Government
As New York develops adult-use marijuana rules, equity concerns emerge
New York’s plan to create a diverse, multibillion-dollar adult-use marijuana industry is in danger of slipping from its high goals, according to critics, making it potentially the latest social equity program to experience a less-than-smooth start.
As the state works toward finalizing its adult-use regulations, critics are highlighting what they see as major shortcomings from a program intended to promote greater racial and economic diversity by giving opportunities to those impacted by the war on drugs.
Sales are expected to start late this year or in early 2023, and state officials said in March that the initial 100 to 200 recreational retail licenses would focus on applicants with past marijuana-related convictions.
But critics note that there is:
- No chief equity officer in place.
- No advisory board to offer guidance on making the state’s recreational marijuana program more diverse.
- No detailed social and economic equity plan as required by the adult-use law enacted last year.
The lack of progress on those fronts jeopardizes the lofty social equity goals the state has set, industry experts say.
Those goals include ensuring that 50% of all licenses go to social equity applicants and that a $200 million fund is created to help support those businesses.
All of this is reminiscent of other slow-to-start equity programs, most notably Illinois, which still doesn’t have an equity business in operation 2½ years after the start of recreational marijuana sales.
A chief equity officer “is a critical position to roll out these social equity measures,” said Rob DiPisa, co-chair of the cannabis law practice at Cole Schotz in New Jersey.
New York’s adult-use law calls for the chief equity officer to assist in the development and implementation of the social and economic equity plan as well as to ensure that it is complied with on a continual basis.
Big illicit market
The social equity program’s success also is essential to reducing a large illicit marijuana market that threatens to undercut upcoming legal one, according to industry experts.
The concerns about the lack of progress in filling social equity positions were raised in comments about proposed regulations governing adult-use retailers.
The proposed regulations are just one set of rules that New York regulators are in the middle of finalizing.
Overall, New York is taking a piecemeal approach to drafting and finalizing adult-use regulations, DiPisa noted.
For example, the state’s Cannabis Control Board last week unanimously approved a set of strict marketing and packaging rules that some industry officials fear will make it difficult for marijuana businesses to develop distinctive brands.
The rules would require reusable packaging and would prohibit using certain images and lettering that regulators believe could attract minors.
Those rules still must go through an additional public comment period before a final vote.
For that reason, DiPisa indicated he’s not getting too worked up over a particular set of draft rules.
However, experts are concerned about the lack of progress over certain elements of New York’s social equity program and how that could affect the state’s equity goals and the market’s launch.
In written comments about the proposed retail regulations, the Minority Cannabis Business Association (MCBA) said a chief equity officer, advisory board and detailed social and economic equity plan are critical so regulators can “proactively address and timely respond to barriers to entry and sustainability, and other challenges to creating an equitable cannabis industry.”
The Washington DC-based advocacy group also noted that proper oversight is essential to:
- Avoid the missteps that have occurred in other states.
- Reduce the illegal market.
- Ensure that funding to social equity applicants occurs in a timely fashion.
New York Gov. Kathy Hochul plans to create a $200 million public-private fund to support social equity applications as they “plan for and build out their businesses.”
But details are still to come.
“When the funding is not timely and meaningful, it really is nothing but bells and whistles,” MCBA Executive Director Amber Littlejohn told MJBizDaily.
“We still don’t have a single state that on the day the market opens provided funding to social equity applicants.”
Rollout questions
DiPisa said existing medical marijuana operators could start sales before year-end.
But if New York is serious about having a social equity retailer help launch the market, he added, regulators must begin and complete a licensing round relatively soon.
“I don’t see how this all is going to work,” DiPisa said, especially with no chief equity officer in place.
Illinois, meanwhile, stands as a potential warning sign for social equity advocates in New York.
The Midwestern state once was lauded as a potential social equity blueprint before New York came along as a potential game changer.
Recreational marijuana sales in Illinois launched in January 2020, but the state has yet to issue a single low-interest loan from its social equity fund. Also, zero social equity growers and processors are operating in Illinois.
Despite New York’s lofty social equity goals, concerns have persisted that the existing 10 medical marijuana operators will have an inherent market advantage and dominance because they are allowed to be vertically integrated while social equity businesses won’t be.
Nine of the 10 existing medical marijuana businesses are multistate operators.
The last remaining independent, Etain Health, announced in March that it was selling for $247 million to Toronto-based RIV Capital, a Canadian investment firm bankrolled by a unit of lawn and garden giant Scotts Miracle-Gro.
As for New York’s draft regulations, experts such as DiPisa see positive aspects as well as areas for concern.
“It’s clear to me that New York is taking its time and being thoughtful and definitely cherry-picking the successful aspects from other jurisdictions,” he said.
Some might criticize the piecemeal approach, DiPisa said, “but I think it’s a good way to expedite” the regulations.
He said he was pleasantly surprised about the strict sustainability provisions in packaging, such as the requirement for reusable material.
But industry officials are concerned about extremely restrictive draft marketing provisions that would prohibit bright colors, bubble letters and even the word “candy.”
Kaelan Castetter, co-founder of the New York Cannabis Growers and Processors Association, said the proposed regulations would make it more difficult for marijuana businesses to develop distinctive brands, according to The (Syracuse) Post-Standard.
“Brands are not going to have a lot of creative freedom when designing their packaging if these regulations were to go on the books as is,” Castetter said.
DiPisa countered: “What’s important for everyone to remember is that these are in draft form. The whole point is that the community can now come forward with public comment.”
Source: https://mjbizdaily.com/as-new-york-develops-adult-use-marijuana-rules-social-equity-concerns-emerge/
Business
New Mexico cannabis operator fined, loses license for alleged BioTrack fraud
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Business
Marijuana companies suing US attorney general in federal prohibition challenge
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Business
Alabama to make another attempt Dec. 1 to award medical cannabis licenses
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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