Big weed is on the brink of a multi-million dollar surge into New York’s cannabis market. New York promised to put independent businesses at the heart of the legal pot industry.
In early 2017, there might not have been a flashier entrepreneur in the legal cannabis industry than Adam Bierman. In Los Angeles, his company, MedMen, had become known for its glossy red storefronts with sleek, minimalist interiors that drew comparisons to Apple Stores and the eyes of investors.
California had already legalized weed, allowing his company to expand from the medical marijuana market, and he proceeded to dot L.A.s’ skyline with red billboards promoting his brand. New York was years behind California on legalization, but it had an allure. He pursued the acquisition of one of the state’s five authorized medical marijuana companies in anticipation of the day New York would follow what looked like an inevitable path to full legalization.
“It was a future investment,” said Bierman. “Manhattan is a jewel — maybe the jewel in North America — for building a brand around the world.”
In 2018, MedMen opened one of its signature retail stores, for medical users only, on Fifth Avenue, envisioning the day it would sell to the broad mix of New Yorkers and tourists passing by.
While corporate controversy led to Bierman’s exit from the business a few years ago, many investors and cannabis entrepreneurs have flocked to New York in his stead, bitten by the same bug. Today, there are 11 medical marijuana companies licensed in the state. Each has invested millions in its operations, all with the gleam of the 2021 legalization in their eyes.
Now, their moment has come.
If, as expected, the state’s cannabis regulatory agency passes on Tuesday a proposed set of permanent rules for the industry, any of the 11 medical companies that pony up a $5 million down payment will be able to open one of their medical stores to sell cannabis products to adults over 21 by the end of the year — a couple of years earlier than previously proposed.
They’ll be allowed to cultivate up to 100,000-square-feet of weed in indoor environments not permitted for other growers, allowing them five harvests a year, compared to one for the struggling individual farmers currently licensed by the state to grow outdoors only.
And they’ll be the only state licensees allowed to operate full farm-to-processor-to-retail operations. State officials prohibited this type of vertical integration in the law legalizing cannabis so that small operators entering the market had a better chance to succeed against deep-pocketed corporate players.
For those who have tracked the state’s legalization process, the Big Weed multi-million entry may come as a surprise. When legalization took place in March 2021, the law’s progressive character assumed center stage. The state granted the first retail licenses to people who had been locked up on weed-related charges and their relatives. Upstate farmers who had lost their shirts when the market for hemp collapsed got the chance to grow the state’s first legal crops. To promote sustainability, the state required them to plant outdoors instead of in greenhouses, which trap globe-warming gasses.
“No other state in the country prioritized the people who were most negatively impacted more than New York,” state Assembly majority leader Crystal Peoples-Stokes (D-Buffalo), who co-sponsored the legislation, told THE CITY in an interview.
Now, with the state having failed to roll out more than a handful of weed stores, a court injunction halting the opening of stores owned by people affected by drug laws, and licensed growers sitting on hundreds of thousands of pounds of rotting product because of the dearth of authorized retailers, the companies are about to cash in on a market they have campaigned to reach for years through millions of dollars of lobbying in Albany.
Matt Darin, the CEO of Curaleaf, a $3 billion cannabis corporation, said that getting into the wider adult-use business from the medical niche was always the goal.
“The expectation and the precedent has been in literally every other market that if you were a medical operator in good standing that you would have an opportunity to participate in the adult-use market if and when that occurred,” he said in an interview with THE CITY.
New York’s price of admission for the companies isn’t cheap: the $5 million down payment goes toward a full payment of $20 million. That would be a potential boon to the Office of Cannabis Management (OCM) whose delays have undone projections about how much tax revenue would be pouring into the state and city.
But the prospect of a wash of money righting a troubled system comes with big questions, arising out of the entwined histories of the medical companies and the state’s sputtering program.
Will a rush of corporate money, branding, and potential dominance of the wholesale market crush the prospects of the small farmers and justice-involved individuals the state has trumpeted as its priority? Or will the Big Weed plunge into retail sales not be as enormous a splash as many cannabis licensees fear?
