Episode 22

NY Cannabis

NY Cannabis

In this episode of the Higher Enlightenment Podcast, our host Adam Kolbach interviews experts Mercedes Woods, Marissa Cortez, and Emily Seelman about New York’s new cannabis laws. They discuss the seemingly rushed March 31, 2021 legalization and some of the issues surrounding it. These include the earmarking of some of the tax revenue to social equity programs. They also cover competitive vs noncompetitive markets, which of these categories new York will fall into, and much more!   

SPEAKERS

Mercedes Woods, Emily Seelman, Marissa Cortes, Adam Kulbach

 

Adam Kulbach  00:15

Hello and welcome to the higher enlightenment podcast brought to you by higher yields cannabis consulting your seed to sale Cannabis Business Solutions team. My name is Adam. I’m your host today and part of the creative design team here at higher yield. today’s podcast deals with New York’s new cannabis laws with our experts, Emily Silman, Orissa, Cortez and Mercedes woods. So let’s get on with the show. Okay, well, we’ll start by having you guys introduce yourselves. Let’s start with Emily, could you tell us a little bit about yourself and what do you do?

 

Emily Seelman  00:54

Sure. My name is Emily Stillman. I’m a Senior Technical Writer here at higher yields. I oversee a team of writers and editors coming from a variety of backgrounds. I was a former civil litigator in Pennsylvania, when cannabis was making its start into the state or medical cannabis was and had the good fortune of supporting clients in their pursuit of some really competitive applications and licenses there. And we were fortunate enough to be one of the winners and made my way into the cannabis industry fully and and have been able to support clients in competitive application states since.

 

Adam Kulbach  01:32

Okay, thanks, Mercedes, could you introduce yourself?

 

Mercedes Woods  01:37

Hi, my name is Mercedes. I’ve been working with higher yields for a year now, as their compliance specialist and government relations coordinator. My past experience comes from working within the cannabis industry here in Colorado. I was a retail operations manager for a dispensary chain out here for a couple years. And then I also was a general manager and a sales and marketing director for an upcoming edible company about four years ago. And then I’ve been kind of doing compliance and government relations work here with higher yields. So for compliance, I focus a lot on the metric side of things, the laws, regulations, and new states and kind of helping clients navigate that area. And as for the Government Relations side of things, just keeping up on these new and emerging states, reaching out to governors, senators, local municipalities, to kind of see if there’s any way that we can help with these regulations, and get get these states up and going just staying abreast of of all that.

 

Adam Kulbach  02:49

Okay, thanks, Mercedes. Marissa, could you introduce yourself?

 

Marissa Cortes  02:55

Absolutely. My name is Marissa Cortez, and I am the director of compliance and General Manager here at higher yields consulting, have been in the cannabis space for about 10 years now and have done just about everything you can think of compliance wise, but also operationally as well. I’ve operated cultivation facilities, manufacturing facilities, as well as large retail chains across the state of Colorado. And since jumping on board with higher yields about three years ago, I’ve expanded from just the Colorado cannabis market to all over the country and even some parts of the world working with HMRC particularly focused on compliance or regulatory interpretation, standard operating procedures, helping facilities with inventory tracking startup, you name it.

 

Adam Kulbach  03:42

Okay, on to the first question. When did New York officially legalized adult use cannabis? And why did it seem to happen so quickly?

 

Mercedes Woods  03:51

On March 31 2021, the governor signed the bill into law to legalize recreational cannabis and New York wouldn’t call it quick. It’s been years in the making for New York. The biggest thing that halted their previous attempts were disagreements on what the tax revenue would be utilized for. According to The New York Times, the Democratic lawmakers, especially those who were not white, insisted that a large portion of the money be earmarked for communities where black and Latino people have been arrested on cannabis charges in disproportionate numbers and the governor wanted to retain more control over how that money was spent. New York is anticipated to be the largest most successful adult use cannabis market in the US. One of the few states that legalization is specifically tied to economic and racial equity. It was agreed upon that 40% of the state tax revenue generated from cannabis sales will go directly to communities that have been disproportionately impacted by the war on drugs in cannabis prohibition. People convict bit of the cannabis related offenses are no longer criminalized and will have their records automatically expunged. And so again, not happening, you know, quickly, they’ve been working on this for a really long time. It just, you know, seems like it it happened fast because they pass the law through quickly. But, you know, it’s been something they’ve been working on for quite some time now.

