A Blueprint For Federal Cannabis Legalization?

Earlier this year, New York Gov. Kathy Hochul signed a bill that will allow the state’s 63 licensed hemp farmers to apply for a conditional license to grow cannabis for the adult-use market. Under the law, cultivators would need to meet several criteria, including assurances they will abide by “safe, sustainable and environmentally friendly” farming practices. Qualified applicants must have grown hemp for at least two of the past four years and will be required to participate in a social equity mentorship program, providing training for underserved partners to prepare them for future roles in the industry.

The program aims to accelerate adult-use cannabis production in New York, which was legalized last year. Industrial hemp — marijuana’s low-THC cousin — was previously decriminalized federally in the 2018 Farm Bill, opening a pathway for states to create their own licensing programs regulated by the U.S. Department of Agriculture. Essentially, what New York has done is leverage the experience and expertise of existing hemp farms to build a strong foundation for the recreational marijuana market and avoid the mistakes of its predecessors.

In another bold move, Hochul also announced New York’s first 100 cannabis dispensary licenses will be issued to people who have been convicted of past marijuana-related offenses, part of what she calls the “Seeding Opportunity Initiative.” The first-of-its-kind approach is meant to favor victims of the war on drugs and give them a head-start on what is expected to flourish into a multi-billion dollar industry.

Taken together, these actions serve a dual purpose. First, they will help guarantee an adequate supply of legally grown cannabis once adult-use retail sales begin, allowing the market to better compete with illegally grown pot. On the other side of the country, California’s illegal marijuana market is bigger than ever, despite the state legalizing recreational sales in 2016. According to an article in Politico, sales of illegal marijuana is worth nearly $8 million in California, twice the volume of legal sales. Businesses cite high state and local taxes, complicated regulatory hurdles and a limited number of available licenses as pushing the legal market out of reach.

Secondly, New York’s approach aims to fulfill the goal that early entrants into the marketplace are members of communities that were most negatively affected by the war on drugs. As Hochul put it, the program is “a major step forward in righting the wrongs of the past.” 

New York is determined to learn from the experiences of states like California and Colorado, which have grappled with both illicit markets and an imbalance of opportunities for minority communities. A 2021 editorial in the Los Angeles Times described California as the “Wild West” of illegal marijuana, with the Los Angeles County Sheriff’s Department identifying 500 illegal farms during a recent flyover. Residents report feeling threatened by farmers carrying weapons. Illegal farms are responsible for forced labor, water theft and environmental destruction.

In favoring those with marijuana convictions, New York also appears to be trying to avoid pitfalls in other states where “social equity” applicants and mom-and-pop shops struggle to compete with deep-pocketed corporate operations. Chris Alexander, executive director of the state Office of Cannabis Management, has said that “instead of opening our market with the same existing operators who are dominating the national space, we’ve instead decided to put those who have been most impacted at the center of what we are building here.” The first licenses are expected to be distributed by fall 2022, with sales launching before the end of the year. 

This is exactly the type of pragmatic, problem-solving approach the industry needs as it continues to gain broader acceptance. While not yet a “mature” industry, cannabis producers are making significant strides nationwide, with a total value estimated at $61 billion in 2021. It hasn’t always been the most seamless path, as evidenced by the challenges of the earliest U.S. markets. But with these new conditional licenses for hemp growers, New York is demonstrating the kind of forward thinking that can give the rest of the country a roadmap for success and stifle gains in the illicit market. 

Federal lawmakers should be taking note of what is happening in New York. As hemp farms begin producing cannabis, they will give the state a leg up in providing affordable, legal product to satisfy the nascent industry. It is a novel strategy, and one that congressional leaders could look to adopt on a broader scale for federal legalization.

The Hemp Farming Act of 2018 may be just the place to start. Lawmakers could amend this legislation to accommodate the legalization of marijuana under New York’s model. While hemp is defined as having no more than 0.3% total THC under the law, it could be a matter of raising that level under a separate definition for marijuana and clarifying consumption methods, creating a path forward. Not only would users benefit, but the impact to agriculture would be tremendous, capitalizing on forecasted economic growth. 

Reality suggests this might be an unlikely scenario, though it does illustrate how industry representatives can think outside the box to create regulatory certainty in a way that is safe, sustainable and discourages harmful and illegal activity. Despite some progress at the federal level, more needs to be done to bring these key goals across the finish line.

Meanwhile, states continue to develop thriving industries despite federal hurdles. New York provides one great example of states leading the way, finding new ways to establish cannabis markets that generate maximum economic, social and environmental benefits. Their example suggests the U.S. doesn’t need to invent something entirely new in the federal sphere. There are ways to develop this industry safely and in a way that benefits consumers, businesses and communities where these farms exist. Now, all that is needed is for federal leadership to follow in their footsteps. 

Joe Caltabiano, CEO of Choice Consolidation Corp., is a respected and important voice in today’s emergent cannabis industry. Prior to launching Choice, Caltabiano co-founded Cresco Labs--one of North America’s largest vertically integrated cannabis operators--and grew it from a start-up to a Multi-state Operator with annualized revenue over $250 million and operations spanning nine states.