A battle is brewing for the future of cannabis social equity in New York
Plus, Tilray wants to be a beer company, earnings roundup, and more.
First off, apologies for the slow pace of newsletters these past two weeks — I’ve got a lot of awesome stories planned for you, so keep an eye out.
Between my upcoming exams, traveling for conferences and weddings, and writing, I’ve been a bit stretched thin.
But it’s a good kind of busy.
Okay, so what’s happened since I was last in your inbox?
On Thursday, I moderated a panel at Green Market Report’s Finance Summit with Cannabis NYC Founding Director Dasheeda Dawson and the New York City Economic Development Corporation’s Brinda Ganguly.
The EDC has established a fund that will provide loans — at below market rates — to cannabis entrepreneurs who qualify for social equity licenses in New York.
The EDC has already committed $8 million and is looking for partners to target around $20-$30 million total, Dawson and Ganguly told me.
If anyone reading is interested in learning more, I’m happy to help connect.
Let’s get to it.
Today’s Cultivated is sponsored by the PBC Conference.
PBC Conference is the preeminent payments, banking, and compliance conference for the cannabis industry, held in the heart of Washington DC at the Capital Hilton.
PBC brings together lawmakers, top cannabis regulators, and executives at the biggest cannabis companies to chart the future of the industry.
September 21-22 will be the fourth iteration of the conference.
There will be keynotes from Rep. Earl Blumenauer — a longtime champion of cannabis reform in Congress — as well as Jim Cole. You’ll also hear from the head regulators of New York, Illinois, Massachusetts, California, and Oklahoma, among other stellar panelists.
I’ll also be speaking again, and I hope to see you all there!
💡What’s the big deal?
What happened: New York’s social equity licensing program rollout is on hold — at least until the end of the week.
The New York State Supreme Court issued an injunction on Tuesday that prevents regulators from issuing more licenses until a hearing on Friday.
The injunction is related to a suit from a group of service-disabled veterans — Carmine Fiore, William Norgard, Steve Mejia, and Dominic Spaccio — who claim that they should be included in the first wave of licenses.
The suit was filed against New York’s Office of Cannabis Management (OCM). The suit named Cannabis Control Board Chair Tremaine Wright and the OCM’s executive director, Chris Alexander, specifically.
It’s yet another roadblock for New York’s choppy legal cannabis rollout, which has been plagued with litigation, complaints from all sides of the political spectrum, and a proliferation of illicit shops.
The injunction has left many social equity applicants in the lurch.
They’re now forced to wait and see if all the risk, time, and money they spent to set their businesses up will ever come to fruition.
“It’s not fair to keep telling people they are going to have an opportunity and not follow through,” The Legacy Growers, an advocacy group for cannabis growers, said on Instagram.
License-holders already in the process of opening their stores may continue, however.
Let’s back up for a second: The veterans’ suit claims that service-disabled veterans should’ve been included in the first wave of the state’s Conditional Adult Use Retail Dispensary (CAURD) program.
Right now, licenses are only being awarded to to prospective cannabis entrepreneurs with either a cannabis-related offense or a direct relation of someone with a cannabis offense.
The veterans claim that violates the spirit of the Marijuana Regulation and Taxation Act (MRTA), the bill that legalized cannabis in New York in 2021.
The MRTA, according to the suit, specifically lists service-disabled veterans as one of five priority groups for access to the economic opportunities legalization can provide.
Fiore told CBS News that he feels that veterans like himself were “used” to get legal cannabis passed in New York.
“Then once it was passed, we were cast aside for a separate agenda,” he said.
Big players are getting involved: On Wednesday, an industry group backed by large cannabis companies — The Coalition for Access to Regulated & Safe Cannabis (CARSC) — asked to join Friday’s oral arguments.
These companies filed a similar suit against the OCM in March. Their suit claims that, according to the MRTA, licenses should have been awarded to everyone at the same time.
CARSC members included publicly-traded companies like Green Thumb Industries and Curaleaf, who stand to gain a ton if a court forces New York to open up licenses to everyone immediately.
As cannabis stocks slump thanks to declining wholesale prices, heavy tax burdens and regulation — and, not to mention, persistent competition from the illicit market — these companies have looked to New York’s potentially multi-billion-dollar cannabis market as a savior.
Right now, these companies are obligated to wait until the end of the year to open up retail stores.
Why it matters: Since the beginning, New York’s legal cannabis rollout has been plagued with lawsuits and other hurdles.
Critics say New York’s progressive vision of legalization has led to far too much bureaucracy and stores opening up too slowly.
They say that will handicap the legal market from ever competing with illicit sellers, who don’t pay taxes and don’t need to comply with onerous regulations.
There are still only about 20 dispensaries open statewide, though the MRTA was passed well over two years ago.
Even worse, there are only a handful open in New York City — a city with well over eight million people and the world’s top cannabis consuming city by metric tons, according to a study from The Center for Advancing Health.
These two suits bring together two very different groups — publicly traded companies and veterans — for what legal observers say could be a compelling challenge to the legitimacy of the CAURD program.
Time will tell what the courts decide, but there’s a very real chance that the CAURD program, and with it, New York’s progressive goals for cannabis legalization, could be abolished entirely.
But, previous lawsuits have attacked the social equity-first rollout. And the CAURD program has survived legal challenges before.
