New York’s Legalization Plan Gives Advantage to Medical Cannabis Companies

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Gov. Andrew Cuomo’s legalization proposal favors medical cannabis operators in the state over other competition solely focused on the impending — but larger and more lucrative — adult-use industry, according to an analysis posted by state Senate budget staff.

Medical cannabis license holders would be the only type of license-holder able to hold all three different types of licenses in the state’s “three-tier” system. The three tiers are meant to ensure smaller businesses have a chance to compete with larger ones by requiring separate licenses for suppliers, distributors and dispensaries or retailers.

Suppliers and distributors would not be allowed to own a retail store — unless they’re also licensed to sell cannabis under the state’s medical program. Medical cannabis businesses can also co-locate their adult-use cannabis dispensary.

The new office that would control New York’s legal adult-use cannabis regime would have significant oversight authority and sway over the new industry.

The Cuomo proposal puts much of the power and control over the state’s regulatory framework in what would be called the Office of Cannabis Management, a new executive branch agency that would have an annual budget of around $35 million, according to the new analysis. The office would oversee all aspects of the state cannabis program —  including adult-use retailers and hemp cultivation — and have broad investigatory power, including the ability to hire investigators and subpoena witnesses to ensure cannabis businesses are operating within the law of the new program.

The office’s director would also have the ability to add medical conditions without going through the legislature.    

The new analysis also sheds light on the much-cited estimate that the state would collect $300 million. After legalization, the state expects to collect $83 million in fiscal 2021, $85 million the next year and $141 million in fiscal 2023, according to the document, likely acknowledging the time it would take for cannabis businesses to apply for licenses, for those licenses to be reviewed and awarded, and for businesses to get off the ground.

Before the analysis was released, Sen. Diane Savino, one of the primary driver’s of the state’s medical cannabis legalization, told Cannabis Wire that she planned to drill down more into the budget number as it may be overly rosy.

“We don’t know how many people will participate [and] there’s really no way to predict right now,” Savino said. “Those are questions I have for the for the Division of Budget when they come before us. How did they arrive at that number? I don’t know.”

Other key parts of Cuomo’s proposal lawmakers, including much-anticipated criminal justice reform, are expected to explore in the coming weeks, according to the analysis:

  • Sealing past cannabis convictions. Those with cannabis convictions could have their charges sealed but would have to file a motion with the court to do so. This may draw scrutiny from criminal justice advocates. In other states, advocacy groups have sought to automatically expunge or automatically seal convictions.
  • Driving under the influence with a mix of alcohol and drugs would move from being a misdemeanor to a felony. The proposal keeps intact the decriminalization of small amounts of cannabis and also eliminates cannabis use as a violation of parole, probation, supervision or bail.
  • Adds new qualifying conditions to the state’s medical cannabis program: substance use disorder, Alzheimer’s, muscular dystrophy, dystonia, rheumatoid arthritis and autism.

Cuomo’s proposed legislation that establishes the adult-use regulations and includes both medical cannabis and hemp is expected to be vetted with the rest of the state budget by the end of March. The cannabis legislation is likely to come up at a February 5 hearing when finance committee members of the Assembly and Senate meet to discuss health-related financial impacts to the state budget.

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