To Flood Or Not To Flood NY's Retail Cannabis Market... That Is The Question: Industry Stakeholders Say Take It Slow

Licensing retail cannabis shops has moved at a snail’s pace over the past year, much to the chagrin of industry stakeholders and multi-state operators keen to cash in on New York’s huge and sure-to-be lucrative market.

New York farmers who grew cannabis watched their crops grow moldy, nearly driving them into bankruptcy as the state's dysfunctional regulatory system remained paralyzed by lawsuits, and setbacks for over a year. Oh, yes, and did we mention the NY illicit weed market is out of control?

In response to the above, Gov. Kathy Hochul told state cannabis officials in March to overhaul the entire retail licensing scheme from top-to-bottom. Shortly thereafter, New York's Cannabis Control Board approved 101 new licenses, representing a 30% expansion in retail licenses.

So, why aren’t stakeholders happy about Hochul’s move to push the beleaguered industry along?

Too Much, Too Soon, Too Chaotic

The Cannabis Association of New York, a group representing the legal marijuana industry cautioned Hochul and state cannabis regulators about the potential negative consequences of a dramatic increase in the number of cannabis shops.

Damien Cornwell, the group's president expressed concern that regulators have not yet effectively dealt with the issue of illegal cannabis operators and that issuing retail licenses should be done with calm and caution.

"We are writing to express our deep concern regarding the Cannabis Control Board's (CCB) recent discussions about dramatically increasing the number of cannabis licenses in the state," Cornwell wrote in an April 12 letter sent to CCB chairwoman Tremaine Wright and members of Cannabis Advisory Board, reported the NY Post. "We believe that this approach if implemented without proper analysis and stakeholder input, will have disastrous consequences for the fledgling industry and public health."

Cornwell advised careful deliberation rather than overwhelming the market.

"As the cannabis industry in New York is still in its early stages, many licensed retailers are already facing challenges competing with the illegal market. Flooding the market with additional licenses exacerbates this problem and potentially leads to a wave of closures, undermining the state's social equity goals and leaving vulnerable entrepreneurs in an unsustainable market."

Still Federally Illegal, Still Getting Shafted By The IRS

In a previous interview with the Post, Cornwell highlighted the unequal treatment faced by cannabis retailers compared to other industries. He pointed to the inability of licensed shops to deduct ordinary business expenses due to federal law that continues to view marijuana as a Schedule I drug.

"Without the ability to deduct expenses like rent, employee wages and marketing costs and other operating expenses, cannabis retail stores face a higher tax burden compared to other retail businesses. This can significantly impact their profitability and financial viability," Cornwell said.

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Photo: NYC Illicit cannabis truck by Maureen Meehan