Business of Cannabis: New York 2023 kicked off this morning in the New York Academy of Medicine, bringing together hundreds of the state’s key cannabis regulators, policy makers, financial institutions and leading businesses.
Taking place at a pivotal time for New York’s burgeoning cannabis industry, the day’s sessions are set to dive into the key issues facing the market, explore the unique social-equity-driven framework that it is being built upon, and discuss why it is expected to become one of the and most lucrative and exciting markets in the world.
Follow our live reporting of the event below.
Opening Remarks
The day kicked off with an address from The New York Cannabis Control Board’s Tremaine Wright, who reminded the audience that ‘equity must be the foundation’ of New York’s market.
With over 700 licences now issued, mostly to small family businesses, she added that New York had now created the most diverse cannabis market on the planet.
Despite the ‘ongoing challenges’ being posed by litigation, which have effectively stalled the CAURD programme, Ms Wright continued: “I’ve heard from 1000s of New Yorkers how much they’ve sacrificed to get to this point. And that’s why the Cannabis Control Board and the Office of Cannabis Management (OCM) are so committed to arming licensees and applicants with the tools they need to thrive, including providing business development and training programmes.
“I can’t stress enough that this is a historical moment in our state, and for our country. New York is building the most accessible and inclusive cannabis market in the world. And thanks to our regulations, we’ll make sure this industry is home to a diverse array of independent operators who represent the best in the Empire State.”
She concluded by addressing the room, stating that the ‘future of the legal cannabis industry is here’.
“And we in this room are actively shaping all that it is, and all that it can be. I invite you to join us building the future of cannabis here in New York.”
The State of the East Coast & New York Capital Markets
Next, Viridian Capital’s Scott Greiper took to the stage to discuss the state of the capital markets in New York.
He began by highlighting the fact that the ‘biggest, most dynamic city in the world’ has struggled to attract investment into cannabis.
“Investors chase returns, and returns are based on financial performance. So this can work, but it ultimately depends on the businesses.
“We’ve had a lot of deals in New York, but the money wasn’t coming into the market. We’ve been doing this for nine years. We’ve only been able to track about $35 million investment activity that’s coming to the state.”
He continued that 2019 was the high water mark for investment, M&A and public listings, but that the ‘amount of dealmaking has fallen off a cliff since 2020’.
Mr Grieper explained that in his eyes, ‘rescheduling is the most important factor in bringing in institutional investment as it removes the stigma’.
This is set to ‘change the game’, bringing in a lot of cash flow and will ‘meaningfully increase the value of every part’ of the industry’.
“This state should become the shining star of states in the US. There’s nothing unusual about states going through fits and starts. New York State needs more capital, and needs more M&A activity to scale.”
"We need to think about how we're using careers to create generational wealth. And the best way to do that is by ensuring that these jobs are not just part time employment that we're creating meaningful career tracks for people."@nmkateman
— Business of Cannabis (@BofC_Global) November 3, 2023
Investing in New York
Mr Greiper then joined a panel of investors, advisors and industry experts in a session looking to explore the investment opportunities in the state.
To open, the panel was asked what kind of investors are currently involved in the New York industry, to which the panel confirmed that it remains a ‘non-institutional capital market’, dominated by accounting offices, high net worth individuals and groups built for angel investors.
However, the group stipulated that the growth rate of the cannabis market, currently showing a 30% CAGR over the last five years, cannot be ignored by investors.
David Hess, President and Co-Founder of Hess Capital, told the room: “New York has been arguably the capital of cannabis consumption for decades. The community is here, the consumers are here, and the brands are here, and this is something we’re excited to get behind”.
Ask Me Anything with Jeffrey Hoffman
Next the audience had the opportunity to take part in an unscripted conversation with Cannabis Attorney Jeffrey Hoffman for an AMA session.
A number of questions addressed the unique difficulties New York faces in regards to its booming illicit market.
Mr Hoffman explained the only reason the illicit market has exploded is because ‘the city was doing absolutely nothing about it’, and that the practice has been effectively decriminalised.
“I think for the police, they are really concerned about violent crime, they don’t really want to be dealing with cannabis and they don’t have the resources to be able to address it. Unfortunately, that has just really allowed everything to explode.
“New York is the cannabis capital of the world. There’s been a billion dollar cannabis market here as long as I’ve been alive. It’s an illicit market, not a regulated market. If this type of thing was gonna happen anywhere this is where it would have happened
“If we really want to solve this, we need legally regulated cannabis dispensaries that delight their customers.”
He suggested that legal businesses should be given a tax break ‘until we figure this all out’. Addressing taxes in a later question, he said that the current system has ‘done real damage to the state and the country’, and is leading to siloing across the value chain.
“At this point in the game, we have so many issues with the illicit market, where we have so many issues with equity applicants that we want to give licences to, we want to give them the opportunity to thrive.”
“We’re not collecting huge amounts of tax revenue. Let’s give them that benefit of not having that extra burden to really get their businesses moving. And then once they’re established with their business then we bring in that tax scheme, and that money goes back to the communities”
Addressing the upcoming rescheduling, Mr Hoffman said that he’s not a big fan of its becoming a Schedule 3 substance, because it opens the door for Big Pharma companies to come in and dominate, and will create further paperwork for an already highly regulated sector.
#BUYLOCALNY
Business of Cannabis: New York collaborated with the Cannabis Association of New York (CANY) ahead of the event to launch the #BUYLOCALNY campaign, aimed at championing New York’s local cannabis growers.
In that vein, the next session featured Chair of CANY’s Cultivation Committee Joann Kudrewicz, and the CEO and Founder of Cannabis Now, Eugenio Garcia, who discussed the importance of cannabis growers showcases and local cultivators.
