NY Regulators Forge Ahead

The parade of legal actions that has beleaguered New York’s Office of Cannabis Management (OCM) seemingly forever was hardly mentioned during Thursday’s meeting (viewable here) of the Cannabis Control Board (CCB), but it was in the room. Chair Tremaine Wright, in her opening statement extolling the program’s “season of growth for New York State cannabis,” said of the application process, “Our licensees have borne the burden of setbacks, stoppages, postponements, and delays. Nevertheless, they are steadfast, and they continue to rise above.”

There was no further mention by board members, all but one of whom was present, of lawsuits or court orders or where culpability may lie in the promulgation and operation of a regulatory scheme that has attracted so many legal challenges. Instead, the Board was resolutely focused on forging ahead as quickly as possible, and not letting any challenges deter the task at hand, even (or especially) in the face of impassioned in-person testimony from applicants still caught in the jaws of a flawed program that has consistently over-promised and under-delivered, and now sees no alternative but to continue working to deliver on that promise. If there was any sense of hesitation or failure among board members – and one could argue that trichomes of tension were floating about in the air – they were swiftly quelled by Chair Wright, who acknowledged but did not entertain any suggestion that the program is destined for anything but success.

“We are inching towards the 100th adult use cannabis brick-and-mortar retail location in New York,” she said in her opening. “March has been our best month yet in terms of sales and new dispensary openings. I look forward to hearing more about the health of our adult use cannabis industry from the reports given here today. And at this time, I want to affirm our commitment to the success of the New York State cannabis industry, to issuing licenses to entrepreneurs across the state, to creating a market of opportunity, and to providing New Yorkers’ access to quality tested, safer, regulated cannabis.”

And indeed, there was great news for many applicants as a result of the actions of the Board when it took up the main resolution of the day – No. 2024-66 – which was introduced by Executive Director Alexander. “Before the Board today is a third group of adult-use cannabis license applications which have cleared the multi-step review process and are ready for consideration and hopefully to be approved by the Board,” he said. “This group includes 35 retail dispensaries, 22 micro businesses, 25 cultivators, 11 distributors, and eight processors. This will make 324 adult-use cannabis license applications approved in 2024, if approved by the Board.

“We’re continuing the work of sifting through the applications that have been submitted, and we’re continuing to work with those applicants to make sure that we’re curing deficiencies in a more expedited process,” he added. “We did have a shorter window between the last Board meeting and this one, so it was definitely a huge lift for the licensing team to get through all of this. I just want to thank them again for their continued effort to move through this process, and again, I ask everybody to continue to be patient with us as we do this work.”

Board member Dr. Jennifer Gilbert Jenkins commented, “I’m very happy to see all these licenses moving forward, and I would like to see us paying attention to where these are being distributed across the state, particularly the retail spaces, so that we can make sure that the entire state is being serviced and not just individual areas. I think it’s really important for us to pay attention and make sure that we are issuing licenses statewide.”

“I agree,” said Chair Wright. “I’m very happy to be issuing these sets of licenses. I want to hone in on the fact that we are really looking forward to issuing more, that we are intent on making sure that all parts of the state is represented, and that they have an opportunity to participate in this robust market because it is an opportunity moment, and we really look forward to seeing more [licenses].”

Following a short discussion about adding an applicant to the list, the resolution was passed unanimously. The next resolution – No. 2024-67 – offered a new Part 133 to amend the state’s Cannabis Law “governing the procedures to be followed with respect to violations, hearings, and enforcement” of licensees and unlicensed individuals violating provisions of that law.

“This is an update to our enforcement regulations, essentially streamlining certain processes related to the handling of enforcement matters that arise from compliance matters with our licensees,” explained Alexander. “The board, at the most recent meeting, advanced enforcing regulations that we’re had completed the public comment process. This will be an emergency package, but they will then be made available for public comment. I do want to flag again for the Board that we will still need to bring back another package of enforcement regulations after the expanded enforcement bill passes through the state budget…that really focuses on more of the illicit operations enforcement. This one focuses on more our current enforcement activities related to our licensees.” Following minimal debate, the Part 133 resolution passed as well.