Some of the companies are on the verge of collapse. MedMen, for example, is deep in debt and its stock is selling at two cents a share. Other companies are wary of the state’s record of missing every deadline set for opening stores and helping licensees find financing, and may be looking for opportunities elsewhere.
But major investment at some scale is around the corner. Tice, vice president of New York’s newest medical cannabis provider, RIV Capital, said his company is all in. “We’ve invested heavily in New York,” he said. “This is the market we’re excited about.”
Damian Cornwall, who qualified for one of the early licenses and operates a legal store in Binghamton, contemplated the imminent competition glumly. “It’s just the perfect storm,” he said in an interview with THE CITY. “The state had such an awesome plan and it’s just unfortunate. We could just not bring it home.”
‘My Name is Amanda’
New York’s path to legalizing cannabis started back in 2014, when Gov. Andrew Cuomo signed legislation authorizing the use of medical marijuana for patients with debilitating or life-threatening conditions. Next to him, a 10-year-old girl in a sparkly dress who suffered from epilepsy introduced herself to the crowd: “Hi, my name is Amanda. I want to be a normal girl and I want my seizures to stop.”
The Department of Health chose five companies out of 43 applicants to supply the state’s first patients, many of whom had been diagnosed with cancer or AIDS. Companies vying for the first licenses had to show they had the capacity to grow the plant, manufacture products like oils or edibles, and then sell it at retail locations in different parts of the state — a model some other states used, too.
Building out vertical operations required a lot of capital upfront to serve a market of only 150,000 at its peak — but a potential market of 16 million adults loomed on the horizon with full legalization.
Among the five companies tapped by the state was PalliaTech. A few years old, it had medical licenses in other states and a strong base of investors. New York power broker Frank Carone, who went on to become Mayor Eric Adams’ chief of staff for a year, sat on the company’s board and served as its government relations attorney. In its application, the company stated it had locked down the lease for a former Pfizer facility in Vermont for manufacturing, as well as locations for four dispensaries around the state.
Some of the early players, like PalliaTech, as well as one called PharmaCann, had already obtained medical licenses in Illinois, the first state to launch a competitive application process for the medical marijuana companies. New York sought a more regulated medical program than states like California, where consumers could easily buy a medical card and obtain weed openly in shops.
“Illinois was really trying to move away from that West Coast imagery of medical cannabis being some dude on Venice Beach,” said Jeremy Unruh, the Vice President of Regulatory Affairs for PharmaCann. The state awarded licenses to well-capitalized companies that didn’t necessarily have cannabis experience, rather than operators from California or Colorado who were already in the industry, he said.
“We were able to take that intellectual property that we developed for the Illinois process and immediately go apply in New York,” Unruh added. PharmaCann had the highest score of the 43 applicants. But early entrants faced one of the most tightly regulated medical marijuana programs in the country. Not many patients were eligible and operators were banned from selling cannabis to patients in a smokeable form.
Legalization still looked far off in those days. In early 2017, Cuomo said he was against adult-use cannabis, but that started to shift. When Cynthia Nixon challenged him in the Democratic primary the following year, she made legalizing and taxing pot one of her top policy issues, and polls showed more than 60% of New Yorkers agreed with her. So did a state Health Department report Cuomo requested that laid the groundwork for legalization and made the medical licenses all the more valuable.
MedMen acquired one of the companies with a medical license, and corporate cannabis operators were on the hunt for others. One licensee sold for $18 million in early 2018, before the Health Department report. Another sold for $60 million the following year.
Some of the original companies retained their ownership. PalliaTech expanded its presence in other states, changed its name to Curaleaf, and went public in 2018. It’s now the nation’s largest cannabis company, operating in 19 states. Columbia Care, another of the founding five, also expanded in other states and then went public in 2019.
In New York, patients like Amanda, the young girl in the sparkly dress, were not the drivers of corporate value. The potential to get into the general adult market, enhanced by millions of tourists who visit each year, was.
“We always considered that states were not likely to regress from medical back to nothing, but more likely to progress from medical to adult use, said Unruh. Medical marijuana was the “groundwork for our inclusion in any transition to adult use.”