A suit filed last year by Variscite, a Michigan cannabis company, alleged that the CAURD program was unconstitutional because it was only available to those with convictions in New York. (Variscite’s majority owner has a nonviolent cannabis conviction, but in Michigan, not New York).
That suit led to an injunction that prevented New York from doling out licenses in places like Brooklyn and the Finger Lakes, though the case was settled in May.
Read more: New York Cannabis Insider editor Brad Racino is keeping a running list of all the lawsuits the state is contending with.
What else is happening?
The state shut down and padlocked seven unlicensed cannabis shops, all part of the I’m Stuck chain, on July 31.
Housing Works Cannabis Co, one of the city’s first operational dispensaries, brought in $12 million in cannabis sales in its first six months of operation.
Housing Works is a nonprofit that works on homelessness and sexual health issues in the city. Much of that revenue will go towards helping those in need.
While the strong sales are a victory lap for New York’s regulators, the news release did not give a full accounting of the costs associated with the sales.
🥊 Quick hits
Columbia Care and Cresco Labs have called off their $2 billion merger after missing key deadlines.
New Hampshire will explore selling cannabis through state-run shops, similar to the state’s liquor model.
Minnesotans can legally consume cannabis as of August 1. It’s the 23rd state to legalize recreational cannabis.
Colorado Sen. John Hickenlooper has refiled a bill that would direct the federal government to prepare for legalization.
A former FDA regulator predicted that federal cannabis rescheduling will happen this year.
📈 Market moves
What happened: Canadian cannabis giant Tilray is getting (further) into the beer business.
The company said on Monday it’s buying eight beer brands from Anheuser-Busch, including the popular Shock Top and Blue Point, in an $85 million deal.
Why it matters: It’s tough making money cultivating and selling cannabis at scale, especially in Canada.
Tilray CEO Irwin Simon had made no secret that he wants to diversify into beverages.1
Over the next few years, Tilray may end up as much — if not more — of a beverage business than a cannabis business.
Once the deal closes, Tilray will become the fifth largest craft beer company in the US.
In November, Tilray bought the Montauk Brewing Company, another craft beer-maker. The company already owns SweetWater Brewing Company, and Breckenridge Distillery.
While the market liked Tilray’s move, analysts and other industry experts have pointed out that Anheuser-Busch is offloading brands that have suffered declining sales.
What else is happening?
It’s cannabis earnings season, and some have managed to turn a profit (!) this quarter:2
Green Thumb Industries reports a $13.6 million profit on $252 million of revenue.
WeedMaps reports a $2 million profit on $51 million of revenue.
Verano Holdings reports a $13.1 million loss on $234 million of revenue.
MariMed reports a $900,000 loss on $36 million of revenue.
Scotts Miracle-Gro’s Hawthorne unit, which is focused on opportunities in cannabis, saw a 40% sales decline in Q3.
TerrAscend pre-announced $72 million of revenue in Q2, an increase of 12%. Full results and earnings call are scheduled for 5pm Thursday.
Trulieve reports a $404 million loss on $282 million of revenue.
The company said its “adjusted” net loss was $15 million after factoring in impairments and other charges.
The company also said in a filing that its former CFO, Alex D’Amico, racked up $350,000 - $400,000 of expenses on the company’s dime and may seek restitution.
🧪 Science and research
Healthy, young adults with recent exposure to cannabis — measured by urine testing — scored significantly higher on standardized measures of “prosocial” behavior, like empathy, fairness, and agreeableness (which was particularly high among men).
The study’s results suggest the effect wears off with time elapsed since consumption, however.
Why it matters: The study’s lead author, University of New Mexico psychologist Jacob Miguel Vigil, says that most recent studies of cannabis focus on the harm to users, not potential benefits.
“Most investigations on the effects of using cannabis have focused on either negative consequences of cannabis addiction or on the physical health effects of cannabis use,” he said.
“Almost no formal scientific attention has been devoted to understanding other psychological and behavioral effects of consuming the plant, despite it being so widely used throughout human history.”
While both sides of the cannabis use equation need further research to elucidate the risks — as I’ve called upon consistently in this newsletter — I think Vigil’s quote is revealing: There are plenty of benefits, too.
🗣️ Quote of the week
“Weed was so stigmatized—something that people were forced to feel bad about, something that they were told made them stupid. People are reveling in the fact that they can enjoy it.”
😎 One cool thing
Fifty-six percent of cannabis consumers say their primary activity after a session is watching TV at home, listening to music, or sleeping.3
This chart comes from cannabis analytics firm New Frontier Data’s 2023 Cannabis Consumers in America report.
📚 What I’m reading
CNN’s Sanjay Gupta explores why cannabis is having a “senior moment,” and why his perspective about medical cannabis has changed in a new documentary.
The Globe and Mail’s Jameson Berkow shines a light on why Canadian researchers have been left in the dark about cannabis emissions and toxicity.
Chris Roberts profiles Mikey Steinmetz, the entrepreneur behind Flow Kana which raised $175 million and went up in smoke.
Cal Matters talks to patients who feel left behind from California’s commercial cannabis market.
Danielle Guercio writes for LifeHacker about how to bring weed into the bedroom — and brings science to bear.
“Better knowledge about cannabis empowers people to make informed decisions about the roles it will or won’t play in their lives,” writes psychologist Barry Lessin for Filter Magazine.