Governor Andrew Cuomo (NY) announced his plans to legalize cannabis for adult use in his state budget speech last week. He made the announcement with such enthusiasm some think legalization is an actual possibility this year. A major stumbling block in 2019 was sorting out the social and criminal justice issues that come with cannabis legalization, it will be so again this year.
Can the Empire State overcome the usual pitfalls and set up a market that will finally address those disproportionately affected by the War on Drugs? Unlikely.
If we look closely at the Cuomo cannabis plan there are red flags. According to Cuomo’s budget, “the program will limit the number of producers and retail dispensaries to guard against a market collapse.”
That may sound good but time and again states that have limited licensing markets face serious product shortages, increased consumer cost, and greater startup expenses that ultimately keep illicit markets going.
Fewer licenses at higher costs mean fewer entrepreneurs. In many markets the initial capital requirements are so high minority entrepreneurs can’t compete.
Cuomo says that he wants to “encourage equity through craft growers and cooperatives, and provide training and incubators to ensure meaningful and sustained participation by communities disproportionately harmed by cannabis prohibition.” If you read between the lines, that means the minorities who cannot meet the state’s high standards for a license will be thrown a bone and be allowed into a collective of other potential unworthy license holders who won’t be able to compete with the deep pockets of more established brands. None the less, come election day, it may seem to some that the Governor kept his promise for social and criminal justice.
The budget also says, “the Office of Cannabis Management will administer social equity licensing opportunities, implement an egalitarian adult-use market structure….”
The fastest way to develop an egalitarian cannabis model is unlimited licensing, low barriers to entry, access to capital, ending “grandfathering” of medical market license holders, and a strict government agency that ensures access to minority entrepreneurs and polices abuse like shell companies scooping up licenses.
While a truly free market is the American way, that free market needs to be tempered with reasonable regulation. However, that regulation should not limit the number of licenses, or make licenses inaccessible to less established entrepreneurs.