A Plan to Dominate
As New York’s legalization approached in early 2021, the national big weed companies were at their peak. Across the country people stuck at home during the pandemic, flush with stimulus checks, were buying more cannabis than ever. Curaleaf reported revenues of more than $250 million in the first quarter of that year. Green Thumb Industries reported nearly $200 million. Columbia Care reported more than $90 million.
The three companies were among the eight members of the New York Medical Cannabis Association, a trade group that lobbies on their behalf. In 2019 and 2020, the medical companies’ lobbyists and the trade group together spent more than $2 million on outside firms to campaign for legalization. In March of 2021, on the eve of legalization, a consulting report prepared for the association predicted New York’s market could be worth $4.6 billion by 2023.
The report pushed for the state to allow medical companies into the adult-use market at the onset of legalization. That move would challenge the illegal market by offering a lower-priced product that would squeeze out competitors. And it could potentially earn the state nearly a billion dollars in tax revenue while creating 10,000 jobs over five years, the report estimated.
It laid out an opportunity to dominate New York’s market. Within a few years, it estimated, the companies could capture 40% of the total wholesale market with expanded cultivation capacity. An earlier entry to the market would allow “for operations to commence sooner, providing more retail outlets and wholesale supply, and driving prices down faster,” said the report.
Sen. Liz Krueger (D-Manhattan), a longtime proponent of legalization and a sponsor of the cannabis law, said the report was just one way the medical companies were aggressive in pushing into the state as lawmakers had a social justice agenda in mind.
“They’ve said it and written it up in different internal reports — ‘We’re gonna kill your model and you’re gonna have nowhere to go but to us,’” Krueger told THE CITY. “We have an entire national industry of companies who want us to fail.”
When legalization was enacted on March 31, 2021, the big companies found out they would have to wait before entering. The law emphasized social equity goals. “Existing laws have been ineffective in reducing or curbing marihuana use and have instead resulted in devastating collateral consequences including mass incarceration and other complex generational trauma,” the bill stated.
To address those harms, the law outlined how 50% of licenses should go to “social equity” applicants, including people disproportionately affected by the war on drugs, minority and women-owned businesses, distressed farmers and service-disabled veterans. The state aimed to provide low-interest loans to support social equity applicants establish legal businesses. Tax revenue from cannabis sales would go toward items like public education and community reinvestment grants.
It offered the licensed medical companies two paths into the adult use market. They could either directly supply the wholesale market or, for a fee, convert up to three of their eight storefronts for adult use as well as supply wholesale.
Peoples-Stokes said she told lobbyists for the Big Weed companies that their day would come. “Let’s try to make this work first and then you can have whatever you want,” she recalled telling them. “There’s a space for you in this industry in New York, I just need you to be patient.”
Several of the companies began expanding their production capacity immediately in anticipation of finally accessing the state’s millions of potential consumers.
The day after the law was signed, Columbia Care hired a lawyer to lobby officials in Riverhead, L.I. Within the month, the company announced it was buying a 34-acre cultivation site there with 740,000 square feet of greenhouse space.
Green Thumb Industries, valued at $5 billion at the time, applied for financial help from Orange County in the Hudson Valley to develop a cultivation and manufacturing site at the location of a former prison. Weeks after the law passed, local officials approved tax breaks for the company that were worth an estimated $28 million over 15 years.
A third company, Vireo Health, said it was considering exercising the option to buy a 95-acre plot of land next door to its existing facility in Fulton County, northwest of Albany. By June, the CEO told a local news outlet that even though the regulations hadn’t been finalized it had enough confidence in the market to move forward, and started planning a major expansion.
“New York is the most substantial opportunity for Vireo Health,” the CEO, Dr. Kyle Kingsley, said in a video presentation to investors posted online.
Pipe Dreams
When the law passed, the excitement extended far beyond Big Weed. Farmers who had gone broke growing hemp that they had begun to grow with the state’s encouragement, “legacy” growers, or people who had been supplying the illegal market for years, and people who had been incarcerated on drug charges all wanted a chance to make money in legal cannabis.
Their first invitation came in early 2022, when legislators passed a bill to create a temporary cultivator license for farmers who had previously grown hemp. The newly established Office of Cannabis Management was still working on regulations for the entire adult-use program. In the meantime, the temporary licenses would ensure that there would be a supply of cannabis ready to go when stores opened.
