Hochul orders NY cannabis review

Plus, cannabis companies say there’s no rational basis for federal prohibition

Good morning.

Another Tuesday, and another busy day in the cannabis-world, Cultivated readers.

Perhaps no busier place than the great state of New York - which is where we’ll dive deep today at 10 am Eastern on LinkedIn and YouTube with Elizabeth Kase, Co-Chair of of the Cannabis Law Practice at New York-based Ruskin Moscou Faltischek, P.C.

Let’s get to it. 

- Jeremy Berke & Jay Rosenthal

💡What’s the big deal?

Gov. Hochul wants to fix NY’s cannabis rollout, quickly

What happened: New York Gov. Kathy Hochul has ordered a review of the state’s Office of Cannabis Management (OCM) and the slow licensing process, just weeks after calling the rollout of the legal cannabis industry a “disaster.”

She’s tapped Jeanette Moy, the commissioner for the Office of General Services, to lead the review. Moy will embed with the OCM for at least a month, and make concrete recommendations as to how to improve the agency’s functioning. 

The New York Times’ Ashley Southall first reported the review on Sunday. 

What she’s saying: “Today, we take the first step in revamping New York’s legal cannabis industry to ensure its long-term success,” Hochul said. “I have full confidence in Commissioner Moy’s ability to identify areas that need improvement, establish standards and processes across agencies, and jumpstart the next phase of New York’s legal cannabis market.”

Why it matters: The hope is that by conducting a full-scale review, the OCM will be able to speed up the process for obtaining licenses to sell cannabis and get stores open in order to meet New Yorkers’ demand for legal cannabis.

As of right now, there are only a handful of legal cannabis shops in New York City, and a few dozen open across the state. They face intense competition from illicit sellers, who don’t pay taxes and sell untested products that may contain pesticides or much less, or more, THC than advertised on labels, and have struggled to stay afloat. 

Also, multiple lawsuits have gummed up the OCM’s licensing process, meaning that the incentives for prospective entrepreneurs to go legal are slim to none. 

And more: As part of a recent lawsuit, the OCM has placed its Chief Equity Officer, Damian Fagon, on administrative leave

Our take: New York, per the letter of the Marijuana Regulation and Taxation Act (MRTA), had an audacious goal to center social equity in the development of its cannabis industry. Years into legalization, those goals haven’t been accomplished. 

As we’ve written before, it’s impossible to accomplish these goals without a basic, functioning regulated market. It’s time to get the market up and running and help legal sellers meet demand — otherwise, there won’t be any social equity wins to speak of. 

Finally: The Cannabis Control Board will hold an open meeting at 10:30 AM on Friday at the Bedford Stuyvesant Restoration Corporation in Brooklyn. 


🗯️ Quotable

“We want to have a system that is repeatable and predictable, so that when someone comes to us for licensing, we can give them a sense as to what they can expect,” Lauren Rudick, a lawyer who has helped clients submit cannabis license applications in New York, told The New York Times

“But as of right now, it’s ‘be flexible and pivot or die,’ because we just never know what the state is going to throw at us.”

They say federal government has ‘no rational basis’ for prohibition

What happened: As part of an ongoing effort to overturn the federal government’s prohibition of cannabis, a group of cannabis companies — represented by the powerhouse firm Boies Schiller Flexnersaid in a court filing there’s “no rational basis” for continuing prohibition, given that multiple states have recently legalized cannabis and the federal government hasn’t done anything about it.

The filing was a response to the Justice Department’s push in January to dismiss the lawsuit. The suit is led by cannabis company Verano Holdings, along with a number of other firms, and was filed in a Massachusetts federal court. 

It centers on Gonzales v. Raich, a 2005 case in which the Supreme Court ruled that federal prohibition preempts state-legalized medical cannabis. 

What they’re saying: “Dozens of states have implemented programs to legalize and regulate medical or adult use marijuana,” the filing, submitted by David Boies, who famously represented Al Gore in Bush v. Gore, reads. 

[T]he federal government no longer has any basis for insisting that state-regulated, intrastate marijuana must be banned to serve Congress’s interstate goals.” 

Back up: I spoke with Josh Schiller, one of the lawyers leading the case, about what the legal strategy is and why they’re pursuing it now. 

In short, the suit seeks to declare the Controlled Substances Act (CSA) unconstitutional as it pertains to state-legal cannabis businesses. If successful, it would enjoin the federal government from enforcing the CSA when it comes to legal cannabis companies.

What’s next: We await the DOJ’s response. Pop your popcorn if this thing works its way through the federal courts — it’s everything cannabis policy nerds like us ever dreamed of. 


👊 Quick hits

The UN Commission on Narcotic Drugs is continuing its annual meeting this week, where there are a few sessions related to cannabis. A session today, organized by legalization-opposing nonprofit Smarter Approaches to Marijuana and supported by the Turkish Green Crescent, is called “Lessons Learned from Legalizing Marijuana.” The full agenda is here

More big cannabis companies say they’re looking to follow Trulieve’s lead and avoid 280E taxes, per Green Market Report.

A New York City smoke shop that was selling illegal cannabis was also found to be selling cocaine laced with fentanyl, per a police source. The NYC Sheriff’s Office raided the store, in Midtown East, last week. The store had previously been padlocked but was back open. 

The Cleveland School of Cannabis said it’s the first cannabis industry training program to receive accreditation from the US Department of Education. 

A Colorado bill would ban talking positively about cannabis online, which the R Street Institute, a think tank, says would quell useful discussions about medical cannabis and compromise law enforcement investigations. 

🤝 Deals, launches, partnerships

Trends Dispensary, a black-owned business, is set to open its doors in Long Island City on March 28.

📰 What we’re reading

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