New York lawmakers are trying to fix the problematic marijuana program
New York state capitol

New York lawmakers legalized adult-use marijuana for the state, but the rollout has been plagued with numerous problems and the Office of Cannabis Management is being sued from all sides. Even the governor has expressed her unhappiness with the program calling it a “disaster.”

Now it seems that legislators are trying to fix the problems through a variety of proposed pieces of legislation. There are over 80 cannabis-related bills that have been introduced in the 2023-2024 legislative session, though most will never pass through their committee of jurisdiction.

At the recent Cannabis Real Estate Summit Series presented by Park Jordan, Kaelan Castetter of Castetter Consulting Group ran through the various problems that the proposed laws hope to resolve. He outlined these issues:

  • Rolling back provisions of the law or making it more strict.
  • Advancing the hemp-derived market.
  • Adding seats to the cannabis control board or advisory board.
  • Marketing changes.
  • Enforcement tools.
  • Tax reform.
  • Sustainability.

Tax reform

Gov. Kathy Hochul has already proposed a repeal of the potency tax in her budget and wanted to replace it with a 9% tax paid at wholesale. New York taxes its cannabis at a much higher rate than its neighboring states, which only motivates consumers to shop in the unlicensed market. In this new proposal, vertically integrated operators would calculate the tax on 75% of the retail price.

“This is a major drop in effective tax on some products, such as edibles, tinctures, and beverages but a less significant difference for flower,” Castetter said.

He noted that the legislature is due to release its budget bills at the end of February and advocates are hoping their proposal will drop even lower than the 9% rate.

Enforcement

The proliferation of the unlicensed market is a major problem for neighborhoods and those trying to operate within the regulations of the legal market.

Hochul has sent enforcement language to leadership in the Senate and Assembly. Castetter noted that major points of new enforcement tools involve local law enforcement participation and the ability to lock down illicit operations quickly. While many in the community want the unlicensed operators to quit their operations, they are also queasy about law enforcement returning to seizures of cannabis.

One idea that is being floated is not allowing retailers with tobacco licenses to advertise they are selling cannabis-related products. The goal behind S7174/A6882 is to target bodegas selling bootleg cannabis.

Marketing

Castetter also pointed out that New York has some of the tightest marketing regulations. Here it seems there are more bills to make the restrictions even harder. Although S7572 would clarify the over 21 audience requirement be 75%, instead of the current 90%.

Agriculture

In agriculture, lawmakers want to define cannabis as a crop, which seems obvious. However, farms aren’t generally allowed to house an indoor cultivation facility. Instead, those are supposed to be located in industrial zones.

Castetter said that the Senate isn’t wild about this bill as it would “open a can of worms.” Many large property owners claim to be farms to be tax breaks. Making this change could open up many properties to grow cannabis.

Another issue that New York legislators are hoping to change is the proximity measurement. It currently stands at 1,000-2,000 feet and they are asking to roll that back to 500 feet. In dense areas, like New York City, a thousand feet doesn’t acknowledge the total changes that can happen in neighborhoods or the walking distances. In rural towns, the proximity could force a business out of the town entirely.

New York isn’t unique in tweaking its adult-use program. Many states, once they get their programs up and running, identify problems and set about fixing them. Unfortunately, New York’s problems are growing as those involved in the industry get increasingly frustrated at the mountain of restrictions that seem designed to hinder rather than help these emerging operations.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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