It was a boon for lots of hard-pressed farmers who had seen prices plummet from a high of around $40 a pound, down to as low as $1 a pound when the hemp market became oversaturated.
Hemp farmers already had state licenses that required their backgrounding and vetting. That, plus the imminent bankruptcy of many of them, became a double-barreled plus for the newly created Office of Cannabis Management, which was committed to social and economic justice goals but not staffed up for extensive application reviews.
“The most economic and progressive solution involved these predominantly distressed farmers who had the infrastructure, who had demonstrated their ability to be compliant,” the agency’s Chief Equity Officer, Damain Fagan, told THE CITY. He called the quick provision of conditional licenses to hemp farmers “a slam dunk to get the supply chain going.”
Unruh, the Vice President of PharmaCann, said his company wasn’t surprised by the development. “We knew how important it was for the state to have a couple social equity wins and to put some points on the board when it came to small, distressed farmers.” Unhruh added, “We didn’t view it as terribly threatening.”
Others doubted the viability of the plan. When the bill passed and reached Gov. Kathy Hochul’s desk, a senior administration official who was not authorized to speak publicly, said he felt there was no way that enough authorized stores could open quickly enough to absorb all the weed that was about to dot the state’s farmscape.
“We’re going to let these guys grow weed?” he recalled saying, mindful of the lengthy process of approving retail licenses, locating leasable storefronts, securing financing, and building out shops. “They’re not going to be ready,” he said.
Hochul signed the bill.
Katherine Miller, a farmer in Saratoga Springs, got her application together quickly and was in the first round of 50 cultivators licensed by the cannabis management office last April.
“After a bad two years, the opportunity to potentially make some money with cannabis seemed like an absolute dream,” Miller told THE CITY. Like others, she had lost money growing hemp when prices crashed.
The new, two-year cultivator license largely allowed farmers to grow only outdoors, which is far less energy intensive than using indoor greenhouses that require lots of artificial lights. But it’s also more challenging because of variables in sunlight and weather conditions, which typically allow only one harvest a year.
Still, Miller liked the idea of growing the crop as naturally as possible. “I was really excited about a lot of the limitations that other people hate,” she said.
By the time Miller was getting seeds in the ground, the Office of Cannabis Management had announced it was opening up another category of temporary licenses. The first retail licenses would go to “justice-involved” people — those who either themselves or in their families had a marijuana-related conviction or arrest as well as two years of business experience. Under the plan, those licensees would be eligible for assistance from a $200 million fund that would provide the capital for ready-to-open store locations.
“We are extraordinarily proud, as an office, to be presenting to you a way forward on licensing, in particular with a social equity emphasis,” Axel Bernabe, the chief policy officer of OCM, said at a March meeting.
Doubts Swell
As the state advanced its conditional licensing initiatives as permanent regulations were being fashioned, doubts both inside and outside the agency started to swell.
The Minority Cannabis Business Association, a national trade group with the mission of creating an equitable cannabis marketplace, called on the agency to open licenses to all social equity groups outlined in the law, not just “justice-involved” individuals.
“We have concerns that the exclusion of otherwise qualified applicants could lead to avoidable delays in implementation and unexpected costs to the applicants, licensees, and the state,” it said in public comments it submitted in May.
The agency responded that other social equity groups would be included in the future and the conditional retail license program went forward without changes.
On another front, the Dormitory Authority of the State of New York (DASNY) — the agency charged with securing capital and store locations for the first 150 retailers — had estimated that by last September it would raise $150 million in private commitments to fill out the $200 million state fund created to help licensees finance their businesses.
According to three former staffers there were concerns inside OCM over whether DASNY could raise the money.
“OCM believed there was a lot of bullshit going on with the DASNY side and that nothing was going to happen,” said one of the former agency senior staffers. The staffer said that the agency warned the governor’s office of the possibility that everything could go south, fast, if DASNY didn’t hit its goals.
Aaron Ghitelman, a spokesperson for the Office of Cannabis Management, wrote in a statement responding to questions from THE CITY that “since the moment she has taken office in 2021, our agencies, led by the Governor’s Office, have together jump started the state’s cannabis market, and have been jointly committed to building the nation’s most equitable market.”