 

Adam Kulbach  05:26

Okay, what is the non competitive or competitive application state, and will New York be non competitive or competitive state.

 

Emily Seelman  05:36

So there is no definitive definition of what a non competitive versus competitive state is. But we define it internally through our experience in different states across the country, the the non competitive states are the ones where there may not be a cap on licenses, it may be very cheap to apply, the actual application fee is pretty cheap. The market is such that there’s not a lot of control by the state. So anybody can really apply, it may not take a lot of information to receive a license, where a competitive state may be a huge application project, it could take, you know, months to put together, you’re going up against potentially 1000s of other applicants, if not hundreds, and you have very small chances of winning. And a lot of people put a lot of time, effort and money into it. And they’re often located in the states where there’s a high potential for ROI. So a place like New York is going to be a huge revenue bolster for people who want to be in the industry or who are in the industry and wanting to expand into a new state. So I definitely believe that New York is going to be competitive, especially because this is an area where people have had their eye on for years, and I’ve just been waiting for this to happen. And now it’s finally occurring. So a lot of people are starting to get their teams ready. They’re already figuring out what they need to put together the best application. And, you know, if you’re interested in New York, and you haven’t started, you’re already behind.

 

Adam Kulbach  07:13

How does New York’s legislation Bill differ from other states?

 

Marissa Cortes  07:21

I think what stood out to me the most was that the MRT A is directly rooted in trying to fix the economic and racial injustice that has been greatly affecting over decades and decades, greatly affecting the disproportionately impacted communities within New York. And, you know, a lot of states it’s an afterthought, and you know, more and more that are coming online, like Illinois and whatnot. They’re trying, you know, they’re really trying for social and economic equity, when they’re developing these bills, or these regulations or laws. And, you know, there’s a lot of failure. So we should still, you know, we should Oh, my God, there’s a lot of failure in that. But the way that New York has done it, you know, seems like it might be a game changer, you know, they really took their time as Mercedes said, and although it kind of seems like Governor Cuomo was trying to pull a fast one, they’re going to allocate 40% of all state generated tax revenue from the cannabis industry, to these disproportionately impacted areas that I mentioned. And I think that that is a huge game changer. And then there’s a few other little just nuances that are slipped in there that I actually have not seen before. And that’s not to say that it’s not, you know, not happening in certain states. But just given how big New York is even, you know, New York City itself, New York City is the most densely populated city in the entire country. You know, it’s the population is higher than the entire population in the state of Colorado. And the fact that New Yorkers are actually allowed to smoke cannabis, anywhere that you can smoke, cigarettes, tobacco, anything like that. That’s very interesting to me. I have not seen that in any other bill. Again, not to say that it’s not legal in some states to do that. But just seeing how New York is set up to be the biggest market. It’s, it’s interesting that they slipped that in there.

 

Mercedes Woods  09:21

Yeah. And to add to what Marissa said, I also found it super interesting that they slipped that in there about, you know, smoking cannabis in public. The only thing I did see is that the local municipalities though, we’ll be able to create regulations that more strictly control smoking cannabis in public. So it’d be interesting to see, you know, what municipalities and what areas decide to go more strict with that that area or you know, which ones are going to leave it as is and kind of just, you know, not touch it. So it’s going to be interesting Need to see how that that rolls out. And it seems like you know, they are leaving a lot up to the localities in New York to make a lot of the decisions for you know, they have a whole year to decide if they’re going to even allow cannabis in, in their municipality or not. So just very, very interesting, very different from other states there.

 

Marissa Cortes  10:25

Yeah, and this might not be specific to, you know, the law that was passed, necessarily, but it’s just so different in that New York City is such a beast within New York, I mean, New York City in the metro accounts for 64% of the entire population in New York. And New York is a big state, you know, we’re not talking about Rhode Island or Delaware here. New York is a large state. So it’s going to be very interesting to see what New York City does. I mean, there’s no doubt it will be competitive. But that’s something that’s a bit different than we’ve seen in any other state, the fact that, yeah, New York, the state legalized it, but like, realistically, what New York City does is going to be the biggest factor in all this. So I’m very interested to see how that goes down.

