• Cultivated
  • Posts
  • New York’s new strategy for illicit enforcement?

New York’s new strategy for illicit enforcement?

Plus, Yellen supports cannabis banking, and more

Good morning.

We’ll be watching the New York Office of Cannabis Management meeting today at 10:30. It’s set to be an interesting one, as it’s the first meeting after Gov. Kathy Hochul announced a month-long review of the agency in an effort to speed up the licensing process.

And for all of you who are up at NECANN, drop us a line if you’re having interesting conversations — and if there are deals happening. We’d love a pulse check on the industry. 

- Jeremy Berke & Jay Rosenthal

💡What’s the big deal?

New bill would revoke tobacco, alcohol, and lottery licenses for shops selling illicit pot

What happened: A new bill introduced this week by New York legislators in both of the state’s chambers has a new strategy to enforce illicit cannabis sales: If passed, it would revoke a shop’s licenses to sell cigarettes, alcohol, and lottery tickets if they’re found to be selling illicit cannabis.

The bill was introduced by Sen. Jamaal Bailey, and its counterpart in the State Assembly by John Zaccaro Jr. You can read the full bill text here

Why it matters: You’re all well aware of the problem New York is facing with illicit cannabis sellers. These shops, mostly bodegas or vape shops transitioned into bootleg dispensaries following legalization, are all over the city.

Shutting them down has been a game of whack-a-mole so far for understaffed and overworked regulators.

And, they’ve been generally reluctant to strongly enforce illicit cannabis sellers, as the whole point of the Marijuana Regulation and Taxation Act, the bill that legalized cannabis in New York, was to get people out of the criminal justice system for selling cannabis — not create a new class of cannabis criminals. 

What’s next: Kaelan Castetter, of the Castetter Cannabis Group, worked on the bill’s text and told me they already have over 20 cosponsors and the majority leader on board, so the bill’s prospects are good, but obviously nothing is a done deal yet. 

Our take: This is a smart enforcement strategy that I believe aligns incentives in the right direction. Most bodegas, and their proprietors and landlords, don’t seem to care about the penalties associated with selling illicit cannabis. 

They’ll usually pay the fines and open their doors again within days or weeks. That’s despite Gov. Kathy Hochul, who recently stepped up the fines and beefed up enforcement. While they may be okay with paying fines, I’d bet they don’t want to lose their ability to sell high-margin cigarettes and lottery tickets. It’s a strategy I hope to see work. 

And while going after the landlords is a smart idea, that’s easier said than done: Many of these bodegas, especially in NYC, are listed under opaque ownership structures that take a lot of time and manpower to track down the actual humans behind. 

I also definitely don’t want to see a return to cannabis being criminalized, and for that to happen, we need easier, more streamlined ways for illicit sellers to go legit. And we also need to ensure that they’re not getting outcompeted by illicit sellers — this new bill seems like a good way to do so. 

And more: New York’s Cannabis Control Board, the state’s overseeing agency, will waive license fees for some cannabis growers, known as Adult-Use Conditional Cultivators, who wish to transition to selling cannabis through microbusiness or cultivation licenses. 


🗯️ Quotable

Treasury Secretary Janet Yellen came out in support of the SAFER Banking Act, a cannabis banking bill, yesterday.

“I think it’s a real problem,” Yellen told Rep. Dave Joyce, a Republican co-sponsor of the bill, at a Congressional hearing on Thursday regarding the state-federal conflict on cannabis law. “And it would be desirable to have legislation that alleviated this problem.”

“[T]he fact that marijuana is outlawed by the federal government creates an impediment to [banks’] willingness to provide banking services to cannabis firms, and it creates all the problems that you’re familiar with,” she said. 

So, there you go. Count the Treasury Secretary among the supporters of the SAFER Banking Act, along with the Senate Majority Leader, the American Bankers Association, and dozens of members of Congress from both parties.

The final report of Canada’s legislative review is out

What happened: A long-awaited report on how Canada’s legalization efforts are going was released yesterday: Legislative Review of the Cannabis Act - Final Report of the Expert Panel

What it says: There appears to be momentum to update the restrictive packaging of cannabis. Specifically, the report calls on Health Canada to consider some dried flower packaging to be transparent (!). Also of note, the report notes that Finance Canada should review of the excise tax model currently in place - a major point of contention for the Canadian industry.

Some news for patients too: The report recommended that the medical cannabis program remain intact, which is a good win for patients (and the industry too). As for how to access medical cannabis, pharmacists and founder of Ottawa’s Hybrid Pharm, Rahim Dhalla had this to say: 

Back up: The Canadian industry has been struggling, to say the least. After launching to much fanfare in 2018 when the country became the first G8 country to legalize, the tough regulatory and tax structure, plus fierce competition and Provincially-run wholesale, has squeezed the cannabis industry considerably. This report is a milestone event that looks at the Cannabis Act (the legalization legislation) and recommends improvements to appropriate federal Ministries and other regulatory bodies. 

Our take: This review/report was a long-time coming. While the industry has some reason to celebrate, some of the main challenges the industry is facing - like a 10mg/edible package limit - are likely to stay the same for some time. 

Perhaps this is a two steps forward, one step back report. Time will tell.


🎯 Quick hits

Another cannabis ETF bites the dust. Subversive Capital ETF, which holds US cannabis multistate operators including Green Thumb Industries and Verano, will shut down by March 28 as the fund couldn’t raise enough money to offset operating costs. It’s the fourth cannabis-focused ETF to shut down this year, per Green market report

South Dakota Gov. Kristi Noem signed two cannabis enforcement bills into law this week — one that bans “intoxicating hemp” products, and another that allows law enforcement to search medical cannabis businesses. 

Switzerland launched its seventh recreational cannabis pilot in Zurich. The pilot will run for five years, and will allow up to 5,000 people to purchase regulated cannabis. 

Congressional cannabis champion Rep. Earl Blumenauer followed up his fiery comments at a hearing earlier this week by submitting a written request to the Biden Administration for exactly what they were asking the Department of Justice to provide a legal opinion on in terms of rescheduling cannabis, Marijuana Moment reports

In other political news, the Department of Veterans Affairs said it will support a Republican-led bill focused on medical cannabis access for veterans, if it removes psychedelics.

📊 Earnings round-up

Canadian cannabis firm Sundial Growers on Thursday reported its fourth quarter and full-year results. The company reported a nearly $85 million operating loss on $249 million of revenue for the fourth quarter. For the full year, the company reported a nearly $176 million net loss on $909 million of revenue.

📈 Chart of the day

This one comes from cannabis wholesaler LeafLink. It shows that 4/20 related sales give the industry a clear boost that’s sustained for the rest of the year.

🤝 Deals, launches, partnerships

Tilray’s Redecan is launching a new line of hemp wrapped pre-rolls in Canada.

📰 What we’re reading

What did you think of today's Cultivated Daily?

Login or Subscribe to participate in polls.