005: What entrepreneurs and buyers need to know about cannabis legalization in New York
“A pro-marijuana advocate rallies to enact the Marijuana Regulation and Taxation Act (S.1527B/A.1617B) outside New York Governor Andrew Cuomo's office.”
Image Credit: Erik McGregor via Forbes - LIGHTROCKET VIA GETTY IMAGES
On March 31st , 2021, New York legalized recreational cannabis, becoming the 15th state in the nation to do so. Medical marijuana sales were allowed under the 2014 Compassionate Care Act, and all cannabis usage had been decriminalized in 2019, but this new legislation is a seismic shift in the industry.
The total market demand for cannabis has been projected to be around $3.7 billion in 2021, but currently the majority of sales are illicit. Based off of modeling in Oregon and Washington, the market share for legal cannabis sales is expected to skyrocket from 14% to 62% of the total market share by 2027, or roughly $2.6 billion in taxable sales. The recreational cannabis industry is projected to add over 40,000 jobs to the market, particularly in areas hit hardest by fallout from the pandemic. The final numbers, of course, will depend largely on regulations set by policymakers.
With recreational cannabis sales now legalized, all eyes are turning towards the Big Apple. Entrepreneurs of all stripes eagerly anticipate the boom of a new industry. Yet despite the passage of this law, rules and regulations have yet to be firmly established – as of the time of this posting, only medical dispensaries have been approved to sell cannabis products, and the sale of flowers and buds remain prohibited until lab testing has been approved.
What do entrepreneurs and buyers need to know about cannabis legalization in New York? We outline the basic details below.
What New York Law Has to Say About Legal Recreational Cannabis
Cannabis users can now enjoy relaxed laws across the state pertaining to usage:
The NYPD has been instructed not to arrest individuals smoking cannabis in public.
Cannabis smoking is permissible wherever cigarettes can be smoked. One notable exception is public housing, which is funded by federal grants.
The sale of cannabis without a license remains illegal throughout the state.
Cannabis products cannot be moved across state lines.
Individuals are legally permitted to carry up to 24 grams of concentrated cannabis on their person.
While the legalization of adult-use cannabis sales hearkens in a new era for New Yorkers, licensing and testing may delay actual sales until April of 2022. Some companies have more conservatively estimated sales to begin in December of that year.
Until then, the majority of legal sales are likely to be confined to New York’s 38 medical cannabis dispensaries. These businesses have thus far been relegated to the sale of processed products, such as oils, gummies, vaporizers, and ointments. With the passage of new legislation, however, dispensaries are now allowed to sell the whole flower or bud.
As medical marijuana is not covered under insurance, pricing has been a barrier for those looking to purchase cannabis products. Flowers and buds tend to be significantly cheaper for consumers, expanding the potential for sales in less affluent neighborhoods and regions across the state.
Before flower can be sold in medical dispensaries, however, the product must be run through a gauntlet of health and safety labs through the state health department. Unfortunately, these same labs are currently processing COVID-19 tests, which has slowed down the approval process. Buds and flowers are projected for sale sometime during the summer of 2021.
What New York Entrepreneurs are Saying About Legal Recreational Cannabis
Social consumption lounges, or SCLs, are the hottest trend among budding entrepreneurs in the recreational cannabis space. Provided that establishments don’t sell alcohol at the same kinds of businesses, everything from hookah-style lounges and arcades to yoga studios and hotels are exploring new customer interests.
However, social equity is also a primary focus around recreational cannabis legalization in New York. State officials plan to offer half of all licenses to members of marginalized communities, and taxes collected from cannabis sales are to be directly funneled back towards communities which have been predominantly affected by disparities in drug enforcement.
The biggest issue concerning the development of legal recreational cannabis use in New York revolves around who gets the first licenses.
Existing medical marijuana companies are eyeing the possibility of selling to the general public, but this comes with a caveat: only three of eight can be approved to offer recreational products, and two must be located in underserved areas. These businesses have a head start over other businesses, as they already have a firm infrastructure in place. Smaller players are looking to the Cannabis Control Board to ensure that licenses meet the goal of being equitably distributed across the city and the state.
Conclusion
New York State may have legalized recreational marijuana sales, but still has a ways to go before most consumers will be able to legally purchase cannabis in retail settings. With intense scrutiny among policymakers looking to ensure that licenses are distributed in an equitable way, entrepreneurs are looking towards local communities and neighborhoods.
While New Yorkers wait for broader distribution, medical dispensaries remain the main players in legal recreational cannabis sales. The sale of buds and flowers has opened the door to broader availability and affordability. Whether they leverage their existing networks to dominate the market, or whether minority business owners take central stage, remains to be seen.
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