Big Marijuana Companies Are About to Descend on New York
More than two years ago, New York announced its highly anticipated plans for a legal cannabis market. With projections that the state would become one of the world’s largest retail markets, along with a commitment to equity, there was widespread optimism throughout the supply chain. From deep-pocketed medical giants to small entrepreneurs, plenty of players seemed poised to benefit.
But two years later, it’s a different story. New York State hosts a mere 23 dispensaries, and its regulatory body is embroiled in multiple lawsuits. Meanwhile, one of the key groups that was supposed to benefit — people with previous drug crimes on their record — hasn’t been able to open many dispensaries. And now they’re losing the three-year head start that they were promised. Thanks to a decision by state officials last month, small businesses are soon going to have to compete with well-established, vertically integrated corporations — as early as next January, rather than the previously expected date at the end of 2025.
Lawsuit Chaos
Just before New York legalized weed in 2021, companies that catered to the medical market were among the few companies benefiting from the pandemic, with people stuck at home and a rising demand for weed. Curaleaf, a company operating in 18 states, reported revenues of $260 million in the first quarter of 2021, compared to $96 million in the first quarter of 2020 — a 170% increase.
But recreational cannabis was also on the company’s radar, said Sharron Cannon, Curaleaf’s former outreach coordinator — a job that entailed educating various communities on cannabis. In March 2021, a report written for the Medical Cannabis Industry Association projected that New York’s adult-use market could be worth $1.2 billion by 2023. As the legalization approached, cannabis giants grew increasingly eager. “They wanted to be first,” said Cannon.
Yet, when the plans were announced, pot giants learned they would have to wait three years before gaining entry into the state’s recreational market. Instead, priority would go to people with prior drug-related convictions — a gesture for restorative justice.
This disappointed the companies, since, according to Cannon, they had entered the medical market expecting to pivot to recreational cannabis. “None of these organizations really wanted to be in the medical because it’s expensive,” said Cannon.
Meanwhile, people like Coss Marte, who spent six years in prison for drug-related crimes, were signing leases and preparing to open their dispensaries by last summer. But right before opening day, a judge issued an injunction — the result of lawsuits filed by big medical companies and veterans — that stopped them from opening their dispensaries.
The first lawsuit was filed by the Coalition for Access to Regulated & Safe Cannabis, a trade group representing big weed companies, last March. The suit targeted the state’s social equity program, which offered individuals with prior convictions, and their relatives, priority access through licenses known as “CAURDs” (Conditional Adult-Use Retail Dispensaries.) The plaintiffs argued that this contradicted a law adopted in 2021 that required recreational markets to open to all simultaneously.
The lawsuit also accused regulators of having “waged a thinly veiled attack against the registered organizations” — 10 medical cannabis companies in New York. The coalition includes Curaleaf along with Acreage Holdings, Green Thumb Industries and PharmaCann.
In August, this lawsuit was combined with one filed by disabled veterans, who also accused the state of violating the law.
Meanwhile, the companies were pressuring Gov. Kathy Hochul. In an Aug. 31 letter, four CEOs wrote that the delays were encouraging the unregulated market and depriving the state of tax revenue: “The State’s entire cannabis ecosystem is in dire need of a new direction.”
When contacted by Labor New York, a spokesperson for the Medical Cannabis Industry Association said she wasn’t surprised to hear of individual licensees’ concerns. “They have been consistently critical, and, to be quite frank, not entirely correct when it comes to the law,” Liz Benjamin wrote in an email. State law, she added, “is very clear about who should get into the adult use market and when.”
The Equity Program’s Bad Trip
Out of nearly 500 licenses initially allocated to CAURDs, only 23 managed to open their doors before the injunction left the rest of them in limbo. Licensees are now lagging behind big companies, said Alfredo Angueira, chief compliance officer of ConBudy, a CAURD dispensary that had to push back its opening date due to the injunction.
“It’s difficult for Black and brown individuals to get financing and to raise money,” said Angueira. “And if the market opens up all at the same time, we’ve basically been burning that little bit of capital that we were able to get from the beginning. So it sets us up as a step behind.”
State Sen. Liz Krueger and Assembly Member Crystal People-Spokes, the primary sponsors of the law legalizing cannabis, criticized recent developments in an Albany Times Union opinion piece. “Despite, or perhaps because of our clear intention that cannabis be a vehicle for social equity and restorative and economic justice, national corporate interests are working diligently to hold New York’s market hostage,” they wrote. “Corporate interests are swooping in to try to stuff their pockets.”
Facing Reality
In 2021, state officials predicted that New Yorks cannabis markets would generate $4.2 billion in revenue annually. However, according to the state, total legal sales have reached only $70 million this year. Meanwhile, the recently legalized New Jersey market saw average monthly adult-use sales of around $50 million during the first quarter of 2023, despite having half the population.
The solution now is to turn to large medical companies. In mid-September, officials allowed those firms to open recreational stores by Dec. 31– two years earlier than originally planned.
Any of the 10 medical companies wishing to enter the market must submit a $5 million down payment. If approved, they’ll be allowed to open stores and also cultivate up to 100,000 square feet of weed in indoor environments — as contrasted to individual farmers, who are currently licensed to grow their crop outdoors and who sell only wholesale.
That means big companies can control the entire process, from cultivation to processing to retail. Said Jeffrey Hoffman, a CAURD licensee lawyer: “They just have a tremendous competitive advantage over the other players.”
State officials had to come to terms with their own decisions and delays, he said. “They really do believe in equity and they wouldn’t have proposed all this stuff to try to protect the small businesses if they didn’t believe in it,” said Hoffman. “But now they’re being faced with reality.”
