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The sun shined a little brighter in New York on April 14, 2022. Or at least it did for 52 farmers in the Empire State. 

The state issued its first 52 cannabis cultivation licenses just over a year after then-New York Governor Andrew Cuomo signed the Marihuana Regulation And Taxation Act (MRTA) which legalized recreational (adult-use) sales in New York. 

Under the law, it is legal for adults over 21 to possess up to three ounces of cannabis flower and 24 grams of concentrate. MRTA also allows the cultivation of up to three mature and three immature cannabis plants. MRTA states that police can no longer use the odor of marijuana as a reason to perform a search. It also automatically expunges criminal records for offenses that are now legal. 

But a year after legalization, which companies are set to thrive in the legal cannabis market?

“1.25 billion in marijuana tax revenue in five years”

New York officials project a legal cannabis tax windfall of around $1.25 billion over the next five years. According to a 2023 executive budget summary, the New York governor’s office projects $56 million in tax revenue in 2023. The forecast states that this sum will eventually reach $363 million in 2028. 

According to the cannabis data and market intelligence company Headset, the best model for New York is Massachusetts, where voters in 2016 legalized recreational cannabis. 

“Both had a functioning medical market prior to recreational launch and medical operators were able to or will be able to move to a med + rec model upon legalization.” 

Headset also stated that “by the end of MA's first year of sales there were 33 operational cannabis retailers. New York currently has 10 operational MMJ licenses, which operate a total of 38 dispensaries, with two more "coming soon". Relative to each states' population, this appears well in line with Massachusetts.”

New York could do a lot worse than Massachusetts. 

According to a November 2021 poll, 61% of respondents said recreational cannabis legalization has been positive for Massachusetts, 37% said it’s been “very positive.”  Only 13% said it has been somewhat or very negative.

A slow roll-out for the legal New York retail market

New York’s legal retail cannabis roll-out has not gone off without a hitch. According to NORML, “the Office of Cannabis Management (OCM) continues to drag their feet on establishing regulations regarding sales and the licensing process for retailers.”

In the meantime, unlicensed cannabis retailers have rushed to fill the void. According to a Gothamist post from early April, since New York legalized cannabis, it’s “become increasingly easy to pick up a pre-rolled joint or bag of gummies from a store. That’s the case even though the first licensed dispensaries aren’t supposed to open until the end of 2022.”

Like other states, New York has allowed municipalities to opt-out of the legal cannabis windfall. By the December 31, 2021 deadline, 764 out of 1,520 municipalities opted out of allowing dispensaries and 883 out of 1,520 rejected cannabis consumption lounges. 

Which brands will benefit the most from legal cannabis in New York?

According to Business Insider, companies that already operate to provide for New York's medical cannabis program have a “first mover advantage.” 

“They already have the infrastructure set up to somewhat supply the new marketplace and they'll be allowed to both grow and sell cannabis in the recreational market if they choose to,” Business Insider wrote. 

“The original growers, or OG's, in New York will be given many advantages to the market versus new entrants,” Debra Borchardt of GreenMarket Report wrote in a post for Real Money.  

These include the original 10 license awardees, listed in the article as Acreage Holdings (ACRHF) , Columbia Care (CCHWF) , Cresco (CRLBF) , Curaleaf (CURLF) , iAnthus (ITHUF) , Etain Health (private), Green Thumb Industries (GTBIF) , MedMen (MMNFF) (whose assets have mostly been sold to privately held Ascend Wellness), PharmaCann (private) and Vireo Health (VREOF).

The post also includes an assessment by cannabis investment firm Viridian Capital Advisors that stated that existing operators who serve the medical marijuana market will have a distinct advantage.

"Today, existing license holders are permitted to have four medical dispensaries and are required to be vertically integrated. Under the new law, the license holders can open four more dispensaries with three of eight to be permitted for recreational sales. All new entrants to the market will be capped at three total stores," according to the company.

The state won’t allow for vertical integration for new entrants. They will either work solely as retail or as wholesalers. Existing license holders will not have the limitation.

Creating “access points” for new cannabis entrepreneurs

In a Q and A with the Times Union in February, Christopher Alexander, the Executive Director of the New York Department of Cannabis Management, stated that this restriction will actually help new entrepreneurs. 

“One of the main parts of the legislation, which sets it apart from other states, is the fact that we prohibited vertical integration for adult-use cannabis businesses, and we're trying to create access points for new entrepreneurs.”

He also praised the state’s social equity initiatives in legal marijuana. 

Announced by New York Governor Kathy Hochul in March, The Seeding Opportunity Initiative sets up “individuals with prior cannabis-related criminal offenses to make the first adult-use cannabis sales with products grown by New York farmers.”

According to the Governor’s Office, the initiative “makes sales in New York possible before the end of 2022, jumpstarts New York’s Cannabis Industry, guarantees support for future equity applicants, and secures an early investment into communities most impacted by the disproportionate enforcement of cannabis prohibition.”

In the same announcement, Christopher Alexander said, "we are now on the path to doing what no state has done before: Put our farmers and equity entrepreneurs, not big, out-of-state businesses, at the forefront of the launch of our adult-use cannabis market."

“New York is Taking a Very Thoughtful Approach to Legalization”

According to Attorney Andrew Kingsdale, New York “is taking a very thoughtful approach to legalization.”

Kingsdale was appointed a member of the New York State Bar Association’s Committee on Cannabis Law in May 2021. Speaking to Rootwurks, he highlighted the “heavy, heavy emphasis” in the MTA on helping people “prosecuted in the past for crimes that aren’t crimes anymore.”

He mentioned how the state is prioritizing licensing for people with cannabis-related convictions and has a goal of having 50% of all licenses go to social and economic equity applicants, “the specific types of people who statistics show were more likely to be affected by prohibition.”

He also said that cannabis consumption lounges will help set New York apart from many other legal states. 

“They’re trying to learn from other states and what they did and didn’t do right,” Kingsdale said, adding that “it’s all going to come down to implementation and execution but at least the vision is very thoughtful in various respects.” 

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Ben Hartman, Content Manager

Ben Hartman is a cannabis writing and marketing professional with over 15 years of experience in journalism and digital content creation. Ben was formerly the senior writer and research and analysis lead for The Cannigma.

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