New Yorkers Hopeful Cuomo Exit Gets Legalization Back On Track

Cannabis fans are hopeful that the resignation of Governor Andrew Cuomo will mean legalization efforts will get back on track. The Governor often signaled he was in favor of full legalization, but often behind the scenes, he seemed to slow the process. While the incoming governor Luitenant Governor Kathy Hochul hasn’t signaled whether it will be a key issue for her, many are feeling positive that the April 2022 goal may be back in play. She does come from the more conservative area of the state, but she is also a pragmatic politician and one known for getting things done.

David Feldman, Managing Partner at cannabis consulting firm Skip Intro said at the High NY event in New York City on August 10 that he was sure she’d have other pressing priorities in the immediate future. Hochul has to assemble a team and make the transition to Governor at a time that the COVID pandemic seems to be resurging. Feldman though believes progress could be made again.

Viridian Capital Advisors wrote in a new report, “Despite passing legislation in March, Mr. Cuomo has always been a reluctant supporter of cannabis legislation and in recent months, the timing of a rollout became uncertain as he and other state leaders politicized the issue leveraging cannabis to get other topics prioritized. Most recently, the Governor and Senate leaders have jockeyed over who will be appointed to lead the Office of Cannabis Management and the Cannabis Control Board. Both sides supposedly are looking to win favor for other issues with appointees. Meanwhile, the two state offices are integral in setting legislation and giving operators sufficient transparency to fund the build-out of assets and future capacity.”

There are ten licensed operators in New York: Acreage, Columbia Care, Cresco, Curaleaf, iAnthus, Etain Health (private), Goodness Growth, Green Thumb, MedMen (majority of assets have been sold to Ascend Wellness), Pharmacann (private). These operators will all have first advantage access to the market.

“Given that New York is expected to quickly become one of the largest cannabis markets in the US (we estimate ~$2B by 2025) and the fact that in almost all new markets existing operators benefit from early mover advantages, we expect each of the ten license holders to generate outperforming revenues and profits in the near term if they buildout assets.  Meanwhile, we expect any new licenses issued to also be highly sought after particularly anything permitting New York City access or cultivation/production at scale and believe all MSOs will look to quickly enter the market.”

The report went on to say, “Even while the vertical integration prohibition on new entrants makes New York expansion through license receipt less attractive than it could be otherwise, we continue to anticipate significant interest amongst MSOs in obtaining licenses and particularly in early rounds. We expect many MSOs to focus either on retail operations near New York City or other populous parts of the state while others plan to operate as wholesalers to the market. Wholesaling as reflected by the previously referenced margin equation can be a highly profitable business (and cash generator) in new rec markets. In Massachusetts, operators within our coverage including AYR Wellness and TILT have proven the highly profitable opportunities from wholesale-centric operations in an under supplied developing markets.”

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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