Today marks a milestone in New York State's rollout of its new recreational marijuana regime — Sunday is the much-anticipated opening day for applicants who want to open retail dispensaries, under the "social equity" category of entrepreneurs who are getting the first crack at what's anticipated to be a $3 billion state cannabis industry when fully up and running.
Equity was a big talking point last Saturday at the second annual Hamptons Cannabis Expo held at the Clubhouse in East Hampton, where the frequent roar of private jets at East Hampton Airport combined with the aroma of roasting blunts provided a handy metaphor for an event top heavy with accounting firms, insurance representatives, cannabis investors, and multistate operators — large cannabis companies poised to enter a New York pot market that's off and running in a big way following former Gov. Andrew M. Cuomo's signing of the Marijuana Regulation and Taxation Act in 2021. The state has already issued provisional licenses for growers and processors this year.
Call it social equity meets private equity — a dance between an investor class champing at the bit to cash in on the marijuana boom and the state's goal to dole out its first round of licenses to individuals convicted of cannabis crimes under the banner of the War on Drugs.
That group is getting preferential treatment at the head of the licensing line — and access to a $200 million public-private pool engineered by Governor Hochul to help stand up their businesses. Applicants will have to show that they've run a successful business for at least two years, and that they have at least a 51 percent stake in the business they're starting, among other requirements.
To much applause, the Cannabis Expo's keynote speaker, Tremaine Wright, chair of the state's Office of Cannabis Management, said she was "hopeful that dispensaries will be open in New York State by the end of the year."
The Office of Cannabis Management has been steadily working up its regulatory package to back the Marijuana Regulation and Taxation Act, and more than one attendee emphasized the deliberative nature of the office's work to date. "Hochul's not happy she can't attend a dispensary ribbon-cutting before election day," said one well-placed attendee.
"Are things slower than we'd like? Sure," added the Expo's M.C., Jeanne Sullivan of Arcview Ventures, a "vertically integrated company servicing the cannabis and hemp industry, built with social justice and responsibility at its core," according to company materials.
Ms. Wright told attendees that the next round of applications would take place in the new year, and that she also expects to see her office's regulations fully in place in 2023. The Office of Cannabis Management has been deliberative, she said, because it doesn't "want to be making changes in years two and three."
Ms. Wright also highlighted that New York won't put a cap on the number of licenses it will eventually issue. "There will be no limits on the number of licenses," she said, "the only limit is ingenuity and creativity" of applicants.
That's a disincentive for investors such as Advanced Flower Capital, whose founder and C.E.O., Len Tannenbaum, told attendees his firm doesn't invest in cannabis companies in states that don't cap licenses.
Mr. Tannenbaum's observation underscored a major takeaway from the Expo: The burgeoning cannabis industry is rife with head-spinning complexities and unresolved issues related to banking, insurance, taxation, investment, and security — all a function of cannabis remaining a federally outlawed product.
Congress tried to address the banking issues last year via the SAFE Banking Act, which would have prohibited federal regulators from penalizing banks for doing business with legitimate cannabis firms, and would have exempted legitimate cannabis businesses from anti-money-laundering laws and protected banks from asset forfeiture if they loaned money to a cannabis business.
The bill passed the House with bipartisan support — outgoing Long Island Representative Lee Zeldin abstained — but stalled in the Senate. Mr. Tannenbaum and others repeatedly stressed the need for the regulatory clarity provided by the SAFE Banking Act, along with changes to the Internal Revenue Service code that would ease the way for accounting firms.
Ms. Wright addressed a couple of issues playing out locally. East Hampton Town "opted out" of allowing dispensaries or cannabis consumption spaces but could opt in at a future date — and several attendees noted that it was only a matter of time.
"They have the opportunity to opt back in," said Ms. Wright, adding that "our external team is actively working and connecting with our mayors, county executives — there is an ongoing conversation so we can stay abreast of what they've already decided and know what's happening on the ground. They can speak to us if they choose to opt back in."
The state hasn't finalized its regulations around the packaging of cannabis products, and especially edibles, but in the meantime Suffolk County lawmakers are considering what's been characterized as the most stringent packaging requirements in any state that has legalized recreational marijuana.
"We are currently in the process of working on our regulations," said Ms. Wright, "they are out for comment therefore I can't comment on them, but everyone that wants to chime in and/or share their thoughts can send in their comments. If the locale has tried to create some additional regulations and laws regarding cannabis," Ms. Wright added, "I'm hopeful that they're engaged and talking to the Office of Cannabis Management to make sure that they are not over-reaching or doing anything that might conflict with the regulations that we are producing."
Southampton Town has opted in and is weighing an ordinance to regulate how and where dispensaries and social-consumption places may become a part of the community — but there's been recent pushback from parents, drug counselors, and some town board members who have expressed an interest in using local zoning to effectively eliminate pot shops in town.
Ms. Wright was asked whether the state would intervene or even sue a town that tried to zone out cannabis businesses after opting in.
"The Marijuana Regulation and Taxation Act specifically states that you cannot create laws that are overly burdensome to the cannabis industry," said Ms. Wright, "Therefore, while we do not involve ourselves in the zoning decisions in locales, we do have that in the New York State law, which everyone is subject to."
The Expo opened with a "land acknowledgement" ceremony by members of the Shinnecock Nation and featured a talk by Chenae Bullock of the nation's nascent Little Beach Harvest dispensary. It closed with Ms. Bullock joining others onstage for a "fireside chat" that demonstrated the intriguing nexus point on display last Saturday between investors and underserved communities.
The Shinnecocks broke ground on a dispensary in early July after approaching Tilt Holdings, a multi-state operator that invests in underserved or social-equity-qualifying businesses. The tribe operates independently of the state legalization regime but as the Tilt C.E.O., Gary Santo, noted, he expected the tribe would promulgate "pragmatic regulations that mimic New York's whenever possible."
Ms. Bullock said the tribe's deal with Tilt could be a model for others on Long Island and beyond. "This, for us, is an anchor and a model for how this can be done."