Cannabusiness Advisory

New York is gearing up to become the 12^th US state to legalize recreational cannabis, and the 2^nd US state to do so by way of legislative measure (as opposed to voter initiative), as Gov. Andrew Cuomo vowed to legalize recreational cannabis in his 2020 State of the State address in early January. Gov. Cuomo followed up his vow as he introduced language legalizing recreational cannabis in the state’s budget legislation last week.

State legislators are also optimistic that a law regulating recreational cannabis will be enacted in the coming months. That is… if the Governor and the state legislature are able to agree to the details following the failure of similar efforts just last year… Contention remains on many fronts as the Governor and state legislators have been unable to agree, among other things, on the proper method to distribute revenue from taxing recreational cannabis. The legislature’s bill proposal seeks to dictate how much funding is allocated for drug treatment and traffic-safety programs. It also specifies that half of the new resources be invested into communities that were disproportionately impacted by laws that criminalize the possession and sale of drugs.

Such “social equity” provisions remain a topic of dispute as the parties disagree on the correct measures to ensure that disproportionately punished communities during the decades-long “war on drugs” would benefit from the newly legal industry. The spotlight on “social equity” provisions come as many believe that the efforts that have been adopted by a growing number of other states with social equity provisions are widely viewed as unsuccessful thus far. So far only six states have enacted social equity provisions within their recreational cannabis programs and several others are currently contemplating initiatives to tackle social equity issues. In a similar fashion, Gov. Cuomo has made social equity central to his plan, hoping to ensure social equity licensing opportunities are available such that social equity and social justice needs are met.

In addition, the Governor’s proposal would restrict sales to adults of 21 years and older and implement quality controls that will be used to ensure the safety and potency of products, including labeling, packaging, advertising, and testing. Of significance is Gov. Cuomo’s proposal to form an Office of Cannabis Management to (i) regulate medical, adult-use and hemp programs; (ii) ensure that social equity and social justice needs are met; (iii) work in concert with neighboring states; and (iv) create a cannabis and hemp research center at the State University of New York.

Both the legislature’s bill and the Governor’s proposal would create an Office of Cannabis Management. The difference is that the legislature’s proposed office would be governed by a board to which the legislature would appoint some members; while Gov. Cuomo’s plan would allow him to appoint all board members. Despite ongoing challenges, many hope that recreational cannabis will be a part of the state’s new budget that must be adopted by April 1^st. Primarily, the hope from Gov. Cuomo’s office is that legalizing recreational cannabis will help close the $6 billion budget gap that the state is facing. However, commentators have been quick to flag that the Governor’s projections don’t come near enough to close such gap as Gov. Cuomo has projected that recreational cannabis could generate $20 million in revenue in the fiscal year 2021, $63 million in the fiscal year 2022 and $188 million in the fiscal year 2025.