of legalizing recreational sales. In July of the same year, the New York State Department of Health concluded in its report, saying that “The positive effects of a regulated market in New York outweigh the potential negative impacts. The study was followed by an amended Marijuana Regulation and Taxation Act bill (“MRTA”), which would legalize and regulate cannabis in the state. Additional reforms took place in 2019, when Gov. Cuomo signed a compromise bill that decriminalized possession of small amounts and introduced a process allowing state residents with prior possession convictions to wipe those details off from their criminal records. However, legalization did not take place.
New York lawmakers repeatedly attempted to legalize recreational use via the legislative process. In 2020, disagreements over allocation of tax revenue from sales and the Covid-19 pandemic have prevented legislation from moving forward. The same effort was included in the 2021 state proposal as the Cannabis Regulation and Taxation Act, but members of the New York State Assembly objected to some provisions of the bill, with preference to pass their own legislation independent of the governor’s office, the Marijuana Regulation and Taxation Act (MRTA). After many negotiations between the governor’s office and the legislature, success took place on March 30th, 2021, when the MRTA was passed in the New York State Assembly and Senate, legalizing recreational use in the Empire State for adults 21 years or older. Consumers are allowed to purchase and possess up to 3 ounces of cannabis flower and up to 24 grams of concentrated cannabis and may securely store up to five pounds of cannabis at their personal residence or grounds. MRTA tasks The Office of Cannabis Management, governed by a five-person Cannabis Control Board, with implementing regulations for New York’s industry and overseeing licensure, cultivation, production, distribution, sale, and taxation.
Another milestone took place on April 9, 2021, where cannabis-related criminal records in the state have been expunged by the law. Apart from driving under the influence, the NYPD no longer lists any crime related to cannabis.
NEW YORK’S IMPACT ON THE GLOBAL MARKET
Being half the size of the legal market in California, New York’s unique global identity and mix of industries is poised to impact the global cannabis industry and culture.
According to a study by MPG Consulting, the total market size in New York, supported by residents, tourists and commuters, is estimated to be $4.6 billion or 747,000 pounds or flower equivalent. The market size and demand are projected to grow up to about $5.8 billion and 1.2 billion pounds in 2027. Should New York adopt practices similar to Illinois, Colorado, Oregon, Arizona and Massachusetts, allowing current medical cannabis providers to immediately serve the market and unlock early revenue benefits to fund social equity and other regulatory programs, the Empire State could capture $1.2 billion market by 2023 and $4.2 billion by 2027, generating between $301 million to $427 million in excise and retail tax revenue in the first two years. Under this scenario, the regulated adult use market would support about $2.8 billion in total economic activity and over 20,900 jobs created by 2023, and $10.1 billion in total economic impact and 76,000 jobs in 2027.
In terms of social and economic equity, the New York’s legislation laid out a goal for that matter specifically, that half of the state’s licenses will be given to women, minorities, disabled veterans, farmers, and people who have been disproportionally impacted by the policies of prohibition. MRTA also aims to promote small business opportunities and avoid market dominance through providing loans and grants to establish incubator programs to encourage participation by the mentioned groups. Tax revenue from retail sales will fund education, job training, drug treatment programs, and other community initiatives.
NEW YORK’S RECREATIONAL SALE IS HERE, BUT NOT QUITE THERE YET
The newly formed, five-member Cannabis Control Board had its first meeting in October, amending the state’s medical program to broaden the sale of flower and to allow a wide range of medical professionals to recommend medical cannabis. Moving forward, medical patients can be prescribed treatments for a bigger list of medical conditions, expanding the state’s existing operations. In addition, other changes made to the medical program include:
- Increased the amount of supply to a certified patient from a month to a 60-day one
- Permanent removal of a $50 registration fee for patients and caregivers.
- Simplified approval process to hold and dispense for patients to places, including hospitals, schools, and residential facilities.
With all the new changes, it is certain that the number of medical patients will continue to grow from the current 150,000 patients.
On the other hand, recreational sales are yet to see the light at the end of the tunnel this year or next. While the state law signed earlier this year had pinpointed the launch could happen as soon as April 2022, New York’s recreational market will not get off the ground for at least another 18 months, which is until mid-2023. New York Cannabis Control Board Chair Tremaine Wright has disclosed in early November that the agency is not expected to finish crafting regulations or begin issuing licenses for another year and a half. She added that it could be even longer for adult-use business are operational. This did not come as a surprise to many but still a disappointment to all as the Cannabis Control Board itself was not finalized until September 2021, leaving the members with a heap of policy work in front of them.
New York’s cannabis law outlines several licenses, ranging from an adult-use cultivator to delivery. Some licenses also have provisions limiting the number and the variety of licenses an applicant may obtain. For example, existing medical operators can obtain license to cultivate, process and distribute. New entrants to the recreational market will have to choose to either cultivate or sell, not both. Without knowing what type of retail stores are allowed and how they will operate, potential retailers are being careful before jumping in the recreational bandwagon.
According to the signed MRTA, a town, village or city may choose to opt out of allowing retail stores and lounges within their borders but must do so by December 31st. Several towns such as Eastchester and Somers in the lower Hudson Valley, the town of Chautauqua along with the villages of Lakewood and Cassadaga in wester New York have already opted out. While those who choose to opt out will not receive a portion of the millions in tax revenue generated from legalizing recreational use, more municipalities are considering opting out because they have not seen sufficient marijuana regulations from the board, which has been delayed by at least six months. However, a municipality may opt back in at any time.
While 2023 might seem like a little longer wait than expected, New York has come a long way: from being the marijuana arrest capital of the world to passing one of the most progressive legalized cannabis laws in the country. In the long run, New York may even aid the East Coast in becoming a bigger market with more lobbying power.
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