After a Year of Planning, New York Adult-Use Sales Expected by Year-End

Regulators, lawmakers and industry members have spent the past year laying the groundwork for an adult-use cannabis industry that was legalized in March of last year.

In that time, they’ve built a unique plan that attempts to prioritize equity by offering additional opportunities to those disproportionately harmed by the war on drugs; minority, women and small business owners; and hemp growers. (See below for a full timeline of New York regulators' initiatives throughout the year.)

But despite their efforts, the state has yet to begin retail sales, as regulators had planned do by the end of this year. With just days left in 2022, is a launch by the year’s end still attainable?

Now that all the regulatory pieces are in place along the supply chain, some operators are still holding on to hope. Housing Works, a nonprofit organization that operates other businesses, recently announced its plans to open its dispensary doors by Dec. 29, kicking off sales that have been nearly two years in the making.

New York has tried to position its adult-use program as “a model for the rest of the nation,” said Gov. Kathy Hochul in October. Regulators and lawmakers have hefty goals for the program–and in a state expected to do $1 billion in legal cannabis sales “relatively quickly,” according to Cannabis NYC Director Dasheeda Dawson, all eyes are sure to be on New York when adult-use sales do commence.

Eyeing Equity

A major focus of the regulations laid out this year has revolved around social equity. Hochul kicked off 2022 with a dedication of $200 million for a Social Equity Cannabis Investment Program to help develop conditional adult-use cannabis dispensaries for social equity licensees. The fund is a key component of the state’s Seeding Opportunity Initiative—an effort to promote social equity by allowing individuals with prior cannabis-related convictions to make the first adult-use cannabis sales in New York. (That wasn’t the only state-administered money dedicated to cannabis in New York this year. In July, Hochul announced an additional $5 million in grants that would go to public colleges to fund cannabis education.)

In March, the state announced it’d be issuing its first approximately 150 adult-use dispensary licenses to applicants with cannabis-related convictions, which could either be awarded to nonprofits or businesses led by someone with a prior cannabis-related conviction. The state has also promised to award 50% of New York’s total adult-use cannabis licenses to social equity applicants.

New York’s attempt at equity extends beyond social aspects–the state is also attempting to level the business playing field. The latest adult-use regulations proposed in late November only permit vertical integration for microbusiness licensees or existing medical operators, prohibiting larger operators from getting even bigger.

The state has also spent the year issuing cannabis cultivation licenses to hemp growers. And while the transition from hemp to cannabis isn’t necessarily easy, it has provided an additional opportunity to bolster a struggling industry.

“It is a potentially great solution for both the state and hemp farmers, in the sense that, with hemp prices dropping over the last couple years, it’s an opportunity to produce a more lucrative crop, while also jump-starting the supply for the recreational or adult-use market, whenever that comes online for New York,” Douglas Sargent, partner at the cannabis law practice group at Greenspoon Marder LLP, told CBT in March.

New York regulators have also worked to incorporate other beneficial elements into the state’s adult-use program, such as an environmental sustainability program for cannabis packaging.

Will New York Live Up to the Hype?

Now that the state has finished laying out regulations from seed to sale, it approved the first Conditional Adult-Use Retail Dispensary (CAURD) licenses in late November. (Regulators plan to issue up to 175 total retail licenses eventually.) One of those was to Housing Works, a nonprofit that operates a range of direct and support services for people living with HIV/AIDS, the homeless, formerly incarcerated, and justice-involved individuals, according to the governor’s office. It also operates a network of charitable retail storefronts.

“It is our goal to be the first,” Housing Works CEO Charles King told Spectrum News NY1 Dec. 14 when discussing the dispensary's opening. “We will not on the 29th have the build-out complete, but we will have a number of our display cases and cash registers up and be able to serve people.”

After a year of planning, only time will tell whether the state’s regulations will solidify into a successful, equitable industry. Some plans have already changed—for example, part of the $200 million Hochul set aside at the beginning of the year was supposed to go toward providing turnkey retail locations for CAURD licensees. However, after fund managers failed to raise the money to provide those fully furnished dispensaries, the state's Office of Cannabis Management (OCM) announced licensees were able to start submitting their own proposed locations and plans for storefronts.

Operators, while optimistic, are also cautious about certain aspects of the state's plan.

“We applaud what [New York] is attempting to do with its [adult-use] market. … However, [the state] is still coming up short in a few areas – the program's rollout has been choppy and problematic,” said Chenae Bullock, general manager of Little Beach Harvest, in an email. “For example, the fact that farmers who were given the ability to grow cannabis this year are now sitting on harvested flowers with few, if any, places to sell their crops, may lead to a devastating financial blow to those the state was trying to help. And just as it is in [California], the illicit side of the industry is a big issue for [New York]—how to manage that so there’s a safe and productive legal industry is a challenge that the state has not yet figured out a solution to.”

But those who helped lay out the framework still have hope that they can set an example for other adult-use states to follow.

“I think the [Marihuana Regulation and Taxation Act] really allows us to lean into this, but we really want to be a No. 1 global hub—seen [in] New York City as the hub of cannabis, if you will—with real excellence in the industry and education and equity across business, science, and culture,” Dawson of Cannabis NYC told CBT in October.