Law New York

[Baron23]

And further on that subject of fucking up a program rollout with true 'elan, I bring you more from NY state. Now, Hochul is in charge but it appears that, as with many politicians, the buck stops somewhere else. This looks like nothing less than a search for a scapegoat. I'll tell you who is responsible...she is.

New York governor orders probe of Marijuana licensing program 'disaster' amid black market surge​

Unlicensed NY storefronts prompted Gov. Kathy Hochul to request online platforms like Google to stop listing them.​

New York will evaluate its troubled recreational marijuana licensing program after lawsuits and bureaucratic stumbles severely hampered the legal market and allowed black-market sellers to flourish, Gov. Kathy Hochul ordered Monday.


The review will focus on ways the state can speed up license processing times and allow businesses to open faster, as well as a top-down assessment of the Office of Cannabis Management's structure and systems.


Hochul, a Democrat, has described the state's recreational marijuana rollout as a " disaster." Just over 80 legal shops have opened since sales began at the end of 2022.


The state's legalization law reserved the first round of retail licenses for nonprofits and people with prior marijuana convictions. It also set up a $200 million " social equity " fund to help applicants open up shops, all in an effort to help those harmed by the war on drugs get a foothold of the state's marketplace.


But the permitting process was soon beset by legal challenges and the so-called equity fund struggled to get off the ground, stalling growth of the legal market.


In the meantime, unlicensed storefronts opened up all over the state, especially in New York City, with the problem becoming so pronounced that Hochul last month asked such online entities as Google and Yelp to stop listing them online.


Still, state regulators have had trouble dealing with the overwhelming volume of applications. The Office of Cannabis Management has just 32 people reviewing license applications but has received about 7,000 applications since last fall, a spokesman said.


The assessment of the program was also announced days after a top official at the cannabis agency was put on administrative leave following a report from New York Cannabis Insider that alleged the agency had selectively enforced rules to punish a marijuana processor.


The state's review will embed Jeanette Moy, the commissioner of the state's Office of General Services, and other state government officials, in the cannabis management agency for at least 30 days. The group also will come up with plans to improve how the agency functions and set performance metrics moving forward, according to a news release.


"We have built a cannabis market based on equity, and there is a lot to be proud of," said Chris Alexander, executive director of the Office of Cannabis Management. "At the same time, there is more we can do to improve OCM’s operations and we know Commissioner Moy, a proven leader in government, will help us get where we need to be."

 

[Baron23]

And here is the key (to me) statement in this article:

"The existing “quarterly payment system” is problematic for two main reasons: it requires businesses to pay taxes in advance, before collecting payments for the tax period, and it imposes a tax nearing 25% of sales on an industry yet to establish stable profit margins"​

​

NY's rollout of a cannabis program should be a good candidate for a political science PhD thesis on how to utterly fuck up a goverment regulated program. And, much like CA, one of NY's most significant problems is due directly to that state's politician's greed for tax dollars to redistribute to favored programs and demographics. They thought that MJ was going to be the goose that laid the golden egg and bail them out of their irresponsible spending deficits. Fucking idiots, one and all.

NY’s quarterly tax payments for Cannabis businesses ‘threatens the viability’ of all operators​

Urgent Need for Reform: New York's Cannabis Tax Payment System.​

As the April 1 state budget deadline looms in Albany, all cannabis tax discussions have been on the THC potency tax repeal-and-replace proposals.


We are thankful that the governor and legislature have all offered substantial replacement options for the THC potency tax. However there is a separate cannabis tax issue that needs to be addressed.


The existing “quarterly payment system” is problematic for two main reasons: it requires businesses to pay taxes in advance, before collecting payments for the tax period, and it imposes a tax nearing 25% of sales on an industry yet to establish stable profit margins, unheard of in any other new industry.


On behalf of the entire New York cannabis industry — from cultivators to processors to dispensaries — we argue that a healthy, balanced industry should be treated similarly to the local New York alcohol sector, paying taxes annually at a more manageable rate.