The last resolution on the agenda – No. 2024-68 – was a consideration of delegation of authority for certain licenses issuance. As explained by Alexander, “We wanted folks to be able to secure opportunities without having to secure locations, so to date, we have had a standing policy for what happened after provisional licensing was awarded by the Board so that folks could continue to move and open at a steady pace. Now that we have a significant [number] of applications in front of us, the Office is working on turning that process in an opposite direction…to allow the Office to approve individuals provisionally and then the Board to still conduct that final review before an individual is cleared to obtain a final license, which is the terminology that we use.

“It is essentially shifting the existing process that we’ve been utilizing to ensure that licensing authority is retained by the Board, which is the sole body able to approve individuals for licensure,” he added. “But we can move a little more quickly through reviewing of applications and issuing of provisional licenses so that folks can go out, identify locations, move a little quicker, and not have to wait for a Board meeting for that opportunity to begin. The hope is that this is an efficiency that becomes helpful to our licensees and to applicants who are looking to move forward and start their journey to get their business open.” The resolution was unanimously approved without comment.

Executive Director Report

OCM Executive Director Chris Alexander began the Executive Director’s Report reiterating the 100+ dispensaray achievement, adding, “I want to shout out to all of our licensees who’ve been able to move through the process, work with local governments, work with our cultivators and those on the supply side to get those businesses operational. I just want to acknowledge that milestone. We have dramatically increased the access of New Yorkers to safer tested legal products and that momentum is only continuing.

“I want to thank the Board for the provisional licensing delegation that was just approved,” he added. “This is going to streamline our process and allow us to really get folks going and have some clarity on the journey ahead. There’s still a lot of work to do, as CAURD licensees will tell you, between provisional status and getting final approval to open and operate, but this is a really helpful approach, and I want to thank the Board for that.”

He continued, “I’m going to remind folks [applying for] a provisional license – and obviously we’ve had a couple of provisional licenses approved in the last couple of board meetings – that we encourage you to use our proximity tool for checking location viability. I think there are approximately 600 or so locations already identified and protected, which shows…the breadth and the scope of access that is going to be representative here in New York’s cannabis market. Each of those dots is not necessarily a final, approved location, but it does give some indication of where folks are hoping to operate as they’re working through the process. Proximity protection is first-come, first-serve as a reminder to everybody, so check if the location is viable. You will have to do your own check on distance from schools and houses of worship, but you can use the tool for the distancing from other dispensaries.

“I also want to flag to those who have been in the CAURD pool, waiting,” he added. “Previous litigation held up the Office’s processing of CAURD applications, and that was lifted on April 1. The Office will begin opening up those applications and begin reviewing those applications again for eligibility. I do want to be clear that not all of the individuals who may have applied for CAURD are going to get licensed. A good amount of those who are left were not eligible, and did not meet those requirements, either by not submitting the proper documentation of business ownership and operation or of a previous cannabis conviction. We will be notifying those who did not meet the qualifications in the coming days and weeks, and then putting before the Board more CAURD applications for licensure as soon as we can. I’m going to remind the cultivators and the processors of the deadline which we talk about every board meeting. I’m going to keep bringing it up. The program expires in June, and May 3 is the date we hope you’re able to submit everything so we can process your transition as quickly as possible.”

After warning people not to consume and drive on 4/20, Alexander handed the floor to John Kagia, who provided a 20-minute report, complete with slides, on the performance of the cannabis market of late, and offering projections of its probable performance in the months and years ahead.

“The focus of our last presentation was around velocity,” he began, “and I think it continues into this month as we look at the updated numbers based on the nearly 20 stores that we had opened just in the time since our last meeting. March set a new all-time high in monthly sales with $32 million, bringing our year-to-date total to $102 million. At the rate that we are going, in Q2 we will surpass our total 2023 sales, and this is based on the fact that we are growing currently at 25 percent month-over-month, and that doesn’t account for the nearly 20 stores that we will have opened between now and 4/20. Incredible momentum, April sales are already at nearly $18 million, and just continued strength velocity in what we’re seeing.

