California Investors and MedMen Drama Take Stage at Latest NY Legalization Hearing


New York State lawmakers held a joint legislative budget hearing yesterday to discuss Governor Cuomo’s proposed legislation for the legalization of adult-use cannabis. Senators and Assembly members raised a number of questions about the proposal, the majority of which were about licensing, equity programs, and how legalization for recreational use could affect the state’s five-year-old medical program.

Assemblymember Crystal Peoples-Stokes (D-141) raised concerns about the number of out-of-state companies aiming to gain a foothold in New York’s recreational market. “I live in Buffalo because I represent that district, and literally for the entire year of ‘19, I would say there’s been at least two or three meetings a week with potential investors from California who come to my office,” said Peoples-Stokes. “I understand what they see: There’s an opportunity here, a big opportunity. But at the same time, I need to make sure we’re protecting New Yorkers’ interests to be in business. How do you propose to do that?”

Counsel to the Governor Alphonso David, who fielded most of the questions yesterday, said the legislation aims to reduce barriers of entry in two ways: first, by prohibiting vertical integration, or when a single company controls its own cultivation, manufacturing, distribution, and retail operations. While New York’s medical cannabis program permits vertical integration, the proposed legislation would prohibit the practice so as to increase the number of available licenses, thus providing more opportunities for those disproportionately affected by prohibition to enter the legal market. “We’ve broken up that structure in order to ensure that more people can participate in this new industry,” David said.

The prohibition of vertically integrated companies will not apply to current medical cannabis licensees, who will be given the option to enter into the recreational market in exchange for an investment in the program with an amount that has yet to be determined. “That provides us the additional capital that will be helpful to provide support to minorities and disadvantaged community members who may be interested in participating in this program.”

Peoples-Stokes asked David whether there would be a cap on the number of current license-holders that would be allowed to invest in the recreational program. “No, I don’t think we want to, in legislation, identify a specific percentage,” David responded. “We want to be careful that we’re not being overly restrictive or overly expansive.”

Assemblymember Walter Mosley (D-57) raised concerns about MedMen, a California-based company that currently holds one of ten medical cannabis licenses in New York and, with its $682-million dollar acquisition of PharmaCann, could hold two. MedMen has recently made headlines after former CFO James Parker filed a lawsuit in California alleging that company executives misrepresented finances, spent money extravagantly, and used homophobic and racist slurs. Since Parker filed, the New York Medical Cannabis Industry Association cut ties with the company.

“I know that MedMen is in the process of merging with another medical license holder in New York State. What type of impact is that going to have with that merger?” asked Mosley, who also asked whether the company will be allowed to enter the recreational market.

“One, I would not conclude at this point that the merger has been approved,” David responded. “The merger is still under review by the state. Second, the state is also aware of those allegations from California, and is reviewing those allegations to determine what impact, if any, it would have on their continued ability to function in the state,” he said.

What will happen to New York State’s medical cannabis program if recreational use is legalized was a central focus of the hearing. Senator Diane Savino (D-23) pointed out the discrepancy between the state’s medical program, which prohibits smoking cannabis, and the proposed legislation, which would allow recreational users to purchase flower product. “Do you not see a conflict? So, if I’m an adult-use purchaser, assuming we pass adult-use, I can purchase flower product for smoking, but if I’m a medical patient, I can’t smoke the product?”

“Correct. I think there’s a little bit of a conflict, but I think we also want to make sure we’re promoting public health as well,” said David, adding the state is looking at the issue.  

While some legislators continued to question the purported benefits and possible dangers of legalization, most focused instead on hammering out the details and praising the potential benefits to public health, criminal justice reform and the state economy. “They actually used cannabis in the bricks for the pyramids in Ancient Egypt,” remarked Senator Liz Krueger (D-28), Chair of the Finance Committee. “Apparently, they held up very well. Just saying.”

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