With these critical adjustments, the nascent cannabis sector could provide substantial employment, contribute its fair share in taxes, and offer returns to its investors to continue to grow sustainably.


Considering the current 110-day Excise Tax cycle, cannabis producers in New York must pay taxes before receiving payment for that period’s sales. Often, they secure only 50% of the necessary sales revenue by the due date, given that most stores pay about 45-50 days post-delivery.


This timing means that about one-third to half of the period’s sales revenue is still pending when taxes are due, forcing businesses to rely on profit margins to cover the tax — which with the current market size and lack of scale is often in the range 5-10% of sales for New York operators.


Take, for example, total sales of $250,000 over December, January, and February. The Excise Tax due would be approximately $62,500, breaking down to about $20,800 monthly. However, the profit from December and January – if it exists – likely only totals approximately $16,700, insufficient to cover February’s $20,800 Excise Tax, thereby necessitating external financing.


This leads New York operators into further predatory debt as there is no conventional financing for cannabis companies, perpetuating a vicious cycle that worsens as the market expands. The lack of external financing options for the cannabis sector intensifies this problem, with tax authorities sometimes seizing producers’ property for unpaid taxes.


Several businesses, including ours, have faced property liens from New York tax authorities for taxes due on revenues not yet received, due to the short collection period. Although we managed to temporarily resolve this issue through a payment plan, it is not a sustainable solution.


This tax structure threatens the viability of nearly all operators in the industry, highlighting the critical need for reform in the tax payment cycle. Even with a proposed excise tax reduction to 9%, the problem remains significant and requires immediate attention.


We are thankful that Senator Jeremy Cooney is understanding of this issue and is working to address it in Albany.

 

[Baron23]

I really don't cherry pick negative articles about NY's MJ program. I derive most of my posts from some sort of MJ article clipping service type emails/websites. Its just that NY and "how to utterly fuck up an MJ program rollout" is in the news almost daily. Wow...

As for Hochul's recent criticism of the regulating authority over this program seems like finger pointing and CYA to me. It seems many current politicians have revised Truman's famous quote to now be "the buck stops anywhere but with me". sigh

New York’s Scorecard: 85 Legal Shops, 2000 Illegal Ones​

Challenges Mount for New York's Cannabis Rollout Amid Illegal Dispensary Proliferation.​

The lack of legal dispensaries and the overwhelming proliferation of illegal ones are the biggest concerns of the rollout three years after legalization.


After three years of fits and starts, the rollout of New York’s recreational cannabis market gained speed in 2024, most notably with the opening of about 50 licensed dispensaries so far this year.


But the licensed retailers, who number about 85 in total, are far outnumbered by more than 2,000 rogue head shops, the target of complaints that they siphon customers, sell to children and attract criminals.


The quick and brazen takeover has left many people frustrated with the government’s slower and stricter approach to expanding the legal market and has emerged as the most pressing challenge facing the rollout, as the authorities struggle to keep the state’s promise to deliver a $5 billion market to diverse small businesses and people harmed by past anti-marijuana policies.


“They need to get a handle on that quickly,” said James Stephenson, a co-founder and chief executive of oHHo, a wellness brand that depends on dispensaries to sell its cannabis-infused chocolates, gummies and seltzers. “You can’t have one set of people playing by the rules.”


While the illicit shops multiplied, legal dispensary openings stalled for months because of lawsuits, the rule-making process and the state’s broken promise to finance the leasing and renovations of the first 150 licensed dispensaries. Just 10 stores are in operation with the state’s help, while another 375 dispensaries, licensed for nine months or more, have yet to open their doors.


Gov. Kathy Hochul, who has increasingly voiced her disappointment, recently ordered a review of the Office of Cannabis Management, the agency handling the rollout. She has also proposed legislation expanding the power of local authorities to punish unlicensed shops and complicit landlords, as well as a measure to slash taxes that drive up the price of legal products. The changes have broad support in the State Legislature.