At the end of March, we had our first $9 million in weekly sales,” he added. “I think at the last meeting, I said we’d had our first $8 million weekly sales. This is a reflection of the momentum that’s building, and one of the things that’s notable about those numbers is as we’ve been able to start drilling down into the performance of these stores as they’re opening, we’re finding and very rarely does a new store hit what becomes its steady state operation numbers within the first couple of weeks of operation.

“We’ve seen a pattern emerging that is generally a doubling [of sales] between week one, week two, week three, and week four. And in some cases, it takes between four and 12 weeks for a retailer to reach what becomes its steady state level of performance. So, as we are opening more stores, and those stores’ early revenues are being included in our forecast, the revenue that is being reported from individual stores in the early days will only grow over time, which is part of the reason why our numbers are increasing at the pace that they are.”

The remainder of his presentation was an examination of potential threats to the ongoing stability of New York’s nascent adult-use market as it develops, including over-saturation of production and resulting price compression, as well as other market disruptors already experienced by more mature markets, like California and Colorado, which Kagia mainly used by way of example.

“We’re going to be looking at issues such as market innovation, and consumer attitudes and how they’re evolving over time,” he summed up. “Beyond the specific market issues within New York’s control, we should also be looking at and contemplating how some of the broader national dynamics and global dynamics are going to influence the outlook for our market. All of which is to say, there’s a lot of very deep thought going into how to ensure that we can optimize outcomes in New York while minimizing risks, and there are a lot of lessons learned from other jurisdictions that are informing our perspectives.” That said, he noted that New York is and will remain a distinctly unique market in terms of its sophistication and appetite for world-class cannabis.

Public Comments

Fewer people spoke at Thursday’s meeting than at previous CCB meetings, but the general tenor of the comments was similar: “Why am I hearing nothing from the OCM when I have done everything asked of me and am about to lose everything I have as I wait for final approval to open my store?” lamented one early speaker. Lack of communication by the OCM seemed to be the most frequent complaint. As is always the case, the utter frustration of  speakers whose options are fading fast, was palpable.

“I’m here ready to become the second store in Staten Island,” said one speaker. “Look at me, I’m here to help me. Get me out of this bureaucratic mess. Everyone wants me to open up. So why am I not open? I’m stuck at OCM hell and still have no license. No one can tell me where I stand. I email every day. I call and talk to different people with the same answer, ‘You’re in review.’ By who? Is someone assigned to me? The answer, ‘You are in review’ I’m 74 years old, working three jobs to stay afloat. This is supposed to be my legacy to my children and grandchildren, and so I’m broke, broken, and running out of hope…I’m here. I’m begging you.”

Another speaker between a rock and hard place said he had spent $500,000 of his own money to pursue a license and was about to sign a lease and deplete his entire life savings. He also has investors ready and willing to put another $4 million towards opening a SoHo location, but until he gets his final license they will not risk the capital.

“I haven’t slept more than three hours at a time since March, which is when I anticipated I would have received my license,” he told the Board. “I don’t know what to do. If I don’t sign the lease, I may lose the ability to open in the location I wanted to due to the [proximity] protections. At the same time, I’m afraid to pour the last bit of my savings into a lease only to not be awarded a license.” There were other complaints about proximity protection, including from one irate CAURD applicant who said a flagrantly illegal store across the street from his location was awarded protection.

Another speaker took great issue with the failure of New York legislators to pass a tough new law targeting shops selling cannabis illegally. “There was a solution proposed by Assemblywoman Jenifer Rajkumar called the SMOKEOUT Act that would empower NYPD to padlock illegal dispensaries while OCM was investigating them,” said the man. “Unfortunately, Assembly Speaker Carl Heastie decided not to include it in the New York state budget, which is being voted on relatively soon.”

In an attempt to nudge Heastie in a different direction, a rally and press conference is planned for this Saturday at 4:30pm ET in front of Heastie’s Bronx office. Details can be found here.

There were also speakers who praised the work of the OCM, particularly in light of the almost impossible task of standing up a brand-new industry while having to meet the expectation of many that it be done to perfection. But for those who remain in license purgatory, perfection has never been the goal or expectation. A simple email or call with clear and precise answers to important questions would suffice…for now.