New York medical cannabis businesses fighting for priority in adult-use market

New York’s medical marijuana companies are fighting to get a first crack at any new recreational market when one is finally created, and they may be making some progress in their efforts.

The adult-use draft bill from Gov. Andrew Cuomo’s office raised concerns among the state’s 10 medical marijuana license holders that some would be left out in the cold.

The draft called for existing MMJ businesses to compete against each other in an auction for an unspecified number of licenses, or to bid in a round that included non-MMJ applicants.

Jeremy Unruh, PharmaCann’s director of regulatory and public affairs, told an ABC affiliate in New York last month the MMJ industry “would simply evaporate” if not allowed to participate in adult use.

But in a recent interview with Marijuana Business Daily, Unruh said he believes the thinking at the state Capitol has “evolved” and that Cuomo’s office now sees the value of allowing existing MMJ license holders into the adult-use market “as swiftly as possible so the state can begin to generate revenue from Day One.”

A sticking point has been how to fund the governor’s social equity goals, and an auction of existing MMJ license holders was seen by the state as a revenue mechanism to do that, industry officials said.

The New York Medical Cannabis Industry Association recently came up with another suggestion, sending a letter to Cuomo and legislative leaders pledging to create a $25 million Cannabis Economic Opportunity Fund to help support women- and minority-owned enterprises.

Unruh indicated the medical marijuana industry is open to other ways to resolve the issue of funding social equity programs and that discussions are ongoing.

No benefits for existing firms?

In some areas of the country such as Colorado, Massachusetts and Nevada, MMJ license holders have been given fast-track or priority status for getting recreational licenses. That has given existing medical cannabis businesses a leg up in the newly emerging adult-use industry.

Other states have started from a more level playing field: Washington had a lottery, and California basically is starting from scratch for both medical and recreational.

New York’s draft bill as it stands now worries existing MMJ businesses, partly because they’ve seen what’s happened in states that have gone rec.

“The current proposal could put many of New York’s medical marijuana businesses, including our women-owned enterprise, in jeopardy,” Hillary Peckham, chief operating officer of Etain, one of the state’s 10 MMJ operators, said in a recent interview.

Cuomo’s office didn’t directly address how it envisions existing medical marijuana operators fitting into an adult-use program, or whether its thinking has changed since the draft bill was circulated.

“Our goal is to ensure that we have an equitable and sustainable adult-use cannabis program for this state,” Tyrone Stevens, a spokesman for Cuomo’s office, wrote in an email to MJBizDaily.

“That’s why we proposed a thoughtful and balanced plan, which addresses the needs of all stakeholders.”

New Jersey cannabis attorney Rob DiPisa, who closely follows the New York market, acknowledged the concerns among existing medical marijuana operators that they might not be allowed to participate in the adult-use market.

DiPisa, co-chair of the cannabis law group at Cole Schotz, noted that when markets flip to adult use, medical marijuana programs often flounder because many potential patients don’t want to go through the process of getting an MMJ card.

MMJ businesses that aren’t able to participate in the adult-use market naturally would be concerned about the potential of their business and the value of their licenses dwindling, DiPisa said, posing the question, “How do you stay in business?”

Still, DiPisa said, “I find it hard to believe that the final version of the New York bill would still have that prohibition” against some existing MMJ businesses.

Cuomo has said a legalization bill won’t be included in the April 1 budget, but the governor predicted lawmakers would come to an agreement on a measure by June.

Diversity clause a concern to many

A delay has occurred partly over protests by black lawmakers who say the proposal doesn’t do enough to guarantee that minority entrepreneurs will receive their share of a potential $3 billion industry, such as marijuana business licenses and job training.

Jason Ortiz, executive director of the New York Medical Cannabis Industry Association, declined to comment about the concern some MMJ businesses might not be included in the rec MJ industry.

But Ortiz did talk about the proposed $25 million pledge to fund the economic opportunity fund.

“The motivation behind the pledge is to show that we’re committed to ensuring the industry is vibrant and diverse,” Ortiz said in a telephone interview.

The pledge caused Etain’s Peckham to resign as president of the association, as well as to withdraw the company from the industry group.

In her resignation letter, Peckham wrote that while Etain supports these kinds of initiatives, its participation would at the minimum “create the appearance of impropriety” for the female-owned business.

“In addition to the conflict here, such a (financial) commitment is not presently within our grasp,” Peckham added in the letter.

Etain seems to be in a particularly undefined place in relation to New York’s draft adult-use legislation.

Not only is the draft unclear in terms of how many MMJ businesses will get adult-use licenses, it’s also vague in detailing exactly how women-owned businesses will fit into the competitive bidding process.

“We’d like to see more consideration for women-owned businesses like Etain,” Peckham, said, noting that 70% of the company’s workforce is women and 30% minority.

Peckham said in testimony at a February legislative hearing that the requirement to bid against existing MMJ operators would be particularly onerous for a company such as Etain.

She said Etain does not have access to the resources to compete against her larger competitors, many of which are multistate operators.

‘“Under that circumstance,” Peckham said, “we would either cease to exist or have to sacrifice our ownership structure to gain access to the resources required to participate.”

Jeff Smith can be reached at jeffs@mjbizdaily.com

6 comments on “New York medical cannabis businesses fighting for priority in adult-use market
  1. Isaiah Abenchuchan on

    This article seems to ignore the fact that New York’s program is a state regulated monopoly. The existing MMJ firms do not face the competition that companies in California or Colorado do.

    If the state is truly interested in promoting diversity in the industry, then they should embrace a free market approach with low barriers for entry. This would truly allow for social diversity and wealth/class diversity within the industry. Legal states cannot continue to give preferential treatment to wealthy and well connected groups.

    Reply
  2. John Cappellini on

    The consumer and people in need are being left behind in New York no matter their color or gender.
    No one is defending that people should have a right to consume and grow their own cannabis in whatever fashion or for whatever reason they choose. What ever happen to FREEDOM in America? Instead we have the government fighting over the taxes they are going to extract from ordinary people. Whatever happened to NO TAXATION WITHOUT REPRESENTATION? The government is representing corporate America, not people.

    Reply
  3. John Jay Jones on

    AMEN Brother, everyone needs to be able to PARTICIPATE. I get the need to tax but let everyone generate taxes, Do like Canada and let us poor people grow a plant, let us go to walmart to buy an excise stamp. Ill throw it in a Kush bottle and im in business. Help me get off food stamps, who fighting on my behalf?

    Reply
  4. MICHAEL C on

    Sure everyone being able to participate sounds good, but the reality is that too many people would participate and there would be a flood of product and people would re-sell on the black market to avoid tax. (like in CA where they grow 13 mil pounds and only consume 3 million legally) The only way to do it right is too limit the number of growers and dispensaries. Therefore the most $$ should win a license at auction, otherwise people will get them and re-sell them to others (like liquor licenses in cities where they are limited). The auction is truly free market.

    Reply

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