2023 CANY Public Comments on the Proposed Full Draft Regulations (Round Two)
CANY Official Communication
CANY Comments on New York State Cannabis Control Board Proposed Regulations (Round Two) on Adult Use Cannabis (9 NYCRR Parts 118, 119, 120, 121, 123, 124, 125, and 131)
SUMMARY
The Cannabis Association of New York (“CANY”) represents the majority of operating licensed Cannabis businesses in New York State – over five hundred and fifty businesses and individuals across the entire cannabis supply chain – from seed-to-sale in every region of the state. Through our policy, regional, and subject-specific committees, CANY works to engage with various communities and stakeholders within the New York cannabis economy. Since being founded in 2019, CANY has worked on numerous laws and regulations in realizing the goals as codified in the Marijuana Regulation and Taxation Act (MRTA).
CANY appreciates the work of the New York State Cannabis Control Board (“CCB”) and Office of Cannabis Management (“OCM”) on the Proposed Regulations concerning adult-use cannabis (the “Proposed Regulations”). CANY notes that the Proposed Regulations would benefit from providing the supply chain with more flexibility to address changing market needs. Our comments preserve the goals of the regulations in creating a safe and well-regulated market while also allowing the cannabis supply chain greater self-determination for innovation and growth. License tiers need to have flexibility of canopy between growing modalities in each Tier, maximizing current infrastructure and leaving room to grow.
Registered Organizations and Effects on NY Cannabis Market
CANY and its membership applauds and fully supports the work of the OCM and CCB in creating the two-tier system. We agree with regulations that enforce the two-tier model across all aspects of the industry–from cross-investing in licenses to paid marketing in digital to any other method of influence that creates a competitive disadvantage for small businesses. CANY has always opposed the carveout in adult-use for Registered Organizations (RO) – a class of vertical licenses for a small number of very large companies. This inherently provides an unfair advantage over small cultivators and CAURD licensees. The expansion of the RO program with more vertical licenses will continue to put all license holders at a disadvantage.
The original draft regulations, published on December 14, 2022, in Section §128.13(b)(9) put a three (3) year time table on the RO entry into the market. The reversal by the OCM in the revised regulations requires reconsideration due to the extremely slow rollout of the CAURD licensing program and new licenses in general. Therefore, CANY strongly recommends reverting to the first round regulations that provided a three year window before ROs entered the market. The OCM should also strongly consider keeping any existing RO and future ROs tied to their own vertical, including supply chain and retail. If very large companies can defy the two tier system in the NY marketplace, then they should only be allowed to sell their own products at their own stores. This approach would create a bubble around their supply chain that would stabilize the social equity licenses and give them a chance to succeed. Keeping the ROs in their own vertical would have the added benefit of enforcing True Party of Interest (TPI) regulations. As it stands RO licenses have the capacity and scale to dominate the entire supply chain with outsized indoor grows and they have the ability to invest in other licenses which will lead to de facto monopolies being created through a variety of investments that the OCM will not be able to untangle.
If the adult-use market launched as the governor promised¹ in October of 2022 with 20 CAURD retail stores and 20 each month thereafter, an early entry into the market by ROs might have made sense. However, at the time of submission of these comments, the market only has seventeen (17) operating storefronts. The market had been promised, and the cultivators relied upon 160 stores. Therefore, the regulations that govern the RO entry into the market needs to be put on hold until 160 CAURD open. Anything different will crash the market, making it unviable for new social equity applicants to apply or enter the market since there will be an outsized supply capacity of indoor flower that will be priced below the cost of production to the detriment of all involved, including the cultivators.
The MRTA clearly states that 50% of all licenses will be awarded to social equity applicants. While the OCM might meet this goal in hard numbers, it is on a path that will create a lopsided marketplace advancing the interests of the few at the expense of the many. Providing the ROs entry into the market along with vertical production, which they can sell to any store, would give them an unfair advantage and literally designate more than 50% market share to a small number of operators. ROs can then leverage their outsized share by capturing even greater parts of the market as small businesses suffer and experience forced bankruptcies.
The comments below specifically address key areas of the regulations that CANY would like revised to achieve a resilient marketplace. The future of New York cannabis relies on creating a strong industry for the state. Through promoting greater opportunities for growth, the CCB and OCM will create a viable market in New York while preparing businesses for a national competitive landscape.
CANY believes that New York State will lead the cannabis industry through innovation at every level of the supply chain. The Proposed Regulations point in the right direction but will need to address specific issues. Our comments provide an industry perspective on how to achieve these common interests and goals.
BACKGROUND
The NYS Cannabis Law vests the CCB with rulemaking authority. Per Section 13: “The board shall perform such acts, prescribe such forms and propose such rules, regulations, and orders as it may deem necessary or proper to fully effectuate the provisions of this chapter.” Such authority explicitly includes both the prescribing of adult-use licensing application forms and processes, as well as the qualifications and detailed eligibility criteria for such licenses.
Please click HERE to find CANY’s comments and related recommendations based on the revised draft of the proposed regulations.
¹ By Brad Racino | bracino@syracuse.com, “Gov. Kathy Hochul confirms marijuana dispensaries set to open this year,” Syracuse.com, October 26, 2022. See this article.