Solutions Explored at NY Cannabis Insider Conference to Address Challenges in New York’s Adult-Use Cannabis Program

NEWYORK–, NY Cannabis Insider hosted a conference in Albany, bringing together stakeholders to discuss solutions to the persistent challenges faced by the New York adult-use cannabis program. One of the main issues raised was the slow enforcement against unlicensed operators, which has hindered the growth of the legal market.

Attendees pointed out the stark contrast in how liquor stores and bars are swiftly shut down when non-compliant, whereas unlicensed cannabis shops are allowed to proliferate. The Office of Cannabis Management, responsible for enforcement, faces staffing constraints, with only five enforcers tasked with overseeing approximately 1,500 stores.

Legacy operators expressed frustration at being associated with unlicensed shops, which they believe pose a significant threat to applicants under the Cannabis Control Board’s Cannabis Regulation and Taxation Act (CAURD). The delay in licensing for CAURD applicants while unlicensed operators thrive was also a source of complaint.

To address these issues, one participant suggested that Governor Kathy Hochul should seek assistance from California to improve enforcement and prevent product diversion. They also proposed revoking licenses for companies involved in diversion. Another view expressed was that as tax revenues increase and the state realizes the extent of revenue loss, stricter enforcement will follow, gradually resolving the problem over time.

The Dormitory Authority State of New York (DASNY), responsible for helping CAURD applicants secure locations and funding for buildouts, faced criticism for its lack of transparency. Stakeholders accused DASNY of offering loans without disclosing the terms, inflating buildout costs to secure larger loans, and setting rents well above market rates. Concerns were raised about flip-flopping positions and potential conflicts of interest involving DASNY President and CEO Reuben McDaniel, who also serves on the Office of Cannabis Management board.

Proposed solutions for DASNY included improving communication, increasing transparency regarding the social justice fund, and separating the Office of Cannabis Management from DASNY, along with McDaniel’s resignation from the board. Stakeholders also called for an audit of DASNY to account for the $50 million allocated by the state for CAURD applicants.

The anticipated timeline for the program includes a public comment period on proposed rules and regulations until July 15. Following the review of comments, final rules are expected to be adopted in August or September, with the application period opening in October or November. The Office of Cannabis Management aims to award the first general licenses at the beginning of 2024.

In addition to the above concerns, stakeholders expressed unease about the True Parties of Interest (TPI) rule. The complexity of TPI regulations, including discrepancies in the revised rules, was highlighted, with some attributing them to typographical errors. Of particular concern was the potential inclusion of vendors as TPIs if they receive compensation above certain thresholds. However, regulators have exempted landlords, lawyers, comp-based sales, and financial institutions from the rule, allowing passive investors with less than 20% ownership in an operation to invest in multiple stores without restrictions.