 

Emily Seelman  11:13

That’s a great point, Marissa, especially when you consider minimum setback requirements and things like that, where you’ve got everything so densely populated, within New York City, everything’s almost on top of each other. And you’ve got these minimum distance requirements, you know, you can’t have a retail facility within a certain amount, a certain amount of feet, from a church or daycare, or a school or something like that. So these, these municipalities and cities can enact their own requirements around that. And it’ll be interesting to see how that plays out in a city like New York City.

 

Marissa Cortes  11:51

Absolutely. And something interesting that I also read that is much different than honestly, any other state that I’ve seen so far. Again, especially one that’s set to be as large of a market as New York, is the fact that they are not allowing people to be vertically integrated. So if you are already a vertically integrated existing medical business, I believe there’s 40 of them right now. You can, you can remain vertically integrated. But any new adult use licensees that are awarded a license, they can only have one license, they are really going to try to not allow certain large cannabis entities, multi state operators to really corner the New York market. And that is very intriguing, because again, I have yet to see that in any other state.

 

Emily Seelman  12:38

That’s really interesting. You could kind of see the pros and cons of that the pro been exactly like you said, Mercer. They’re not allowing. It really doesn’t. It prohibits I guess, and for lack of better words, multi state operators from cornering the market, like you said, but then there’s the argument of well, there’s already people who have established their places vertically integrated operators in the state. So do the individuals if this is so focused on female owned minority owned disadvantaged farmers, things like that? Are they able to compete as well as the existing vertically integrate integrated operators? So that’ll be a really interesting thing to see play out? And if there’s any pushback on that?

 

Marissa Cortes  13:23

Yeah, excellent point, Emily. That is an excellent point will be a lot of interesting. It’s, you know, every the bill was passed, or the law was passed. But there’s still so much that needs to play out. It’s going to be very interesting over the next six to 12 months to see what happens. So true.

 

Adam Kulbach  13:43

More should expungement for cannabis crimes be included in cannabis bills?

 

Mercedes Woods  13:48

Well, there’s a lot of evidence out there that people of color have been disproportionately arrested for cannabis related crimes, even small possessions of cannabis, while at the same time. Other existing surveys that have been taken have found that people of color and white people smoke cannabis at the same amount in the same rate. So there shouldn’t be this huge, disproportionate amount of arrest. And for New York specifically. There was an analysis in 2021 for the year 2020, that of New York’s five bureaus in New York City, and it reported that people of color compromised, comprised sorry, comprised of 94% of those arrested, so and then another 2020 analysis, and Albany, New York for July 9 through 2009. teens through July 9 2020, reported that 97% of the time those arrested or ticketed were black and only four white people were charged with cannabis offenses during the time period. Again, despite that nationwide evidence that people of color and white people use cannabis at roughly the same rate. And then another analysis in 2018 found that Hispanic people across New York had been arrested on low level cannabis charges at five times the rate of white people in recent years. So that’s a lot of people that have been locked up for cannabis possession and small amounts of cannabis possession. And now, here we are with, you know, over half the country, legalized in some form. And we have to figure out a way to correct that we, you know, we’ve decided, as a society that, you know, cannabis isn’t evil, cannabis isn’t bad, and we are making profits off of it, we’re helping the economies from COVID recover, and we’re healthy, you know, cannabis was considered an essential business in a lot of states, which is huge. And so to go from, you know, disproportionately locking people up for small possession of cannabis to using cannabis to recover the economy, and deeming essential, is a huge jump, to make, as you know, as a country. And so it’s super important that, you know, we expunge these, these crimes, and that they’re built into these cannabis bills when people legalize. Because a lot of states, if you are have a criminal record, or you are, you know, arrested for anything, you’re not allowed to enter the cannabis industry, they do background checks, they do all of these things on your application, and you’ll get denied. And so we have to expunge them so that these people have the opportunity to enter this market as well. And to be able to profit from it. And if we don’t do expunge that, then they’re gonna get denied because of their criminal background. So it really just goes, you know, goes to show how important these expungements are to people. And not even just if they want to get into the cannabis industry, just to get jobs in general, it’s still gonna show up on a background check for any job that these people want to do. While at the same time down the street from that job is a cannabis dispensary where people are legally buying it. So I think it’s very important. And every state should really focus on including that into their bills when they legalized.

