As the cannabis industry continues to grow and evolve in New York, the state has recently made a move that many small businesses are questioning. In April, New York announced they would allow Multi-State Operators (MSOs) access to the adult-use market with a one-time fee of $20 million.
Regulators at the Office of Cannabis Management (OCM) recently proposed the revised regulations to jump-start the potential $3 billion market with more retail locations.
This caught many smaller and social equity applicants off guard as they thought they were finally getting a head start before MSOs were allowed in the adult-use market.
For those who thought this was their chance for success, there is now worry that big money will be able to buy out any competition and leave them behind.
The move by New York is similar to California’s last-minute decision to remove acreage caps on cultivations in 2017. This change has been widely blamed as the main reason for California’s current issues, and many are now warning New York that they will look back on this decision with similar regret.
Though it is understandable for some why New York made this decision, they must also ensure that all licensees benefit from the changes, not just MSOs.
The cannabis industry in New York is still young, and the state needs to make sure regulations are correctly implemented to ensure a prosperous future for all businesses involved.
New York’s Supportive Bills
In response to New York’s announcement, legislators have proposed two bills – Assembly Bill A7430 and Senate Bill S7354. These two bills would provide small businesses more time to obtain their licenses and extend the conditional-use deadline until June 1, 2024.
This extension would allow smaller operators to build up their businesses before competing with larger companies that have been given an easier path into the adult-use market.
The bills also propose the establishment of a $200 million social-equity fund which would be administered through the Dormitory Authority of New York. This fund would provide much-needed capital to social equity licensees and applicants to help level the playing field among all businesses involved.
Unfortunately, the failure to secure private investments has been an issue since 2018, when adult-use cannabis was legalized in New York. These two bills aim to address this problem by providing more funding for small businesses so they can compete with larger companies once MSOs are allowed into the market.
MSOs & Lawsuit Aimed at Quick Entry Into Adult-Use Cannabis Market
However, not all MSOs are content with waiting until the rules change. PharmaCann, a multi-state cannabis operator, has put forth a plan in which they would work down their $20 million fee by operating vertically or providing wholesale services for some time.
New York regulators have thus far rejected this proposal as it goes against social equity goals outlined in the Cannabis Regulation and Taxation Act law.
Not long after this rejection, Acreage Holdings, Curaleaf, and Green Thumb Industries filed suit against New York regulators to immediately allow them access to the adult-use market.
The lawsuit claims that shutting out these three companies violates their constitutional rights and that no rational basis exists for denying them entry into the market.
Regardless of how this lawsuit turns out, it is clear that many MSOs are looking for a way to enter the adult-use cannabis market in New York quickly. This could have potentially dire consequences for smaller operators if these larger companies are allowed easier access to the market before they can build up their businesses.
Is New York Following California Down the Wrong Path?
New York’s decision to allow MSOs access to the adult-use market may seem like a good idea now, but when looking at California’s experience, the consequences of this move will likely be felt for years to come.
In 2017, California made the last-minute decision to remove acreage caps on cultivations, resulting in too much supply and an oversaturated market. This has caused problems for many industry businesses, and some warn New York that they may look back on their current situation with similar regret.
Though New York hopes these guidelines will ensure a level playing field among all licensees, only time will tell if this ends up being beneficial or detrimental for small businesses and social equity applicants.
Nevertheless, the cannabis industry in New York is still young, and there are many lessons to be learned from other states’ experiences. It is crucial that the state continues to put regulations in place that protect all businesses involved if they want a successful future for their cannabis industry.
In conclusion, New York’s decision to allow MSOs access to the adult-use market is a cause for concern among small and social equity applicants who thought they had a 3-year head start over larger competitors.
Though the state has put some regulations in place that aim to provide an even playing field, this is not enough to protect those without deep pockets from being muscled out by big businesses.
Furthermore, allowing MSOs to pay hefty one-time fees towards social equity may be seen as a way of washing away this situation rather than actually fixing it.
Ultimately, New York must tread carefully to avoid repeating the mistakes of other states and ensure its cannabis industry remains competitive and thriving for years to come.