New Yorkers convinced of the pot will now be the first to be able to sell it

Most states let medical dispensaries be the first to deploy recreational products, which largely allowed big fish to grow. And places like Illinois and Detroit created lotteries Where restrictions to promote diverse ownership in their adult-use weed sectors only to see them mired in legal challenges and legislative solutions for years. So New York – one of the biggest cannabis markets in the country – went a step further.

New Yorkers with prior cannabis-related convictions and business experience will have the first chance at conditional adult retail dispensary licenses. If selected, the state will provide applicants with a retail location and funding to help them grow their storefronts — with store openings potentially as early as the end of the year.

This “social equity” framework, as set out in the 2021 law as part of the state Marijuana Regulation and Taxation Act which legalized the drug for adult use, underpins the state’s efforts to ensure that the people most affected by the decades-long marijuana ban — not the big, multi-state operators — are at the center of the New York recreation program. The Democratic-led Legislature lobbied to make the measure part of the law.

But it remains to be seen whether these measures will lead to a truly “fair” cannabis market in New York, or if it runs into problems that have plagued other states before it.

Efforts across the country to ensure that those disproportionately affected by the war on drugs can reap the financial benefits of legalization have struggled to achieve results due to legal battles, implementation poor quality and a lack of funding for nascent entrepreneurs.

« I think it’s naive to think that everything will go exactly as planned, » said attorney Robert DiPisa, chairman of the cannabis law group at Cole Schotz, a New Jersey-based firm. « If you look at any other jurisdiction that has attempted to create a social equity-type program, there are a lot of bumps in the road. »

How the New York program will work

The online application portal for New York dispensary licenses, which opened on Thursday, short until September 26. (Application periods for other types of recreational permits are expected in the coming months.)

New Yorkers who have been convicted of marijuana-related offenses in the state before drug legalization – or whose parent, guardian, child, spouse or dependent was – and who have experience in owning and operating a qualifying business will be eligible to apply for the licenses. They must also have a « significant presence, » including residence, assets or other connection in the state.

Applicants will be asked to submit information on “real parties of interest”, including partners; documents proving the eligibility of the person involved in the justice; proof of presence in New York; and tax documents showing they owned and controlled a profitable business for two years, among other things. They will also be asked to select up to five regional preferences from more than a dozen for the location of their dispensary in New York City.

Successful applicants will receive support from a $200 million social equity cannabis investment fund, which was created to help fund the rental and equipment of up to 150 dispensaries across the state. Social Equity Impact Ventures, LLC, a minority-led investment team that includes former NBA star Chris Webber, was selected to sponsor and manage the public-private fund.

Office of Cannabis Management officials said the online application process was designed not to be « too heavy » or require the hiring of consultants or lawyers. They also noted that the $2,000 non-refundable application and licensing fee is much lower than the $10,000 fee for the New York medical program.

« All the things that we’ve identified over the years as barriers to entry, we try to remove, » Alexander said.

Kaliko Castille, chair of the board of directors of the Minority Cannabis Business Association, said New York is « one of the best legalization efforts written » because it gives social equity businesses a head start.

But social equity efforts, even in states like Colorado and California where recreational marijuana has been legal for years, have faced challenges despite grants and training programs.

« A lot of these states basically have unfunded mandates where they, well-meaning in writing the policies, but then haven’t put the money in to make sure that entrepreneurs can access capital without having to go to to a ‘vulture capitalist' ». ‘ – what i call it [when] people have predatory deals that ultimately undermine the whole purpose of having social equity licenses in the first place,” Castille said.

Castille pointed to the social equity fund as a unique « innovative approach » New York is taking to help marijuana companies access real estate, which can be both expensive and difficult from a zoning perspective. . The decision to reserve the first licenses in such a large market for those involved in the justice system also sets New York apart in its efforts to achieve fairness in the cannabis industry.

« Too often these people are paid lip service but don’t really have the opportunity, » he said.

Kristina Lopez Adduci, founder and CEO of New York-based House of Puff, which sells cannabis accessories, praised New York’s steps to remove barriers and prioritize those affected by drug laws in its original license. But, like Castile, she said it was too early to tell if those efforts were enough.

Adduci, for example, said the $200 million social equity fund « is fantastic, but it won’t entirely move the needle » given the costs of opening and operating a marijuana dispensary. . The state, she argued, should ensure that these businesses also have access to incubation programs and workforce training.

If selected, dispensary applicants are subject to a four-year conditional period during which they cannot sell or transfer their licenses, according to program rules finalized in July. After that, they will move to full retail licenses.

DiPisa, who has worked with clients seeking to apply for the licenses, noted that although applicants can select their preferred regions, they ultimately cannot choose the location of their dispensary in which they will be locked up for four years – even if it is in the region of their choice.

« How much control will the (licensee) holder have over the appearance of their space? » he said.

Trying to create a fair program

Alexander said the Office of Cannabis Management expects that because New York will provide continued support, operators will retain their licenses and continue to grow their businesses after the four years. Some, however, have raised concerns that large, multi-state marijuana companies could then purchase the initial licenses.

Adduci said she hopes New York will take “note of other states that have made these mistakes,” adding that she has already started to see “predatory deals” emerge.

« Predatory offers come to my desk saying, ‘Hey, if you win a license, I’ll give you $10 million for it,' » she said.

DiPisa argued that a takeover by major operators in the cannabis industry would « usurp the whole reason for the program » – wanting New York to own its cannabis market. He argued, however, that preventing social stock owners from selling their licenses would also run counter to the intentions of the program.

« The whole point of this is to put them on a pedestal, to give them the opportunity to be profitable, » he said. « Why couldn’t they start a business, achieve the ‘American Dream’ and sell their business? It’s honestly something I don’t know how to deal with or deal with. It’s a hard thing to reconcile because you want both, but you can’t have it all.

This is the line that the Office of Cannabis Management tries to straddle with its regulations. Alexander said New York couldn’t stop the sales from happening after the four-year period.

Although New York is the latest state to move toward dispensary sales, industry watchers say its market size — and position at the center of global finance — raises the stakes for a sustainable program. of « social equity » in cannabis.

Alexander said he expects New York to make « new mistakes » in rolling out its own approach to fairness in a legal state-level marijuana market. He also acknowledged that the New York program will not « solve all the problems » that exist in the cannabis space, such as banking challenges.

But Castille said if the New York program could be successful, it would « send a strong signal to people ».

« New York is a great first kick off to kind of a new era of what legalization could look like with social equity fully integrated into it, » he said, adding that « no matter what comes out of New York, it is likely to establish a new foundation. »