 

Emily Seelman  18:01

And I think, Mercedes, you made a good point about just being able to enter into the industry. One of the bitter ironies that a lot of people are going to realize is that they have a felony on their record for small amount of cannabis possession. And then we see this entire industry open up where people are making millions off of it. And they’re kind of looking up and saying, Wait, what the heck, I’m barred from being part of this industry. And it’s completely legal, the state recognizes that, you know, they can make a profit off of it, it’s it’s not as bad as everyone thought it was. And they’re still stuck behind this, this wall of a felony, and it haunts them. So not only is expungement necessary, but also having provisions in these, these cannabis application frameworks that say, if you have a small possession charge, if you are arrested for small possession, you are permitted to apply. And you may get extra points for it, you may actually score higher because of it. And it’s the state’s way of basically saying, Hey, we know we screwed up for generation, this is a generational issue, then we you know, we look up as as a society and say, Well, why are these people not advancing in society? And we if we don’t take the time to step back and say, it’s because of the laws that are on the books, and what we’ve done for generations, and the generational consequences that ripple out from that, then we’ll never improve that area in society, as far as wealth creation, generational build, you know, building up generations of people to actually have a meaningful place in society and in this industry, so it’s so vitally important to be able to look back and and say, What can we correct now in our laws that will directly affect to the best of our ability, what we have done to harm this group of people. And like Mercedes said, black white, I mean, every race has been impacted by the But there are disproportionately impacted races, and in groups of people, particularly in zip code areas that have been harmed by this in a worse way than other groups. So we it’s, it’s the responsibility of the state to then include them in these opportunities that are coming around with the legalization of cannabis.

 

Mercedes Woods  20:21

Yeah, that’s, that’s a great point, Emily. And just to bounce off of that, I mean, it’d be great if as an industry as a whole, we could look back at all of this, that we’ve done all this legalization all of this hard work, from all the people that started with just trying to get it medical. And I think that if we can look back and say, you know, cannabis helped create social mobility. I think that that would be really important and needs to happen. And we talk about it all the time. As a society right now of how do we, you know, create more social mobility? How do we do this? What What can we do? And I think cannabis is a good place for that I think cannabis and cannabis laws that are created could really help with social mobility as an industry, I think that’s so important.

 

Adam Kulbach  21:15

Okay, so what does cannabis legalization mean for the culture of New York.

 

Mercedes Woods  21:22

So as as we just said, or, as Marissa talked about, previously, being able to smoke in public, that’s gonna be a huge cultural change. In New York, and you know, depending on which localities decide to keep to keep that or not. Also, you know, they are allowing for hotels to allow cannabis if they’d like, so you’re kind of going to see a whole different side of New York, I think pop up of, you know, some of these hotels, they’ll calling themselves 420 friendly, is normally what happens. So you’ll see that side of things, which will just be a huge, a huge shift. I also think, you know, obviously, there’s going to be some relief among the minority communities of knowing that this isn’t going to get them arrested anymore, but this isn’t something that can potentially affect them for the rest of their lives. So that cultural shift, I think is going to be be really big. Um, also just, you know, the idea of there being a bunch of dispensaries possibly walking down, you know, in New York City, and there’s dispensaries that people are going into, and it’s already a high tourism place, and that’s only going to bring more tourists, you know, internationally, I believe. So, I think that there’s going to be, it’s gonna be very different, to have legalization in New York, in New York City, particularly, than a lot of other places, I think that there’s, there’s definitely going to be a large cultural shift there. That will be interesting to kind of see what that looks like for them.

 

Marissa Cortes  23:21

You know, New York was hit hard, as we all know, by COVID. And they are still, you know, struggling with that. And I, you know, being from the East Coast, I spent a lot of time in New York City growing up. And throughout my early adult life before I moved to Denver, I mean, small business owners, restaurant owners, that they thrive on that tourism, they thrive on being able to operate, you know, even just without restrictions, like Newark had has had for the last year or more in place because of COVID. So not only will this help, not only will this legalization help with bringing more tourists tourism back to New York City, helping out those small business owners that are struggling right now, you know, restaurants, I can’t think of the percentage off the top of my head, but restaurants make a large percentage of of the businesses that are located in New York City. So I think that that is going to be an absolute game changer. And it’s going to help New York City so incredibly much with bouncing back and New York to Atlanta as a whole. And with that, even it provides new opportunities because many of these small business owners didn’t make it. While there are a lot still hanging on, they did not make it and some of the parameters that New York has set up in this MRTA has, or will hopefully, help and work in favor of the small business owners like I had mentioned previously about not allowing for people to own more than one license or license type. You know that in itself will hopefully open up the market to these small business owners and provide them an opportunity to bounce back.

