After a three-year push, New York has legalized one of the most progressive and largest recreational weed markets in the United States with revenues projected at US$3.1 billion in the program’s fourth year.
Late Tuesday, the state’s legislature passed the bill and Gov. Andrew Cuomo officially signed it into law Wednesday morning making New York the 16th state to legalize cannabis for adults 21 and older.
The measure allows for possession of up to three ounces of dried bud and six plants to be grown at home.
While it will take the state an estimated 18 months to draw up regulations and launch recreational sales, the new law is being lauded by advocates as the new gold standard nationwide for addressing social issues.
“This law comprehensively addresses the harms of overcriminalization and establishes one of the most ambitious marijuana legalization programs in the nation,” Melissa Moore, New York state director of the Drug Policy Alliance, said in a statement.
The legislation will creates equity programs to provide loans and grants to people including small farmers who have been disproportionately affected by the war on drugs.
The bill will expunge criminal records of tens of thousands of people, has a goal of 40 per cent revenue reinvestment into communities of color and will grant 50 per cent of adult-use licenses to social equity applicants and small businesses.
Read more: New York expected to legalize adult-use cannabis next week
New York cannabis equity comes with caveats
But Chris Lindsey, director of government relations with the Marijuana Policy Project, says the devil’s in the details regarding how that progressive agenda will roll out.
“In my opinion the biggest factor in the success or failure will be the resources those equity companies will have access to as they apply and maintain their licence in the early stages,” he said in an email.
Costs are extraordinary in the U.S. cannabis industry because of additional city and state fees layered on top of hefty rental rates and new taxes.
Add to it the lack of banking services due to federal prohibition, Lindsey says, and equity applicants maintaining full ownership while running a successful business is a very high bar to set.
While lawmakers in U.S. Congress are expected to pass reforms this year that will free banks to service state-legal cannabis operators, those moves could be delayed by conflicting pushes for federal legalization.
Read more: After 8-year wait, SAFE Banking Act expected to pass
In other lucrative U.S. markets, major weed firms with deep pockets have cut deals with equity licence holders. They either take a stake in their business or buy them out entirely.
However, New York lawmakers included provisions in their bill to reduce fees for social equity applicants and not allow them to transfer or sell their licences within the first three years of issue.
New York bill less friendly to corporate cannabis
The legal market is expected to rake in billions of dollars in revenue for the state and for New York City in particular, with a sizable 13 per cent excise tax, which includes a 9 per cent state tax and a 4 per cent local tax. The bill also includes a new potency tax of 0.5 cents of THC per milligram for flower, 0.8 cents per milligram for concentrated cannabis and 3 cents per milligram for edibles.
Cities, towns and villages can opt out of retail altogether.
Gov. Cuomo’s office predicts annual tax revenues from legal weed sales could bring in US$350 million a year and add 60,000 jobs to the state when the industry is fully established.
Companies with medical cannabis licences could have a head start over newcomers when the state opens adult-use sales.
Five of the largest U.S. multi-state operators currently hold medical dispensary and production licences in New York, including Curaleaf Holdings Inc. (CSE: CURA) and Green Thumb Industries Inc. (CSE: GTII).
However, analysts have noted that New York’s legalization bill doesn’t favour corporate cannabis.
The bill prohibits larger businesses from holding both cultivation and retail licences in order to protect the adult-use sector from being controlled by large operators. Vertical integration will only be allowed for equity businesses.
And while existing medical licence holders will have some first-mover advantages, they will only be able to open three adult-use stores. However, they will be able to double their current number of dispensaries from four to eight, provided two are in unserved or underserved areas.
For medical cannabis advocates, having more dispensaries in the state will boost patient access.
The bill includes other provisions to strengthen the state’s existing medical cannabis program by expanding the list of qualifying conditions and allowing patients to actually smoke weed.
A new Office of Cannabis Management — an independent agency operating as part of the New York State Liquor Authority — will be responsible for regulating the recreational cannabis market as well as the existing medical marijuana and hemp programs. It will be overseen by a five-member Cannabis Control Board.
While the law is effective immediately, it has allocated six months to set up the new state agency. Then it’s expected to take another year to rollout the adult-use program.
For policy expert Lindsey, New York entering the cannabis regulatory system will have a ripple effect on the entire U.S. industry.
With a population of almost 20 million and an estimated 1.5 million regular cannabis users, the state’s adult-use program will have its own character and influence.
Not only will New York pressure other Beltway states like Connecticut and Pennsylvania to get serious about recreational legalization, it could speed up timelines for major federal reform.
U.S. Senate Majority Leader Chuck Schumer, a New York Democrat, said Wednesday that a bill to federally legalize weed will be introduced imminently in the Upper Chamber.
Senate Majority Leader Chuck Schumer on decriminalizing marijuana: "I support decriminalization at the federal level, and we'll be introducing legislation with a few of my colleagues shortly." pic.twitter.com/fkc9HE2wQB
— ABC News Politics (@ABCPolitics) March 31, 2021
Top image via the office of New York Sen. Liz Krueger who co-sponsored the legalization bill