Several key people in key positions in the State of New York have signaled an increasing openness to the idea of legalizing adult use cannabis. The item has appeared on the state budget but for various reasons but never got beyond that status. Now as the pandemic has wrecked the state's economy, it's looking more and more like a reality.
"It was being considered even prior to the pandemic but now more than ever, as we're finding how cash strapped our state will be as we run out of revenues, I think it will absolutely be on the table for consideration in the next budget," Lieutenant Governor Kathy Hochul recently said. Governor Cuomo weighed in saying that the state will legalize marijuana "soon" to help with the economic recovery from the coronavirus pandemic. He was quoted as saying that "We need revenue and we're going to be searching the cupboards for revenue. And I think that is going to put marijuana over the top."
Canopy Growth (CGC) has a new video series hosted by David Culver called, "Under The Canopy," and Cuomo's Assistant Counsel Axel Bernabe appears on the show. He spoke about how bordering states that have legalized adult use cannabis are pushing for New York to consider making changes. According to Bernabe, the governor will be introducing legislation that will serve as a "model" for other states, prioritizing social equity and economic development.
"We're watching New Jersey closely. We've always been confident that we get to this before New Jersey, so if they pass the referendum they still have to have agreement between the governor and the Senate over there," he said, referring to necessary implementing legislation that will need to be approved if voters pass the ballot question. "We're working on this. We're going to reintroduce this in our budget in January. We think we can get it done by April 1."
Elliot Choi, counsel at Vicente Sederberg LLP's New York office said, "The size of the New York market cannot be overstated. The population of New York City alone is greater than that of Massachusetts and Rhode Island combined. New York already appears to be headed toward legalization, but passage of Public Question 1 in New Jersey would provide additional motivation for the Legislature to get it done in the upcoming session. There will likely be some form of coordination between the two states, or multiple states in the region, as Gov. Cuomo and other Northeast governors have previously indicated their intention to work together. This coordination could result in, among other things, New Jersey and New York imposing similar tax rates and/or launching their markets around the same time in order to deter customers from crossing state lines to make purchases."
New York has only issued 10 medical marijuana licenses and each of those holders can only open four locations. The publicly traded companies include Columbia Care (CCHWF) , Curaleaf (CURLF) , MedMen (MMNFF) , Acreage Holdings (ACRHF) and Vireo Health (VREOF) . The private companies include Citiva Medical, Etain, Fiorello Pharmaceuticals PharmaCann, and Valley Agriceuticals. At one point MedMen was planning on acquiring PharmaCann, but the deal was terminated. The state currently has 129,316 patients registered in what is considered a fairly restrictive program.
There has also been little discussion of increasing the number of licenses other than to hint that new legislation would be addressing social equity issues. Only one of the state's providers is a female-led company, Etain and none are considered to fall under a person of color category.
The potential of legal New York adult-use cannabis sales have been estimated at $1.5 billion a year by 2023, although depending on the levels of taxation, a well-embedded illegal market may continue to thrive. In December of 2019, Michigan became the tenth state in the U.S. to legalize adult-use cannabis. Less than a year in, it's already outpaced Nevada to become the fifth highest-grossing state for cannabis sales and is on track to surpass $1 billion in sales, according to data from Headset. The entire state of Michigan has 7.3 million adults over the age of 21, New York City alone has over 8 million. So, those estimates are looking very low indeed.
Despite salivating over potential tax revenue, April is still a pretty aggressive timeline for New York to develop and administer a legal cannabis program. Even the most enthusiastic states have generally needed a year to develop and launch such a plan. If New York wants to accomplish that, it will need to lean on those already licensed companies and they will be the big winners in the New Jersey/New York race to legalization.