But according to seven people who worked in the executive chamber or OCM at the time, there frequently was little coordination between the two offices following Hochul’s initial nominations to the agency in September 2021. At the helm of OCM were people the legislature had recommended to the governor but who often lacked experience running a state agency.
In a statement from Jason Gough, the governor’s deputy communications director, Hochul’s office did not respond to THE CITY’s queries about the reports of internal dissent and lack of interaction, instead issuing this broad comment:
“New York State’s efforts to create the most equitable adult-use cannabis market in the nation are being delayed by litigation backed by large cannabis corporations seeking to increase their profits,” said part of the statement. “We will continue working to ensure that small, local businesses are able to compete and thrive.”
Assembly member Peoples-Stokes and Sen. Kreuger confirmed to THE CITY that Hochul had followed their recommendations of who to appoint to lead OCM. Both said they believed the agency and the governor’s office were working well together.
By the fall of 2022, as more than 200 cultivators hauled in their first harvests, the extent of the administrative bottleneck was becoming clear. The cannabis agency was still vetting more than 900 applicants for stores and nobody had been awarded a license to operate one. Also, the question of where those selected would get the financing to build out their stores was unresolved. The dormitory authority was still in the process of finalizing an agreement with a private equity firm that was being lined up to help provide loans.
“Mathematically Impossible”
At a meeting in September 2022, the head of the dormitory authority, Ruben McDaniel, who also sat on the board of the cannabis management office at the time, estimated that DASNY planned to get 15 to 20 stores open by the end of the year at a cost of about $20 million.
About a month later, Hochul doubled down on the estimate: she told the NY Advance Media Editorial Board that the state was on track to open 20 stores by the end of the year and about 20 stores per month after that.
OCM officials said they were caught off guard by the comments Hochul made. “How are we going to do that?” a former OCM official told THE CITY he wondered at the time.
Joe Rossi, the managing director of lobbying firm Park Strategies, was surprised when he read Hochul’s comments, too. His firm was representing the Cannabis Association of New York, which represents mostly cultivators and processors. “That’s mathematically impossible,” he thought.
The medical marijuana companies grew impatient as the months dragged on without indication of when they would be authorized to join the adult-use marketplace. The original law had not included a timeline for that or when they could begin wholesale operations.
“The biggest way the state dropped the ball was this lack of visibility and transparency,” said Unruh, the PharmaCann vice president. “For them to just continue to not tell anybody, particularly big companies that are waiting for this next inflection point to determine how the operations in New York are gonna go— that’s unforgivable.”
In November 2022, they got a clear indication when OCM released the first draft regulations for the adult market as it announced the award of its first 36 retail licenses.
The draft regulations included a stipulation that medical marijuana companies would have to wait three years to open their first adult-use retail operations from the time of the first sale at a licensees’ store. Though the regulations allowed them to supply wholesale cannabis to licensed retailers, none of them had opened stores yet.
Darin, the CEO of Curaleaf, called the three-year rule “completely unreasonable.”
Other medical company executives agreed.. “The three years was a bit of a surprise. We didn’t expect a significant delay in order to access retail,” Frank Tice, the Senior Director of Social and External Affairs for RIV Capital, told THE CITY.
Funded by the gardening product corporation Scotts Miracle Gro, the company had closed a nearly $250 million purchase earlier that year of the company Etain, one of the state’s original medical marijuana licensees.
Curaleaf posted $350 million in revenues the last quarter of 2022 — one of its best ever — but not all of the medical operators were doing well. As the pandemic waned, share prices of many of the major companies were taking a dive as cannabis use declined, access to capital began to dry up, and state regulators created a new layer of obstacles.
By that point, Bierman had long left MedMen. A different cannabis company, Ascend Wellness, abandoned its plan to acquire the company in August 2022 and MedMen put its New York assets up for sale.
The company’s CEO said in an earnings call that entering the New York market wasn’t a priority. “The regulatory environment in New York remains highly uncertain given the unknown timing of the commencement of adult-use sales, unclear licensing process, and the lack of policing of the illicit market.”
