NY Officials Probably No Longer Talking Trash About Other Adult-Use Cannabis States

It’s hard to screw up a social equity fund when you can barely get one off the ground

Anyone who has ever followed New York politics for more than five minutes could have guessed that the Empire State’s rollout of recreational cannabis was going to be as smooth as a ride down the FDR Drive in the back of an NYPD van wearing handcuffs.

In short, on one front, officials there tapped the Dormitory Authority (DASNY), the state’s “public finance and construction authority” which “finances, designs, and builds health and education infrastructure,” to assist on the retail side of adult-use cannabis. Specifically, they’re tasked with identifying and assisting with leases for locations fit for NY’s first Conditional Adult-Use Retail Dispensary (CAURD) operators.

That move has been questioned by good government and cannabis industry stakeholders alike, as was the decision to involve the DASNY in developing the state’s social equity program to help lift up hopeful business owners who “have been disproportionately targeted for cannabis infractions.” The agency was put in charge of fielding “proposals seeking a fund manager to sponsor and manage the $200 million fund.”

Next, officials got celebrities involved. Last June, Gov. Kathy Hochul announced that a “premier minority-led investment team” would “sponsor and manage the $200 million New York Social Equity Cannabis Investment Fund.” Their selection: Impact Ventures, led by NBA Hall of Famer Chris Webber and entrepreneur Lavetta Willis.

“New York’s thoughtful and inclusive approach to establishing equity in the cannabis space and creating opportunities for those affected by the War on Drugs is truly unparalleled,” Webber said in a press release at the time.

“I’m proud of DASNY’s role in a program will help build generational wealth that has been out of reach for far too many of our citizens, and that will succeed in creating social equity when so many other states’ programs have failed,” DASNY President and Cannabis Control Board member Reuben McDaniel told reporters.

Fast-forward to May 2023, and they’re singing a different tune. Syracuse.com reported today that “nearly a year later,” the “team composed of NBA Hall of Famer Chris Webber, entrepreneur Lavetta Willis, and executives from the financial services firm Siebert Williams Shank, have yet to raise any of the money for the fund.” “Partly as a result, industry stakeholders have become increasingly vocal with their criticism of DASNY, placing much of the blame for the state’s slow rollout of its cannabis marketplace at the authority’s feet.”

A letter sent from CAURD licensees to state regulators last week read in part: “We are consigned to a process that is monopolized by DASNY and the Fund by way of financial information, service providers, and access to real estate. … It appears as though we are once again asked to participate in a market that is fundamentally inequitable and counteractive to the purpose of the very initiative the government launched.”

Meanwhile, despite there being fewer than 10 adult-use dispensaries from Brooklyn to Buffalo, there are well over a thousand estimated stores selling unlicensed cannabis products in the state. If you’ve been there, you’ve seen it, bright signs and everything. But now it’s looking like the party’s over.

As of May, with 50 new adult-use licenses awarded earlier this month, there are 215 dispensaries planned for New York. To help those applicants succeed and push the blame for multiple disasters onto the illicit market, last week state legislators passed a law that will give their Office of Cannabis Management (“OCM”) and the Department of Taxation and Finance (“DTF”) unprecedented powers to search, close, and even fine illegal shops up to $20,000 a day.

“Under the new legislation, OCM and DTF can inspect any cannabis and smoke shop, licensed or not, without a warrant,” attorneys from the firm Prince Lobel, which has cannabis clients in Massachusetts and New York, explained in a public memo on the matter. “The OCM will have the power to seize untested cannabis products and cannabis from unlicensed businesses and seek court orders to close such entities down. The DTF will also be able to levy civil penalties on businesses that fail to pay required taxes and establish a new tax fraud crime for businesses that fail to collect or remit required cannabis taxes.”

Additionally, “Governor Kathy Hochul, who proposed the legislation in March, said the new enforcement tools would protect New Yorkers from illicit sales and allow for reinvestment of cannabis tax revenue in communities that have suffered from disproportionate cannabis enforcement.”

At this point, it’s unclear if there will be comparable repercussions for public officials or contractors who fail to deliver for those same communities.