New York Cannabis Industry Waiting on Governor’s Appointments

Recreational cannabis retailers could have to wait until 2023 to open storefronts in New York because Gov. Andrew Cuomo hasn’t taken the first step to set up an oversight board.

The state is scheduled to become the nation’s second-largest largest legal marijuana market after Cuomo (D) signed legislation in March allowing the licensing of dispensaries.

More than three months later, the state has yet to kick off the process for state regulation of growers and sellers.

Nothing can happen until Cuomo nominates someone to head the Cannabis Control Board and run the Office of Cannabis Management, as required by law. Both nominations then must be approved by the state Senate.

“It’s the governor’s move,” said state Sen. Liz Krueger (D), who sponsored the legalization bill in the Senate.

Krueger originally had anticipated sales to begin as early as next year, but if delays continue, it could be 2023, she said.

“The timeframe is tightening because we haven’t started off,” Krueger said in an interview. “I’m still cautiously optimistic that some licenses could go out by the end of 2022. Once licenses are out, sales can start.”

Photographer: Patrick T. Fallon/Bloomberg

Cannabis plants

“The longer the delay, the more it hurts small businesses,” said Kaelan Castetter, director of policy analysis at the consulting firm Castetter Cannabis Group. Small businesses don’t necessarily have the capital to “sit around for two years,” he said.

Cuomo’s office didn’t respond to a request for comment.

Legislative Session

New York is one of 19 states that legalized adult-use cannabis, though marijuana stores probably won’t open in Connecticut, New Jersey, and New Mexico until next year. Virginia’s law doesn’t allow for sales yet, and South Dakota’s law is under appeal in that state’s Supreme Court.

Under New York’s law, adults 21 and older will be allowed to purchase and consume cannabis.

Once fully rolled out, pot sales are estimated to generate tens of thousands of jobs and about $4.2 billion in sales, trailing only California, which had about $4.4 billion in legal cannabis commerces last year.

Money raised through a 13% sales tax will be divided between the state (9%) and localities (4%). Distributors will collect an additional excise tax of as much as three cents per milligram of THC, the active ingredient in cannabis, using a sliding scale based on the type of product and its potency. Taxes are estimated to generate revenue of about $350 million a year.

A Cannabis Control Board will have authority over the number of licenses issued and setting up zero-interest loan programs for social and economic equity applicants from communities disproportionately affected when marijuana was illegal. An Office of Cannabis Management will work with the board to administer the state program.

The legislative session ended last month, but the state Senate can return for a special session to confirm nominations.

Timeline

With no control board or government managers in place, entrepreneurs can’t map out their businesses, said Castetter, who’s also vice president of the New York Cannabis Growers and Processors Association. “I think people are trying to make plans and I think they’re trying to get into this industry.”

A stalled legal marketplace also could inadvertently help illicit sales because buyers think pot’s legal, he said.

Krueger said she’s not anxious about the wait. “This bill only passed a couple of months ago and New York is pretty good at getting things done,” she said.

To contact the reporter on this story: Keshia Clukey in Albany, N.Y. at kclukey@bloomberglaw.com

To contact the editors responsible for this story: Tina May at tmay@bloomberglaw.com; Katherine Rizzo at krizzo@bgov.com