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New York’s cannabis crackdown gets tough(er)

Plus, Thailand wants to re-criminalize weed

May 9, 2024

Good morning.

Thanks for your well wishes and your chicken soup, everyone. Our Editor-in-Chief Jeremy is slowly getting back-in-action after his throwback bout with Covid.

In this one, we take a look at the recent crop of cannabis earnings, and more. 

Let’s get to it. 

-JB & JR

This newsletter is 1,762 words or about a 8-minute read. 

💡What’s the big deal?

Mayor Adams’ Operation Padlock to Protect

Driving the news: Readers of this newsletter are no doubt aware of New York City’s problem with illicit cannabis shops

There are about 2,800 across the city, with seemingly more cropping up every day. 

They’re the result of the overly burdensome regulations, a lethargic licensing process, and what many industry insiders say are too-high taxes for legal shops that leave them unable to compete with those breaking the law.

The state is trying to dole out more licenses, and quickly. But enforcement has so far been Sisyphean, as many shops are raided and then open within days. 

The state provided more enforcement mechanisms in the new budget, which allow authorities to close stores for up to a year while the case works its way through the courts. And Gov. Kathy Hochul has ordered a top-down review of the Office of Cannabis Management, the chief regulatory agency. 

What happened: Now, enforcement, at least in New York City, will have more teeth. Mayor Eric Adams on Tuesday announced the new “Operation Padlock to Protect” initiative, which will padlock shops selling illicit cannabis, based on the rules set out in the new budget. 

The New York Police Department has already served 20 warrants, and Adams says the operation will ramp up in the coming weeks. 

What they’re saying: “Today, our administration is delivering on a promise to shut down unlicensed smoke and cannabis shops, protect our young people, and ensure that the future of legal cannabis burns bright in New York City,” Adams said. “Legal cannabis remains the right choice for our city, but to those who choose to break the law — we will shut you down.”

Our take: New York City is a place where supply always meets demand, no matter what the demand is. 

So punitive enforcement only works if consumers have access to enough legal stores that can compete on quality and price. We here at Cultivated are pro-consumer, and we’ll always be. 

We don’t want to see a return of cannabis criminalization. But we do want to see a vibrant cannabis market in New York, with companies of all sizes selling innovative products that people like. 

But we won’t get there with nearly 3,000 illicit cannabis shops. The state is clearly trying to respond, by both hurrying up the pace of licensing and enacting a more robust crackdown. We hope it works.

And more: The New York State Cannabis Control Board is meeting in Albany on Friday at 10:30 AM. You can watch it here


🗨️ Quote of the day

Throwing a bowl of spaghetti against the wall, claiming that we breached, would be somewhat laughable if it didn't have such harsh consequences for the stakeholders of Goodness Growth,” Goodness Growth Holdings CEO Josh Rosen said on the company’s first-quarter earnings call on Tuesday.

“I recently agreed to commit a drop in interim from my CEO title because I'm excited about our team and our path, and I'd like to see this through. And that could include needing a full trial. I hope it doesn't. I think that would be a shame for both parties, but there's no love lost for what Verano did to us. And I'm now much more confident that we are positioned to benefit significantly from this litigation,” he added.

Chicago-based Verano Holdings signed a definitive agreement to acquire Goodness Growth for about $413 million in February of 2022, but backed out of the deal by October. Goodness Growth filed a lawsuit, saying it’s owed millions in termination fees. 

Last week, Goodness Growth asked a judge for a Summary Determination, meaning they want the case decided before they go to trial — but Rosen seems confident that either way, they’ll come out on top.

Thai PM wants to re-criminalize cannabis two years after decriminalization

What happened: Thailand’s new-ish prime minister, Srettha Thavisin, said on Wednesday that he wants to re-list cannabis as a narcotic in the country and make it only legal for medical purposes. And he wants it done by the end of the year. 

The new rule would make cannabis a Category 5 narcotic, which could carry criminal penalties of up to 15 years and carry fines of 1.5 million baht, or more than $40,000.

But cannabis is estimated to be a $1.5 billion industry in the country, which also relies heavily on tourism, by 2025. 

What they’re saying: “Drugs is a problem that destroys the future of the country, many young people are addicted. We have to work fast, to confiscate assets [of drug dealers] and expand treatment,” Thavisin said, per The South China Morning Post. 