After receiving a licence early, Ms Kudrewicz explained that given New York is expected to be the largest market in the world, by now she expected she would be ‘flush’ and that the product she produced last year would be ‘long gone’ providing money in the bank to ‘fuel the continuation of this business’.
With only 26 outlets currently licensed to sell the products, ‘cultivators have no money’.
“Without the retail operations available for us cultivators, there’s just not enough opportunity for folks to sell, let alone thrive and make a living.”
She went on to explain how the cannabis growers showcases have been a lifeline for businesses like hers.
“So many of those farmers are not in dispensaries and don’t have the bandwidth to get their product on the shelves. If these showcases do not continue, I don’t know if we’ll be able to survive financially.
“This is the only means of revenue that we have. These showcases are meant to end on December 31 of this year.
“I’m in six dispensaries right now, and the only reason is because of the relationships I’ve built through these grower showcases.”
Regulatory Update from The Office of Cannabis Management
Following a short break, The Office for Cannabis Management’s Director John Kagia took to the stage to give one of the most highly anticipated sessions of the day.
In a regulatory update, Mr Kagia explained that the OCM is planning issue between 1000 and 1500 licences, in what is ‘going to be the single largest issuance of cannabis licences that have ever been attempted by anybody’.
“I want to make it clear that this is not the end of our expected issuance of licences in this market. We are starting big because we know that the demand is going to push the OCM to our limits.”
He added that applicants should not be disheartened if they ’do not get a licence as part of this round. This is just the beginning.’
“This is a lottery based system. It is not going to be done on a first come, first serve basis. There’s no utility in getting your submission in as early as possible. Take your time to do it right. Make sure you understand what you’re submitting and you’ve cleared all the documents before you get them in. All of the ones are going to be done after this window closes so just bear that in mind.”
My Kagia then joined the next panel, looking into how businesses can thrive in this burgeoning market.
Arana Hankin Biggers, CEO of Union Square Travel Agency, said that in order to succeed in this market, you need to have a thick skin, as you face constantly changing and ‘insurmountable hurdles from day one’.
Mr Kagia responded, stating that he ‘commends our operational licensees for how hard they have worked and the quality of the work they are doing’.
“Cannabis is tough, and there are foundational challenges that you face trying to build a cannabis business”.
“For prospective applicants, I cannot stress enough, prepare for hard work because this is a tough industry to operate in, even under the best of circumstances.”
The State’s enforcement efforts against businesses selling illegal cannabis products is no small feat. At Monday’s hearing, Sen. @LizKrueger asked about the process and partnerships behind the work.
Hear what OCM Executive staff had to say. pic.twitter.com/zpHZX2N0Ho
— NYS Office of Cannabis Management (@nys_cannabis) November 1, 2023
The panel then went on to praise the OCM for making the industry accessible to everyone, and for making it possible for non-profits to operate.
To criticisms surrounding the illicit market that continues to flourish, Mr Kagia said that while enforcement is absolutely a priority, more staff were needed, and enforcement alone cannot solve this issue.
“How much is it also incumbent upon the operators to educate their consumers. How do you get them in the door? How do they distinguish between the illicit shops and licensees? And I’d actually like to ask questions about the brands themselves.”
In response, the panel suggested that it is difficult to educate consumers who are used to and educated by the more mature illicit market, and called for the regulators to ‘allow me to compete against the illicit market the way they compete against me’.
Asked what in the regulations they would change if they could go back in time and start again, Mr Kagia explained that the litigation has been the factor most impacting their ability to move forward, but he’s not really sure how this could be guarded against.
“I know it has not necessarily been a smooth process for many reasons discussed but for the intent and the spirit with which the office has been working to do this in a way that can try and build the most equitable, sustainable, diverse enriched innovative market in the country, I stand behind this.”
To a round of applause, Ms Biggers suggested that the key thing she would change is enabling New York brands to promote themselves more openly in order to compete with national brands.
“There’s no way that I’m going to survive long term unless I’m able to be given opportunities to promote who they are and what their product is and why it’s better than others.”
SAFER Banking and Descheduling
Asked what the latest iteration of the SAFE Banking act hopes to achieve, Ryan Handleman explained that it will enable insurance, payments and social equity which the industry really needs, while keeping all the reporting requirements that the banks need.
“But it doesn’t overnight mean you can walk into a Bank of America and open an account, unfortunately we’re not there yet.”
As to whether the bill is likely to pass given the turbulence in the US congress over the past few weeks, Aaron Smith, CEO of the NCIA, said that Congress is obviously having trouble getting this through, and the US now has a speaker who is openly against the bill.
“But the silver lining, the good news is that in this new Congress actually the speaker doesn’t have the stranglehold that previous leadership positions have had so it’s a lot easier for any member of Congress to attach a provision, like say for banking, to another bill or move it as an amendment and get a vote on the House floor.”
The panel then stipulated that ‘luckily’, congress is not the only avenue for accomplishing federal cannabis policy change, referencing news that a federal rescheduling could soon be on the cards.
Mr Smith said he believes there is a ‘good chance that we’re going to see the DEA move to reschedule because there’s a lot of politics surrounding this.’
However, he added that he wants to ensure ‘people understand that rescheduling is not the end game. The end game is de-scheduling, removing it from the list of controlled substances and regulating it appropriately at the federal level.’
“Rescheduling really provides an avenue for Big Pharma to create pharmaceutical products and sell them through their channels and pharmacies.
“It doesn’t end putting people behind bars. It doesn’t end the war on drugs, and it simply is not enough. That’s the message we’re carrying,” he said, urging the industry not to rest on its laurels and assume the issue is solved if this goes through.
However, he suggested that this is likely to be about as far as the President is likely to go, adding that it was up to the industry to ensure this went progressed.
