NY Medical Cannabis Operators on Defense After Rules Change

New York’s Registered Organizations – the 11 cannabis companies currently serving the medical marijuana community in the state – have come under fire after the Cannabis Control Board approved rules that will allow them to enter the adult-use market earlier than anticipated.

Originally, the ROs – which are primarily large multistate operators – were supposed to wait for three years before being allowed to participate in the adult-use market, but the slow launch of stores from the social justice applicants and the explosion of unlicensed stores prompted the CCB to shorten the timeline to quickly increase the number of licensed stores.

The medical marijuana operators will now be able to enter the market at the end of 2023.

The move was finalized at the CCB meeting earlier this month, where many in the New York cannabis community expressed anger because they expected to have a head start on the larger operations. But the ROs seemed dismayed at the vitriol aimed at them when medical providers are often lauded for their efforts at taking care of patients.

Is the call for cancellation warranted?

The current environment in New York has essentially pitted the adult-use side of cannabis against the medical providers.

The issue even arose during a panel discussion at the Green Market Report New York Cannabis Business Summit. The panel featured industry leaders, including:

Kellie Rivera of Columbia Care (now known as The Cannabis Company)
Frank Tice of RIV Capital/Etain Health
Jeremy Unruh of PharmaCann

Jordan Isenstadt, senior vice president of Marino PR, moderated the discussion, which offered an unfiltered view of the complex issues surrounding the ROs role in the state’s cannabis market.

Each of the 11 registered organizations is authorized to operate up to four medical dispensaries. However, only 38 of the potential 44 stores are operational.

The new regulations will permit ROs in good standing to open one adult-use store by year’s end and an additional two by 2024. With a limit of only three adult-use stores each, at most, the ROs would add 33 stores to the statewide market.

In addition to that, regulations stipulate that only two co-located stores can be situated south of Westchester County, limiting the potential to 22 dispensaries downstate. In contrast, an estimated 8,000 unlicensed stores are believed to operate in Manhattan alone, underscoring the immense consumer demand that the legal market must capture.

Despite these calls for delay from a vocal faction at the CCB meeting, Unruh emphasized during the panel discussion that the market needs to move forward, noting that “ROs have waited long enough,” with some operating in New York since 2016 – many with the belief that they would get first crack at the recreational licenses.

Wider market benefits

Adding the ROs to the adult-use market could also offer benefits for others already up and running, Tice said. When the ROs open their stores, shelf space for farmers and brands will quickly increase as well, especially since 50% of RO shelves must be dedicated to New York-grown cannabis.

Tice further elucidated that delaying the ROs’ entry would have implications for social equity licensees. The revenue generated by RO licensing fees, which amount to $5 million per RO per store, plays a crucial role in supporting social equity initiatives in the state.

It was also pointed out that while the ROs are portrayed as multimillion-dollar public companies, they are in fact operated as individual companies due to state regulations. They’ve spent millions to establish medical operations in the state to service a relatively small number of patients and have actually lost millions of dollars to date in the state.

No broad alliance

Etain took pains to emphatically clarify that it was not part of any of the lawsuits surrounding cannabis licensing in New York. The Cannabist Company is also not part of those lawsuits.

PharmaCann, however, is involved with the Coalition for Access to Regulated & Safe Cannabis lawsuit.

So while all of the companies can benefit from the rules change, they’re not all operating as a single cohort.

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