Why it matters: Thailand decriminalized cannabis in 2022, with lawmakers hoping that only medical use would be allowed. But they failed to proactively create regulations guiding the industry, leading to a rush of “gray market” cannabis shops opening their doors and a ton of confusion about what’s legal, and what’s not. 

Sound familiar? 

Walking around Bangkok looks very much like New York City: There are hundreds of shops and trucks selling loosely regulated products. Of course, the neighbors are going to complain. 

What’s next: In January, Thailand’s Health Ministry tried to roll back cannabis laws, writing a bill that would restrict it to only medical use and creating new fines for rule-breakers. 

Thavisin is going to have an uphill battle trying to close cannabis shops. According to Pattaya Mail, an English-language outlet, there are about 6,000 dispensaries across the country. 

The final word: Legalizing cannabis isn’t easy. 

Thailand’s cannabis turmoil is primarily a result of a lack of forward thinking among lawmakers. 

Cannabis industry regulations should stem from the policy goals that the original legalization laws are trying to achieve. In New York’s case, those goals are all about economic and racial justice. In Canada’s case, those goals were all about public health and reducing teen use. The regulations, in theory, should flow logically from those goals — though the execution in many jurisdictions has left much to be desired.

But Thailand seemingly had no plan at all. The result is backlash against the entire legalization project, rather than a proactive effort to make the regulations more rational. 

Squeezing the toothpaste back into the tube is always harder than pushing it out. Excuse the terrible metaphor, but it’ll be the first time a country has experimented with decriminalization only to roll it back. 

Thailand isn’t exactly a Western democracy, but it does have rules and processes that the military can’t override. Expect this to be a political fight. 


Quick hits

A new report from Cannabis Business Times finds that there are 59 Senators who would likely support the SAFER Banking Act, a cannabis banking bill. That’s one short of the 60-vote filibuster threshold. The report outlines the stance of each Senator on SAFER Banking — it’s worth a full read

Law enforcement agents intercepted 61,000 pounds of cannabis on the Mexican border. That's 29% less than 2022 — and 98% less than 2013, according to an analysis of US Customs and Border Protection data by the National Organization for the Reform of Marijuana Laws (NORML), a pro-legalization advocacy group. The data suggests that more Americans are buying legal weed, and undercutting what was once a lucrative cartel business. 

White House Press Secretary Karine Jean-Pierre said that “we’re going to let the process continue,” when asked if President Joe Biden supports moving cannabis to Schedule III. Biden campaigned on reforming federal cannabis laws, and likely wants to show recalcitrant young voters that he accomplished the job before November. 

Rumors that DEA head Anne Milgram hadn’t signed off on the proposed rescheduling rule aren’t exactly true, per Politico’s Natalie Fertig. Her sources say that no one signed the proposed rule because there’s nothing to sign yet — and we could be a while off from the rule actually making its way to the White House Office of Management and Budget. 

High Times, the former cannabis culture magazine turned retail dispensary chain, is selling off its West Hollywood store, MJ Biz Daily reports

📊 Earnings round-up

Green Thumb Industries had a knock-out quarter, posting $31 million of net income on $276 million total revenue, up 11% year-over-year — in perhaps the weakest sales quarter of the year. 

Verano Holdings posted a $5 million net loss on $221 million of revenue, down about 3% year-over-year. CEO George Archos said that if rescheduling is approved, it would’ve saved the company $80 million worth of tax payments last year — and that the company will take “swift action” towards listing on a US exchange. Read more about why US cannabis companies are eyeing the major exchanges, post rescheduling. 

MariMed reported a $1.3 million loss on $37.9 million revenue and beat consensus estimates for earnings-per-share, an important metric for financial performance. The company’s earnings call is tomorrow at 8 am. 

Canadian cannabis company Village Farms reported a $2.9 million loss on $78.1 million revenue, up 21% year-over-year. 

Still on tap: 

🚀 Deals, launches, and partnerships

NewLake Capital, a cannabis real estate firm, announced the acquisition of a 58,500 thousand square foot facility in Connecticut for $16 million. The company is partnering with a subsidiary Michigan cannabis company C3

New York’s newest cannabis dispensary, Mighty Lucky, is set to open on the Lower East Side with a ribbon cutting ceremony at 11 am. 

🗞️What we’re reading

😜 One fun thing

Here’s your wild stat of the day: Cannabis in the US is responsible for about 1% of the country's electricity usage, or 13.5 million homes. By 2035, experts expect that number to hit 3%, according to Straight Arrow News

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