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Cannabis Watch: New York issues first retail cannabis licenses to business owners with a past conviction in a first for the sector

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The New York Office of Cannabis Management’s Cannabis Control Board on Monday awarded 36 conditional adult-use retail dispensary (CAURD) licenses with a focus on equity and inclusion.

The move marks a symbolic first step in allowing adults over 21 to buy cannabis legally in what’s expected to be one of the largest markets in the U.S., projected at roughly $5 billion in annual revenue.

In an attempt to compensate victims of the War on Drugs, the Cannabis Control Board awarded 28 licenses to business owners with cannabis convictions or family members with cannabis infractions. The board awarded another eight licenses to non-profits with a history of serving current or formerly incarcerated individuals, such as by creating vocational programs.

State officials hailed the license awards after a long-sought promise to work to establish a more equitable cannabis business than others around the U.S.

Over the last 30 years, Black New Yorkers were 15 times more likely to be arrested for cannabis infractions than whites and Latinos were eight times more likely, the Cannabis Control Board said in a statement. Accordingly, the majority of the license awardees in the first round of licenses are people of color, the state said. 

“This is a momentous day,” said Jen Metzger, a member of Cannabis Control Board. “It’s a very exciting thing to be a part of. This is really the first of its kind anywhere.”

Tremaine Wright, chairwoman of the Cannabis Control Board, described the license awards as a “heavy lift” for state officials to get up and running in the past year and receiving 900 applications for retail licenses.

The state will continue to award additional retail licenses as it works through more applications. It will also provide financing to license holders as well as real estate for cannabis dispensaries and other business support.

Also Read: Pot advocates call for expungement of cannabis records in rare hearing on Capitol Hill

One question, however, is whether a lawsuit in federal court will cause more delays for licenses in certain parts of the state.

Earlier this month, U.S. District Court Judge Gary Sharpe temporarily blocked the state from issuing about 63 of the 150 licenses in Brooklyn and parts of update New York, citing a lawsuit by Variscite NY. The suit alleges that New York State’s plan to award the first 150 licenses to business applications to in-state residents impacted by the War on Drugs breaches the state’s constitution’s dormant commerce clause that protects interstate commerce.

The Cannabis Control Board declined to comment on the suit.

State Assembly Majority Leader Crystal Peoples-Stokes said she was proud of the cannabis effort by the state and said “it’s sad” that some of the licenses are on trial in the federal suit. “I know we’ll win this case,” Peoples-Stokes said.

The Cannabis Control Board also awarded 16 more adult-use cultivator licenses to bring the total to 277, along with eight cannabis processor licenses and three cannabis laboratory permits.

The board also OK’d a resolution to revise cannabis packaging and labeling rules and also to air proposed regulations on the state’s adult-use program.

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Among the speakers at the hearing, some ex-inmates said the application process was complicated for people just getting out of jail and that more should be done to work with people who have not been able to set up a successful business yet.

The state is structuring the state adult-use rules to prevent monopolistic activities in the market. Just as a major beer company can’t handle distribution or retailing of its products in New York, the same so-called two-tier structure is now proposed for New York. The state will also require information about stakeholders in cannabis companies and will ask for ownership data on whether they’re also investing in other companies in the sector from outside of New York

Much more work awaits as New York moves to finalize regulations and award licenses for cannabis delivery companies as well as consumption lounges.

Aaron Grey, analyst with Alliance Global Partners, said the proposed regulations by the state will restrict multi-state operators to the wholesale market near-term, although the comment period could bring changes to the final regulations.

“While the regulators were clear on their focus on the success of small operators in the market, we believe the biggest factor will be how regulators crackdown on the illicit market, compared to rules for the legal operators,” Grey said. “Indeed, we see it as difficult for any of the legal operators to succeed in the NY market if the illicit market continues thriving.”

Operators with exposure to the New York market include Acreage Holdings
ACRHF,
-2.47%
,
Columbia Care
CCHWF,
-6.85%
.
Cresco Labs
CRLBF,
-4.73%
,
Curaleaf Holdings
CURLF,
-3.21%

and Green Thumb Industries
GTBIF,
-4.31%
.

Also Read: New York raids illegal cannabis shops ahead of plans to issue licenses

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