 

Adam Kulbach  24:56

What challenges do you see coming forward with applying for Canada? is licensed in New York.

 

Marissa Cortes  25:04

Real Estate real estate real estate? I’ll Emily take that one because you did mention earlier, Emily. But that is, you know, top of mind that I can’t stop thinking about, it’s going to be a beast to get in there.

 

Emily Seelman  25:17

Yeah, I think you’re right Mercer that it like we were saying earlier, it everything is so close to each other in some of the more highly populated cities where people really want to locate in. And and it’s going to be a struggle to find a property that’s available property that’s affordable, that you know, these landlords or property owners aren’t going to charge a quote unquote green tax where they’re going to up charge for everything that costs a normal price, they’re gonna, you know, multiply that out, because they, they think you’re the big bad cannabis operator coming in, and you’re gonna make a ton of money, which is far from the truth in the first year, at least in operations. And so they’ll try to charge you that. So it’s going to be a challenge for people to find real estate. Absolutely. And to I would say, there’s just the the general challenges that come with competitive application processes, these things are insanely large projects, they take a lot of work, a lot of people we’ve seen make the really big mistake of trying to apply on their own, and then they’re in over their head, they come to us, you know, a couple weeks out from the deadline, and they say, Can you help me scrape this together, and they don’t have even a quarter of what they need. And it’s almost impossible to overcome that hurdle to become a competitive applicant, they may be able to submit on time, but they certainly won’t stand out. And you’re talking about hundreds, if not 1000s of applications of for these licenses, especially in New York, which would be my prediction based on some other competitive states that are similarly similarly situated. So you’ve got when I say that typical application challenges, I mean, you have to stand out. So when you’re submitting your operating plans, when you’re submitting your team structure, your community impact plans, your your security plans, all of those things are, can come down to one or two points between a winner and a loser of a license. And then you’ve got the added challenge of multi state operators coming in that Marissa kind of touched on earlier, who have got the the years of experience, the acumen and the understanding of competitive application process is under their belt. So they’re, they’re going to come in there and they’re your competition. So I like to see it as a whitewater raft. And I think I’ve said this before, probably because it’s my favorite analogy in this industry, you you can get in a raft, and you could try to get down that rapid, or those rapids in on your own. You’ve never done it before, you may not survive, but you can give it a shot. Or you can you can give it your best effort, get someone who’s been down the rapids before that understands all the pitfalls that can help you avoid the challenges and get you a much higher chance of getting to the bottom of life, there’s still not you know, you still may not make it to the bottom, but your chances have increased exponentially. So the pros have already started preparing to overcome the challenges that come with application preparation. And the rookies are the ones who wait are the ones who tried to do it on their own, or the ones who try to cut corners. So my recommendation is acknowledging that this is going to be one of the most you know, full time challenging things you do when you’re applying for one of these. And if you see it in that lens, then you will apply the right time to it, the right resources to it, and the right team and consultants to it.

 

Mercedes Woods  28:38

I also think what we might see in New York, as far as licensing, and it goes to the real estate point that both Marisa and Emily have touched on is there’s a lot of real estate investors in New York, and that is what they do. They buy up real estate they sell it. And I think what we’re gonna see, which will be different, is I think that a lot of these real estate investors are going to buy a property and apply for licenses. And they’re not going to use those licenses, they’re going to sell them. And it’s going to be costly. So you’re also going to go up against these very large real estate companies that have their own team as well behind them that are going to apply for these licenses. So not only are you going to be competing against, you know, these multi state operators, you’re going to be competing against well connected real estate investors in New York as well. And I think that’s going to be very different from other states. Because the real estate in in New York is just so big and so huge and those people are going to know what properties are best faster than anyone else. So I think that that’s going to throw this licensing people wanting to actually run a store through a loop.

