­­New York Retail Marijuana Licensing: A Noble Goal With Unintended Consequences

By Jeffrey Chmay, Staff Writer

          Photo Courtesy of Pixabay

  In August 2023, a New York Supreme Court judge halted the issuing of recreational marijuana retail licenses due to the preferential treatment given to those with past marijuana convictions.[1] A group of veterans filed the lawsuit stating that New York marijuana regulators improperly limited initial licensing.[2] With large, multi-state marijuana retailers gaining access to the market beginning in 2024, social and economic equity applicants say that the Court’s injunction has hindered their ability to establish footing in the soon to explode retail marijuana market.[3]

            When New York legalized recreational marijuana, a key aspect of the Marihuana Regulation and Taxation Act (MRTA) was to give preferential licensing to certain classes of people under the “social and economic equity plan.”[4] Within the MRTA, “social and economic equity applicants” include those disproportionately affected by enforcement of marijuana prohibition, minority-owned businesses, women-owned businesses, distressed farmers, and service-disabled veterans.[5] When the first round of marijuana licensing commenced, however, those with marijuana related offenses were the only class given access.[6]

            While interpretation of the MRTA is still in the hands of the court, veterans argue that the MRTA’s goal of allocating 50% of marijuana retail licenses to those within the social and economic equity class meant unified access to those licenses.[7] But the New York State Office of Cannabis Management (OCM) took a different approach and implemented the Conditional Adult-Use Retail Dispensary License (CAURD), which provided licensing access only to those with prior marijuana convictions.[8] In response to the lawsuit, the OCM modified the rollout of licenses and will make them available to all applicants come October.[9] This change puts all social and economic equity applicants on edge as it means large multi-state retailers will enter the market alongside small business owners.[10]

            In all fairness to regulators, the state has struggled to get the cannabis market off the ground, unable to open enough dispensaries to meet demand.[11] Marijuana farmers are complaining that there are not enough retailers to sell their crop and that the illegal market has stepped in to fill the void.[12] This issue, gone unaddressed, would be likely to have far-reaching economic implications as New York’s retail marijuana market is predicted to generate $4.41 billion by 2030, competing with California, which has generated $4.51 billion this year, for the largest marijuana retail market in the United States.[13]

            Unfortunately, the lawsuit filed by the veterans has resulted in the unintended consequence of completely opening the market, putting all social and economic equity applicants at risk of being pushed out.[14] This fear is not unwarranted as big marijuana corporations have consistently taken control of retail marijuana markets.[15] It is basic economics – large corporations have the ability to produce at scale and price the smaller companies out of the market.[16]

Now, even those who were given some of the first licenses in New York are worried that the state has not given them enough time to get ahead of big marijuana corporations.[17] Even a small retail operation can cost over $1 million to get up and running and allowing big players to enter the market sooner than anticipated will make it very difficult for small retailers to recoup their investment.[18] Social and economic equity applicants have requested that the OCM delay big marijuana corporations’ access to licensing.[19] In response, the OCM has only expressed their “continued commitment to the success of [social and economic equity] licenses.”[20]

            What began as a noble goal to provide a form of reparations to those disproportionately affected by marijuana prohibition has only resulted in the rolling back of a governmental promise. Hopefully the OCM can honor their new promise of “continued commitment” to the success of these small marijuana retailers.

[1] https://apnews.com/article/marijuana-pot-new-york-dispensary-11309564fe45ddce 653c29752227b503.

[2] Id.

[3] Id.

[4] Marihuana Regulation and Taxation Act, 2021 New York Senate Bill No. 854-A, 2021-2022 Regular Sessions.

[5] Id.

[6] https://nypost.com/2023/08/03/ny-favors-drug-felons-over-disabled-vets-to-sell-marijuana-suit/.

[7] https://www.forbes.com/sites/dariosabaghi/2023/08/08/new-york-judge-temporarily-halts-new-marijuana-dispensary-licenses/?sh=278319da77ba.

[8] Id.

[9] https://www.cnbc.com/2023/09/14/new-york-legal-marijuana-program-expands-retail-licenses.html.

[10] Id.

[11] Id.

[12] https://apnews.com/article/marijuana-pot-new-york-dispensary-11309564fe45ddce 653c29752227b503.

[13] https://www.cnbc.com/2023/09/14/new-york-legal-marijuana-program-expands-retail-licenses.html.

[14] Id.

[15] https://greeneugene.com/2023/03/03/big-cannabis-takeover/.

[16] Id.

[17] https://www.cnbc.com/2023/09/14/new-york-legal-marijuana-program-expands-retail-licenses.html.

[18] Id.

[19] https://spectrumlocalnews.com/nys/central-ny/politics/2023/09/13/ny-cannabis-applications-to-open-to-all-this-fall?cid=share_clip.

[20] https://www.cnbc.com/2023/09/14/new-york-legal-marijuana-program-expands-retail-licenses.html.

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