Medical Marijuana Giants Struggling To Enter Recreational Market in N.Y.
Medical Marijuana Giants Struggling To Enter Recreational Market in N.Y.
Large companies want to join the state’s new industry. A multimillion-dollar fee could be in the way.
In 2015, New York State granted the first ten medical marijuana cultivation and sale licenses. The winning bidders celebrated the chance to own a lucrative market.
However, they also knew there was more to come.
New York’s legalization of recreational marijuana would place medical marijuana companies in a strong position to control the market.Â
This is similar to what they did in Arizona and Illinois.
However, New York took a different approach and promised to place those harmed in the war on drugs first in the line for retail licenses. The application process is set to open Thursday.
Medical Marijuana Giants Struggling To Enter Recreational Market in N.Y. – MM Companies Scrambling
This approach has caused the ten medical cannabis licensees and companies interested in their business, almost all large, multistate operators, to scramble.
Moreover, some have donated to Gov. Kathy Hochul’s campaign, and almost all have hired lobbyists spending $2 million to make the most of the $6 Billion market.
Their campaign centers on a fee that cannabis operators must pay to be able to sell outside of the state’s medical program. The state’s marijuana law requires this fee.
Initial discussions suggested a fee of $20 million per operator. The medical marijuana industry is keen to lower that number.
Ngiste Abebe, the president of the New York Medical Cannabis Industry Association as well as an executive at Colombia Care, said, “It needs to be grounded in the economic realities of the market.Â
Additionally, she said that while operators were excited to support social equality, she would love to see an economic analysis justifying $20 million.
Good Intentions, Poor Strategy
The decision to give preference to members of communities that were affected by anti-drug laws shook the New York medical marijuana industry. Many of them were counting on the lucrative recreational market.
The cannabis industry was vocal in lobbying the state for recreational sales. It argued that they, as experienced operators, were best placed to capture and convert the illicit market.
A report funded by the industry even predicted significant tax losses for the State if medical operators were not prioritized.
However, lawmakers remained firm in their belief that social equity candidates, defined as women, minorities and distressed farmers, veterans, and others affected by the war against drugs, should be allowed to succeed.
Furthermore, the industry made a key provision: Each of the ten medical professionals would be allowed to open three recreational dispensaries for a fee. This would make them the only vertically integrated players in the New York market. The fee would be used to seed social equity candidates’ businesses.
New York’s cannabis law does not specify how much or when the fee should be charged. Officials have started issuing regulations focusing on other aspects of the new industry. However, the licensing fee is still largely a mystery.
Medical Marijuana Giants Struggling To Enter Recreational Market in N.Y. – NYS MMJ Regulations
The regulatory uncertainty is already starting to take a toll. Ascend Wellness, a cannabis company, recently announced that it would abandon plans of acquiring MedMen’s New York medical marijuana operations.
However, medical companies do have leverage in this fight. The state will need marijuana to fill the shelves at the first Social Equity Shop.
Although the state has approved more than 200 marijuana farmers to cultivate cannabis outdoors and in greenhouses, there are restrictions on how much and what product can be made.
Some worry that opening retail shops with insufficient supply could lead to users being cut off from the legal cannabis market. This is a severe threat.
Additionally, medical operators will gladly sell some of their wholesale product to new shops to avoid this problem. However, any sale would have to be contingent upon the payment of that fee. This would mark an end to the rare period when small entrepreneurs dominated New York’s legal marijuana market.Â
Ultimately, the state needs to step and answer to the medical marijuana operators in N.Y. While the social equity program is well-intentioned, there are some repercussions for small-scale cannabis entrepreneurs.Â
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