 

Marissa Cortes  30:10

New York has committed to allocating 50% of their licenses, the available cannabis business licenses to social equity applicants. And we have yet to see that in any other state. And ladies, correct me if I’m wrong here. But I think that’s huge. And I think that with what Mercedes had just mentioned, I’m hoping that some of that can be avoided, at least by taking away 50% of those licenses. So those wealthy you know, real estate investors and Wall Street types aren’t able to corner the market like that, and just completely get us back to square one, when this disproportionately impacted mess. That is that has been the war on drugs.

 

Mercedes Woods  30:51

Yeah, and I think I think that’s a great point, Marissa, and I think it’s all gonna depend on how well New York does their social equity, as we’ve all seen time and time again, and other states. If they don’t do it, right, then it’s not effective. And so they really have to get this on, right. They have to make sure it’s true social equity, that they’re not, you know, taking a token social equity person and putting them on their team and giving them 10% of ownership in order to meet the requirements that are needed, and still buying up that 50% that they’ve allocated. So I mean, I think they’re gonna do it, right. Just because, you know, is such a huge focus on it. And I think that’s the main reason only reason this bill was able to pass was because of those provisions with social equity. But, you know, we saw that in Illinois to where that was the main reason they passed, the governor ran on that everything. And and that didn’t turn out, turn out well. And they didn’t end up doing it. Right. And they’re in litigation for it. So I think that, you know, it’s going to be really, really important for New York to get this right, in order to make sure that some of these these issues that could happen, you know, don’t that we don’t see everyone buying it up. And we’re back to square one, like Marissa said,

 

Adam Kulbach  32:16

what are the most significant benefits to winning a license in New York?

 

Marissa Cortes  32:22

The potential to turn a profit here is just so much higher than a lot of these other states that have legalized.

 

Mercedes Woods  32:32

It’s predicted to be a $4.2 billion industry, which would be, you know, the nation’s largest market for cannabis.

 

Adam Kulbach  32:43

Okay, last question. When will the application rounds open? And why should local New Yorkers work with higher yields consulting,

 

Emily Seelman  32:51

so we’re expecting that the application round will open up next year. But in our experience, the prep work should start now. So like I said, Men mentioned earlier, the pros are already starting the pros have already long started before this, the MRTA was even signed, right? So you’ve got to consider what your competition is doing. And what we like to do. And something that I believe makes us stand out is that we know what it takes to prepare yourself in advance of a round opening up. So similar to what I was saying earlier about the rapids and being prepared in that way. You need to figure out where your strengths and your weaknesses are now, so that you are fully prepared for when the round opens. And as time progresses, properties are going to start getting swept up. Things are going to start going out the window that you need for your application. What types of letters of support do you need? What what property do you need? Who do you need on your team that’s going to bolster that application, all of these things that people think they can do when an application window, and you may be able to get things completed and check all the boxes you need to within that window, but you need to stand out and your thought process has to be how will I stand out from my competition? And that’s where we you know, we provide those services for our clients to better enable them to do that.

 

Adam Kulbach  34:18

Okay, before we wrap things up, does anybody have any final thoughts?

 

Marissa Cortes  34:24

York legalizing adult use cannabis has made a ripple across the United States. And I mean, quite possibly the world for all I know, in a way that not many states have or any, possibly any states have in the United States thus far. And so it’s going to be a very interesting 12 months, there’s going to be a lot that happens a lot that comes out as they’re starting to put together the application framework and timelines, deadlines and whatnot. So this will probably be part one of multiple podcasts we will be doing on New York because it’s just a beast. You know, as I mentioned earlier, the population in New York City alone is almost double the population in Colorado as a whole. So York is definitely in the spotlight and we are anxiously awaiting any new information that comes out.

 

Adam Kulbach  35:16

Okay, I think that’s about all the time we have for today. I’d like to thank you guys very much for being on the podcast and in sharing your wisdom. Thank you. We’d like to thank everybody for tuning in today and listening to our podcast. For information on how to follow the higher enlightenment podcast. Please be sure to check out the description below. You’ll receive all the latest and greatest podcasts news and announcements. Also let you know when we release new episodes. If you’d like to be a guest on the higher enlightenment podcasts, or have ideas about upcoming episodes, please be sure to check out the description below. For information about sponsorship or advertising on the higher enlightenment podcast, please call us at 844 High yield. That’s 844 hai ye i e LD or visit our website at higher yields consulting.com Thanks, have a great day and we’ll talk to you soon