 

[Baron23]

No, a judge didn’t void all of New York’s legalized marijuana laws. He struck down some​

NEW YORK (AP) — New York’s cannabis industry was unsettled Thursday by a judge’s ruling that appeared to strike down all regulations governing recreational marijuana in the state. But a key portion of the order turned out to be a mistake.

The Wednesday ruling was amended Thursday to reflect a much narrower decision after cannabis growers, sellers and other supporters voiced concerns about the implications.

The decision came in a lawsuit brought by Leafly, a cannabis sales website, which challenged the state’s rules barring marijuana dispensaries from advertising on third-party platforms.

State Supreme Court Justice Kevin Bryant, in a strongly worded decision, sided with Leafly in declaring the state’s rules were arbitrary, capricious and therefore unconstitutional.

His ruling initially appeared to void not just the marketing and advertising rules in question but the state’s entire regulatory regime for being “unconstitutionally vague.”

The decision was later amended to show that the judge voided the state rules dealing only with so-called third-party platforms such as Leafly that help marijuana companies market and promote their products.


By then, multiple news articles had appeared saying New York’s entire system for regulating marijuana had been thrown out, and an uproar had begun. State Sen. Jeremy Cooney, who chairs the Senate’s cannabis subcommittee, was among those who quickly denounced the decision.


“Today’s State Supreme Court decision was another setback in a series of blows New York’s adult-use cannabis market has faced since legalization, three years ago,” he wrote in a statement. “While some changes to marketing regulations are needed, the decision by the Court to throw out all agency regulations will ultimately slow progress at a time when we need to more aggressively combat illicit shops to grow a stronger, more-equitable legal market.”

A message was left with a spokesperson for the state court system seeking more information about the initial, mistaken ruling. The state Office of Cannabis Management said it is reviewing the corrected decision.

New York’s rollout of legalized marijuana has been defined by a slow licensing process, legal challenges, a proliferation of thousands of illicit shops and a lack of substantial regulatory enforcement.

The relatively paltry number of licensed shops has also led to complaints from marijuana farmers that there aren’t enough legal sellers to handle their crops. At the same time, authorities have been working to shut down illegal marijuana shops that have popped up all over the state, particularly in New York City, as unlicensed sellers fill the legal vacuum.

Meanwhile Leafly, the California company whose suit sparked the uproar, said it looks forward to supporting New York’s marijuana consumers and businesses following the ruling.

“It’s impossible to overstate the importance of providing consumers with choices, and educational information when making purchasing decisions,” the company said in a statement. “It is critically important that licensed-retailers have equal access to important advertising and marketing tools to help them succeed in a competitive landscape.”

 

[Baron23]

NY Judge’s Cannabis Ruling Opens Door for More Challenges​

New York Judge's Ruling Sparks Potential Wave of Cannabis Regulation Challenges.​

A New York judge’s recent ruling that a handful of the state’s adult-use cannabis regulations are “unconstitutionally vague” and infringe on the free-speech rights of cannabis businesses will likely spur more challenges, attorneys said.


New York Supreme Court Justice Kevin Bryant has done “the homework for every lawyer out there that has their eye on this space” and has standing to sue, Andrew Schriever, partner at Prince Lobel Tye LLP, said about the decision in Leafly Holdings Inc. v. NYS Office of Cannabis Mgmt.


Such lawsuits will likely be limited to specific sections of the rules, rather than the entire framework, attorneys said days after Bryant issued an amended opinion on the legality of the state’s recreational marijuana regime.


Bryant’s ruling focuses on five specific requirements, including rules that prohibit retail dispensaries from paying for marketing or promotion through a third-party platform that lists cannabis products for sale and a ban on fulfilling orders placed on a third-party marketplace where other retail dispensary licensees are listed.


Though Bryant narrowed his previous ruling to invalidate only the third-party marketing and pricing rules, rather than several other regulations that weren’t challenged in the lawsuit, the judge’s overall stance remained the same—that the state’s adult-use cannabis rules are arbitrary and capricious and there’s no “sound and substantial basis in the record” to support the actions taken by the New York Office of Cannabis Management.


