The Delay in NY Addressing Recreational Cannabis Is an Opportunity

The Delay in NY Addressing Recreational Cannabis Is an Opportunity

New York is learning that legalizing recreational cannabis is easier said than done. In the face of media reports confirming New York’s obstacles and delays in passing adult-use marijuana, now is the time to ramp up your knowledge and preparation to enter the inevitable New York cannabis explosion. In other words, the delay is a reprieve and an opportunity.

Proposed Plan to Legalize Recreational Cannabis in New York

In December, New York Gov. Andrew Cuomo announced plans to legalize recreational cannabis in the first 100 days of 2019. The announcement made waves because Gov. Cuomo had previously opposed legalization, characterizing marijuana as a “gateway” drug.

As outlined in his 2020 budget, Gov. Cuomo’s plan calls for a three-tier model of distribution. Similar to the market for alcohol, the Office of Cannabis Management (OCM), which would be created to oversee the industry, would issue licenses for producers, distributors, and retailers. Producers would be prohibited from also owning retail cannabis establishments. The proposed cannabis program would also cap the number of producers and retail dispensaries.

Gov. Cuomo also proposed imposing taxes at several points in the chain of distribution. At the cultivation level, there would be a tax of $1 per dry weight gram of flower, and $0.25 per dry weight gram of cannabis trim. Retailers would be taxed at a rate of 20 percent of the invoice price when purchasing wholesale cannabis from growers and/or processors. An additional wholesale tax of 2 percent of the invoice price would be paid to the county in which the retail store is located.

New York Putting Brakes on Cannabis

On March 20, Gov. Cuomo announced that a bill legalizing recreational cannabis would not be included in the state’s 2020 budget. He also removed the projected revenue in the budget associated with recreational cannabis.

According to Cuomo, lawmakers need more time to reach a consensus on the best path forward. “For us, marijuana is a relatively new issue,” Cuomo stated in a radio interview with WNYC’s Brian Lehrer. “It really started with my proposal this year but they have signaled that they need more time to talk about it. Therefore I didn’t want to count the revenue for marijuana in this budget.” 

“If we could get it done by the budget, that would be great,” he added. “But there’s a whole legislative session after the budget and my take is it will be done during the legislative session post budget and therefore I took the revenue out of the budget.”

As for the path forward, Gov. Cuomo stated that he hoped a bill could be passed before June. However, he acknowledged it may not be an easy process, even with Democratic majorities in the New York Legislature. “When it’s not done in the budget, then it is, in my opinion, harder to do as a standalone bill because its now just marijuana with a capital M,” Cuomo said, adding, “I said from day one that the marijuana issue was going to be controversial. There’s no doubt about that.”

Next Steps for Businesses Seeking to Enter the NY Cannabis Industry

We will continue to track the progress of the state’s efforts and provide updates. In the meantime, there are numerous small things people can do now to investigate and prepare for opportunities in the New York cannabis space. The same can also be said for the New Jersey market, which is also facing setbacks and delays after lawmakers recently canceled a planned vote on its recreational cannabis legislation.

With offices in both New York and New Jersey, Scarinci Hollenbeck’s Cannabis Law Group can guide you through the process and, with the help of strategic partnerships with industry experts, can provide you 360 degree analysis of the opportunities and challenges that are part of this growing industry.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Gregg Hilzer, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.