Still, better heeled medical operators in the state pushed harder to get into the adult market. Nearly all of them wielded sophisticated lobbying operations to appeal to legislators, OCM officials and Hochul’s office.
In 2022, eight medical companies, as well their trade group, the NY Medical Cannabis Association, spent more than $1.5 million on lobbying efforts, state filings show.
A few months later, in March 2023, some of the medical companies formed the Coalition for Access to Regulated and Safe Cannabis. The coalition filed its suit accusing the Office of Cannabis Management of violating the cannabis law by only opening up the retail license applications to justice-involved individuals rather than all social equity candidates outlined in the law. It requested that the state open up the retail license applications to everyone immediately, which would have helped establish markets for their wholesale weed.
At this point, there were 270 licensed hemp farmers who had also grown a lot of cannabis — hundreds of thousands of pounds of it in 2022 — but, by the beginning of 2023, there were fewer than 20 stores across the state that could buy weed from them or the big companies.
Miller, the cultivator in Saratoga Springs, had planned on being in stores by the new year. But what she hoped was just a delay in openings was becoming a near halt.
“Money was starting to run out. We had hoped by January we would be selling to dispensaries,” Miller said. “The money that we thought would be coming in just wasn’t. It’s been a constant search for income.”
A Break for the Bigs
This May, six months after the state had released its first draft regulations for the adult-use market, OCM revised them. The three-year delay for Big Weed to enter the market was gone. Instead, the medical operators could pay the $5 million fee to open their first store by the end of the year. PharmaCann, for example, has a medical location on Flatbush Avenue in Brooklyn. That would go towards the total fee of $20 million to open up the other two stores they were allowed by the law by mid-2024.
“There was a general consensus that we need more stores,” said Bernabe, OCM’s policy director, at the agency’s May meeting. Bernabe couched the regulatory shift as a win for farmers who were sitting on thousands of pounds of last year’s stock and growing increasingly panicked.
“That would allow some of our brands, some of our upstate farmers to access retail stores right away, which is positive,” he said.
Nonetheless, the revised regulations set off immediate alarm bells across the industry.
“We were shocked,” said Rossi, the Park Strategies director, the longtime lobbyist for cannabis growers and processors. The medical companies already had the advantage of being vertically integrated with growing, manufacturing and retail capabilities. In contrast, the 2021 law legalizing adult-use cannabis prohibited this vertical integration to prevent any business combine from owning too much of the market.
“How can anyone else compete with that?” Rossi added. “This business just isn’t meant for the little guy. We have to stop lying.”
The hundreds of licensed cultivators were nervous, and not just about 100,000 square feet of indoor growing space the companies were allowed to fill under the proposed regulations — potentially 10 times the capacity of any outdoor farmer. Indoor cannabis also typically has a longer shelf life than the outdoor product currently sitting in their warehouses.
“We don’t have money coming in,” said Joseph Calderone, the president of the Cannabis Farmers Alliance, a group of licensed cultivators advocating for the state to address its cannabis supply problem. “If dispensaries had been open in time we would have had some cash flow and potentially be able to compete with that type of policy change.
Plus, he added, dramatically enlarging supply capacity when there’s already a glut seems a sure way to tank prices.
Tice, the vice president of the Big Weed med company owned by RIV Capital, acknowledged the concern but doesn’t anticipate such a price collapse. The medical market has been small, he said. “Nobody really has built out the infrastructure to kind of just ramp up supply and start pushing it out to all these stores. It’ll take time to kind of scale these businesses.”
But Unruh, the PharmaCann vice president said in a new market, “prices tend to come down and compress – so that’s going to happen regardless.”
In a recent court filing, OCM said that licensed cultivators grew 300,000 pounds of cannabis last season. By the end of this season, it expects farmers will have grown a total of 600,000 pounds of weed. With a couple of dozen stores open, only about 3% of the state’s legal supply has been sold so far.
This leaves many small growers fearing the worst. “How is that not going to crash the market?” questioned Jeff Jones, a licensed cultivator in the Finger Lakes. For Jones, the looming entry of Big Weed is reminiscent of what happened in California in 2016 when the state legalized adult-use.