Bryant’s presided over at least two other lawsuits challenging the state’s conditional adult-use dispensary licenses. This past August, he temporarily halted the cannabis dispensary licensing process in response to two separate but related lawsuits brought by a group of veterans and the Coalition for Access to Regulated & Safe Cannabis who said the state overstepped its constitutional authority by creating a new type of dispensary license and limiting eligibility. The challengers settled their cases.


“Whether you have a problem with any particular regulation, if that regulation was not seriously looked at, then this case becomes a precedent and tool by which somebody could challenge it,” Schriever said. “That’s assuming they have standing to challenge it—that part’s important. The sky really can’t fall because you have to actually be injured before you challenge the regulations.” Schriever represents Gracious Greens, an adult-use cannabis license applicant, which filed suit last month against the state’s proximity protection rules in the Albany County Supreme Court.


Anyone who wants to challenge New York’s regulations going forward is going to quote from Bryant’s decision, predicted Josh Bauchner, partner at Mandelbaum Barrett PC.


Those challenges will likely be limited to individual parts of the regulations, like the so-called “true party of interest” framework that places restrictions on who can own shares in a licensed cannabis business, or the “buffer zone” regulations that establish how close one dispensary can be to another dispensary, school, or church, said Cecilia Oyediran, chair of the New York State Bar Association’s Cannabis Law Section.


The likelihood of success is low for any lawsuit trying to throw out the regulations wholesale because the statute of limitations for challenging government actions has passed, added Oyediran, who’s also deputy director of Cornell’s Labor and Employment Law Program.


“I feel pretty confident we’re safe in that regard, but I do think we’ll see additional lawsuits, especially as the agency continues to make decisions that impact individual licensees or individual stakeholders or people who have an interest in the market in some respect,” Oyediran said. “I think we’ll see those come down the line.”

Investor Restrictions​

The true party of interest framework is going to be a focus going forward because they limit how cannabis businesses get financing, Bauchner said.


Some people looking to set up cannabis businesses have to seek out financing from third parties who often operate in other states and want to get a foothold in New York, but the state says that if an applicant is invested in the supply-side, like cultivating or processing, in another state, they can’t be a true party of interest in an adult-use retail dispensary in New York. Conversely, if an applicant owns a retail license in another state, they are allowed to invest in or own a retail or supply business in New York.


It’s an area that’s potentially “ripe for litigation,” according to Oyediran.


“People have sent OCM tons and tons of comments about that area, and there really hasn’t been any sort of demonstration from OCM that they, in developing the regulations, took those into consideration,” Oyediran said.

Buffer Zones​

New York’s process for approving dispensary locations is creating confusion and will be another area of litigation, according to Oyediran.


The state’s proximity protection rules, which establish a buffer zone around dispensaries, require a minimum of 1,000 feet to 2,000 feet between adult-use cannabis retail dispensaries, depending on the population of the municipality. It also requires dispensaries be at least 200 feet and 500 feet from churches and schools, respectively.


The issue, Oyediran said, is that the Office of Cannabis Management will sometimes put “a flag down” for one business that’s higher up in the review queue, which blocks off the area for other dispensaries.


“There have been cases where someone’s been on the map one day and off the next and someone else is there in their place,” Oyediran said. “I’ve been hearing a lot of complaints around that from folks and frustration.”


The buffer zone rule “has a lot of hair on it,” Bauchner said. “You have to be a certain distance from operators but until they’re operating they’re not an operator,” he added.

Going Forward​

The pendulum has swung far enough into over-regulation in New York that it’s opened the door for potential cannabis business owners to make claims they’re being singled out or treated differently from those in other industries, like alcohol, simply because they’re in the cannabis space, Schriever said. That’s irrational, he added, but one could carve out an equal protection argument.


“As long as those variances exist, people can find a way to challenge those regulations,” he added. “Anytime that happens, we tell clients the court’s job is to find a way to save the regulations and help local government.”


Oyediran said she hopes the Office of Cannabis Management starts to think about outlining a clear hearing process that allows people to bring their complaints about rules and regulations directly to the agency so that they don’t have to keep going through the court system.