Emerging Markets: New York
On March 31st, 2021, New York state finally legalized adult-use cannabis, announcing their imminent arrival into the industry nearly a decade after cannabis was first legalized in the United States in Colorado. Despite the late legalization, New York has made big moves in an attempt to open sales before the end of 2022. These moves include a special emphasis on their social equity program, where New York is giving those affected by cannabis criminalization the ability to apply for and receive licenses before anyone else. To further this goal, New York Governor Hochul pledged to commit $200 million to support social equity applicants in building adult-use cannabis businesses. Additionally, New York City Mayor Adams announced a $4.8 million plan to further social equity applicants in New York City.
Regulations for “Conditional Adult-Use Retail Dispensaries” proposed by the New York State Office of Cannabis Management entered a 60 day public comment period on June 15, 2022. The subset of dispensaries under these regulations must be owned by equity-entrepreneurs with a prior cannabis-related criminal offense who also have a background owning and operating a small business. They will be the first to open and make sales in New York State, establishing equity-owned businesses at the front-end of New York’s adult-use market.
The current window for cultivator applications closed on June 30, 2022. However, New York governor Hochul recently signed a bill that allows for a “conditional adult-use” cultivator and processor licenses which would allow businesses to process and distribute cannabis products without holding an adult-use processor or distributor license. The application window for Conditional Processors began June 28, 2022, and will remain open until August 31, 2022. The Office of Cannabis Management website further states that they are diligently working on the roll-out of additional license opportunities, so we can expect more information soon.
New York's Regulations
How a cannabis market will turn out depends mostly on the laws and regulations for that market. On March 31, 2021, the New York Marihuana Regulation & Taxation Act (MRTA) was signed into law, legalizing adult-use cannabis. Starting with licensing regulations in New York, this Act also defined many license types, which will be listed here:
Cultivator, Conditional Cultivator, Nursery, Processor, Distributor, Cooperative, Microbusiness, Retail Dispensary, On-site Consumption, Delivery, Registered Organization Cultivator Processor Distributor Retail Dispensary, and Registered Organization Cultivator Processor Distributor.
On that long list, a number of these licenses stick out as notable:
First, a delivery license was created which would authorize the delivery of cannabis and cannabis products by licensees to cannabis consumers. Even in states where adult-use cannabis has been legalized for years, sometimes delivery licenses are not available, so seeing that New York has crafted this option into the list of licenses right at the start is great. This option could provide a low start up cost entry point to the New York market.
Second, an on-site consumption license was created, this license authorizes the acquisition, possession, and sale of cannabis on the licensed premises to consumers, for use on the premises. On-site consumption locations, usually referred to as Cannabis Cafes, have slowly been legalized in some states around the country. Currently, Cannabis Cafes are legal in California, Illinois and Colorado, with Massachusetts and Maine looking to try the idea in their markets soon. However, on-site consumption is very new to the eastern United States, so New York offers an interesting opportunity for anyone looking to cultivate their brand around this concept in the east.
Finally, as mentioned previously, the conditional adult-use license sticks out as providing a great entry point for any social equity entrepreneur looking to open a cannabis business in New York. With the way the legislation is set up, these social equity applicants will be the first to open and make sales in New York State, allowing such an applicant to establish their businesses at the front-end of New York’s adult-use market.
Moving to the packaging, labeling, and marketing of cannabis products there is not much of note in New York yet. The proposed regulations for packaging and labeling include minimum standards that ensure cannabis packaging is child-resistant, tamper-evident, and non-toxic. Additionally, they would require detailed labeling that include components that provide relevant warnings, and give details regarding serving size, potency, ingredients, and usage and storage instructions. Of course, the proposed regulations would also prohibit any packaging that is attractive to young people or that includes false or misleading statements. Overall, these regulations are very similar to what can be seen in most states, and any small differences can easily be taken care of by a compliance specialist.
Forecasting New York’s Green Rush
New York is on track to be the biggest addition to the cannabis market since California legalized cannabis in 2016. California is now the largest cannabis market in the world with a significant portion of total sales in the United States over $5 billion in taxable sales this past year. Colorado, the second largest market and the first state to legalize recreational cannabis use, had over $2 billion in sales this past year. By comparison, the New York cannabis industry is expected to generate $1.3 billion in sales just in its first year. Considering California’s increase from $2 billion to $5 billion in four years of cannabis sales, New York’s projected market entry of over $1 billion makes the NY cannabis market one of the most profitable markets in the world.
Even beyond the comparisons to other states, the cannabis industry in New York will be massive, and comes at a time when new revenue is sorely needed following the COVID-19 pandemic’s impact on New York City. In the words of New York City Mayor Adams, “The cannabis industry could be a major boon to our economic recovery — creating new jobs, building wealth in historically underserved communities, and increasing state and local tax revenue." Regardless of the actual numbers, New York’s legalization of cannabis will significantly impact the state’s overall economic well being and provide boundless opportunities for an ever evolving workforce.