Crypto News: Here's an update on New York's pot progress

To call New York's rollout of legal cannabis a tortured one is an understatement. But is momentum building? There's been some progress recently, with sales rising and a large new batch of license holders, even though the number of retail locations is still small. This week we take a look at the latest.

Since legalizing cannabis, New York has been in the spotlight for all the wrong reasons — from its glacial pace of granting licenses to the proliferation of illegal stores that undercut the legal competition.

Those problems aren't going away, but after making adjustments earlier this summer, the state appears to be starting to make some progress. The Control Board of New York state's Office of Cannabis Management last week granted 212 new licenses, approvals that were met with lengthy applause and cheers. It brings the total number of so-called CAURD licenses, which are given to communities that have been hit the hardest by the war on drugs, to 463. More licenses are expected to be granted during the Control Board's next meeting.

"It's been a long journey but finally there's light at the end of the tunnel," said Vlad Bautista, the co-founder of the events and lifestyle company Happy Munkey, who was among those receiving a license. Asked whether he believed the state's cannabis program is improving after its rough start, he responded: "I think so, yeah. At the end of the day, they just released 212 more licenses, and I think they should just give them to as many people that qualify as possible."

To be sure, getting a license is only the beginning for most recipients, many of whom now begin the arduous process of finding an approved store site while securing financing and navigating local bureaucracy. Since the market opened late last year, there are still only about 20 legal cannabis retail locations in New York state, although John Kagia, director of policy for the Office of Cannabis Management, said about 40 more are "in development."

Openings accelerating

During the Control Board meeting, Kagia predicted retail openings will accelerate in the second half of 2023. He said most businesses are taking about 4½ months to open their doors after obtaining a license, and officials are working to speed that process up. Kagia also pointed to rising legal sales as new locations come online: Licensed cannabis sales in June jumped almost 50% to $11 million from the previous month.

Emily Whalen, an attorney and lobbyist at Brown & Weinraub who chairs the firm's cannabis practice, referred to the situation as "a mixed bag." While new rules would shorten licensees' timeline for opening, there's "underlying anxiety" about competition from well-financed multistate operators and looser proposed rules for medical marijuana.

Large cannabis producers may be allowed to sell medical marijuana in New York at the end of this year or in early 2024 if draft regulations are approved. The rules would offer a pathway to the recreational market.

The agency also moved to help New York licensed producers, who have been sitting on cannabis they can't unload because there aren't enough stores to buy the product. A new pilot program would allow "Cannabis Growers Showcases" — a farmers market in which cultivators can sell their marijuana. At least three growers and a licensed retailer are needed to host a showcase event, but local authorities must also be on board.

While some expressed optimism at the Control Board meeting and gratitude for the new licenses, there was still a lot of criticism of the state.

"Please, we implore you to not forget us and get those licenses out, because we're desperate," said one speaker, who was identified as Margaret Nicole and said she had a woman-owned business. "We're paying taxes out the ying yang on our farmland and we can't produce anything."

One speaker who received a license, Jillian Dragutsky, called on authorities to reconsider allowing the multistate operators in. "You need to give the small operators like us, the people in this room, the opportunity to establish ourselves," she said.

More support needed

Paul Yau, chief executive officer of the dispensary Union Square Travel Agency, said in an interview that the expanded pool of licensees is helpful, but the state needs to offer more support to them — especially assistance in getting funding. "Access to capital is the biggest barrier to opening," he said.

The Dormitory Authority of the State of New York, the state's public finance and construction agency, has proposed a 10-year, $200 million private investment fund. The agency has sought to address criticism of the investment fund with changes made in June, but many speakers at last week's Control Board meeting were still complaining of a lack of access to funding.

The arrival of Chicago Atlantic as an investor in the social equity fund is expected to help capital start to flow to CAURD licensees. The New York City Economic Development Corporation is also creating another fund that seeks to provide $20 million to $30 million to small cannabis businesses.

Of course, there are still all those unlicensed stores, which are selling cannabis products illegally. The state has started to crack down on them. Chris Alexander, executive director of the Office of Cannabis Management, said there have been 53 inspections and the actions are "ongoing and expanding." All illicit cannabis that was found was seized and penalties and fines have been assessed, he said.

Of course, many of the stores that authorities targeted appeared to be back open in short order. Even so, Yau said the enforcement efforts seem to be helping.

"It's a bit of a long play toward closing these stores down, because they raid them and then they reopen for business the next day," he said. "I get the joke that people suggest that is nothing happening. But what we're also seeing is that consumers are getting educated. A lot of consumers didn't know the difference between the legal and the illegal dispensaries."

$33.4 million

The total of New York's licensed cannabis sales through June. For comparison, Colorado — a smaller but more established market — reported more than $650 million in sales this year through May.

"You're doing exactly what you shouldn't do. You're creating a flooding of the market and we know that when that happens, the prices fall and the ones that survive are the ROs, the ones with the money. And they squeeze everyone else out."

Nicole Ricci

President of NY Small Farma

Ricci spoke at the Control Board meeting about the expected arrival of multistate operators to New York.

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