At first, California codified that no cultivators could grow more than one acre of cannabis for the first five years to give small businesses a head start against deeper-pocketed operators. But, in a late rule change, the state introduced smaller, quarter-acre licenses with no restrictions. Well-funded, Big Weed cannabis operators snapped up a number of them and opened mega-arms as big as 25 acres. In just a couple of years the oversupply of weed led wholesale prices to crash. Farmers all across the state were put out of business.
Jones saw the devastation first hand while growing cannabis in Mendocino County in northern California for a few years. “I left with my tail between my legs because I got so hammered. And part of it was my own failings but it was also these huge structural issues that I didn’t realize I was coming up against,”
OCM’s own officials seem to understand the dilemma of pitting Big Weed against small operators. Addressing the crowd of a cannabis expo at Javits Center in early June, Fagan, the agency’s chief equity officer, recognized the challenges for social equity candidates if the state was too permissive in letting in large operators.
“Social equity has to go first,” Fagan said. “You cannot hand the market over to larger participants and give them a head start — they have a huge head start at the beginning already with capital infrastructure and experience — and then sprinkle equity on top. It will never work.”
Darin, the CEO of Big Weed company, Curaleaf, said that the fears were short-sighted. The concern that medical operators “will be able to flood the market with product is just not the case. There is, without question, enough room and enough business to be done for all participants here.”
Just as the new draft regulations were released, farmers like Miller had to decide quickly whether to plant a second season of crops with hundreds of pounds of unsold cannabis already locked away in store rooms.
“I’m in too deep to get out,” Miller said, who’s maxed out the number of personal loans she can take out and has a second line of credit on her farm.
“I still have to believe that there’s going to be something that is a tiny bit profitable about this industry and that this won’t all have been in vain.”
Small Budgets, Big Fears
In August, the slow rollout came to a halt when the veterans group sued OCM, accusing the state, as a group that included medical companies had, of violating the law by opening the retail licenses to only one social equity group. The 2021 law, it said, specifically stated that the license applications had to be opened to all at the same time. The Coalition for Regulated and Safe Access to Cannabis, which includes medical operators who sued OCM in March and who’s case remains pending, was granted a motion for a co-trial with the veterans.
In late August, the judge sided with the plaintiffs and granted the injunction against the state’s program. By that time, OCM had awarded 463 licenses in an effort to get more stores open. With only 23 currently operating, that’s left about 440 licensees on the hook — including dozens who were just about to open their doors. It’s a loss for farmers, too, who still have hundreds of thousands of pounds of cannabis to sell.
On Tuesday, OCM will vote on the regulations that were introduced in May. They are expected to pass. That will pave the way for license applications to open for the adult-use market a month later. Among them will be the licenses that will allow the medical companies to transition to the market.
Likely, not all of the companies will make the $5 million down payment to open one of their retail locations to the wider population in New York.. In its most recent quarterly report, MedMen said it only had about $15 million cash on hand and $137 million in debts.
Bryan Murray, a Vice President at Acreage Holdings, another Big Weed, multistate operator with a medical license in New York, was among several executives who said his company would pay up. “It would be nice if it were a lesser fee, but at this point we just have to move forward,” Murray said. “New York needs to get its market open.”
The prospect of these Big Weed, high-stakes entries alarms a lot of people who have entered the market from the ground up. Jeremy Rivera, who was days from opening up his store, Terp Bros, in Queens before being blocked by the injunction, said he doesn’t have the kind of capital to sustain himself that a bigger operator does.
“I dont have the budget,” Rivera said. “When you’re essentially a small hardware store competing with Home Depot, it’s just very hard.”
Those who haven’t made it into the market are wary of entering before they see how things shake out with Big Weed. Joshua Waterman, who goes by Dr. Dankenstein has been growing weed illegally for years and will remain on the sidelines for now. He said he expects the entry of the medical operators to nosedive prices.
“Watching this rollout has made me and a lot of other people go ‘Okay, well, we can’t get to the market until they collapse it’ because that’s what they’re gonna do,” said Waterman, referring to the medical operators.
“All these other poor, actual equity farmers are left with their product and not able to even get a spot in a store,” he said. “It’s just a shame.”
