New York’s equity provisions for cannabis continue to lead the country

Liz Krueger is a veteran Manhattan state senator, the chair of the influential Finance Committee – and an author of the state’s Marijuana Regulation and Taxation Act that ultimately became state law in 2021. Earlier, Krueger was instrumental in shaping the state’s medical marijuana program. And in paving the way for legal recreational marijuana, she has helped ensure that the state decriminalized possession and sale of the drug, created an agency to regulate growers and retailers, and established a tax structure that would send marijuana revenues to disadvantaged communities. 

How well is New York’s adult-use cannabis program working?

It has had lots of problems, but I will point out that every state that moved into legal cannabis has had lots of problems. We are a bigger state, so I think our programs appear bigger. We’re the only state in the country that actually follows through in our legislation to do a social equity system and not roll over for a couple huge companies that already had a huge share of the legal market. And they told me that they would make sure what we were doing would fail and they would slide in and save the day. But they were creating some of the problems.

What’s working well? 

We have the strongest and best legislation in the country in any state and that seems to be ratified as a position to many people in the criminal justice and policy universe. Regulators come in from other states and say “Oh, I wish we should have done that.”

It’s a complex piece of legislation. It not only legalizes cannabis for recreational purposes, it gutted and restructured our medical program, which was terrible. We established a cannabis and CBD regulatory framework, so it’s not just THC cannabis for recreational or medical. It’s the other associated industries that are made up of cannabis products. We created a whole new agency from scratch. OCM has had growing pains just because they were expected to get up and running and do everything immediately, and that was an unrealistic ask.

I’m impressed with the staff at OCM, their talents and follow-through on some of the issues. Everybody’s expectations weren’t realistic.

What, if anything, needs to be improved? 

We have been delayed to open up hundreds and hundreds of legal stores because of two major lawsuits to stop us from giving out licenses. They pretended they were individuals who felt harmed by our policies, but these were large corporate-funded lawsuits – they basically admitted it.

Finally, we’ve negotiated a settlement that lets us open more stores, but that held us up for a year in actually being able to open any significant number of stores. That’s been a huge problem not of our making, but of companies who believe if we fail with our initial target goals that they can sweep in, like a cigarette company or drug company or alcohol company doing a monopoly system as they have done in a number of other states. It would violate our goal of social equity and investments.

Meanwhile, because it has been held up for so long, other not-small independent guys, through an organized funded effort, have opened up illegal shops all over the state in humongous numbers. They all look alike. They sell the same fake product that’s not safe. They all have the same branding and advertising. They are a corporatized model of cannabis sale for storefronts. They make deals with landlords to rent out 25-30 sites in one deal. These are not little guys. They are big venture capital who see they can fill a void.

What issues need to be addressed surrounding enforcement?

I’ve been urging the attorney general and district attorney to go after the people who are underwriting these stores. I don’t want to target anybody, I just want the stores closed. A bunch of these stores are being rented under LLCs, and it’s extraordinarily difficult to track back who the hell is actually the one renting the spaces. That’s why we’ve strengthened the law to help with enforcement.

We need to go after the landlord who rents to 10 stores at a time and make it clear to them, if you think you’re going to make a fortune renting out to illegal activities, you’re wrong. There’s rapid eviction for a one-week timeline. There’s coordination with the DA, NYPD and sheriff’s office to orchestrate some of these takedowns. We gave them more enforcement powers in the state budget bill. We increased the fines because we found the shops would say, ‘Oh, that’s nothing compared with what we make every day, who cares.’

Mayor Eric Adams in a town hall meeting announced he had a plan to close illegal shops within three months. I called OCM. We’re submitting legislation for an easier way to padlock the store. Even if you go through a court process that takes longer.

We’ve also worked with the NYPD to make sure they understand a bunch of penalties and laws didn’t get changed. These stores have to make sure they don’t sell to people under the age of 21, or sell more than the maximum allowed to individuals. There are all kinds of tools we believe law enforcement has not been using enough.

What issues need to be addressed surrounding social equity?

We couldn’t approve the licenses because of the lawsuits. We’re way behind on those stores. We need to speed up the process by which we’re approving licenses. Now that those two courts cases are settled, there is a massive pileup of approved CAURD licenses that can now finally get past the last delay.

I think we’ll see hundreds of stores opening statewide and that hopefully will have a significant impact (increasing) sales through the legal system. That will also hopefully address the major concern of people who went into getting licenses to grow cannabis and learned there was no market to sell it to. If there’s no way to ultimately sell legally and if you’re going to grow it or manufacture it for certain products, the whole thing would fall apart, so we need dispensaries to be allowed to open. That will allow a domino impact positively up the chain to address issues we’re hearing from entrepreneurs. They don’t want the law changed, they just want to make it work.

Are there enough resources in place to run the program effectively?

I think the state budget needs to expand additional funds to make sure OCM has the staff they need. The model was always that the revenue from cannabis taxes would continue to pay for the cost of OCM. I believe that will ultimately be the story as (the state Liquor Authority) is self-funding the alcohol space, but because we’ve seen these delays, OCM isn’t getting the revenue it needs to adequately fund itself. They need additional support in the state budget to get the staff they need to get the work done.

I don’t believe it’s a long-term need. When the tax revenue is rolling, it will cover the OCM’s cost. The legislation was very large, diverse and complex. It included funds to be used to reinvest in social equity efforts in communities that were harmed, education funding, research around cannabis so we know more about how cannabis can be valuable in medical situations. This bill was so rich in substance and was enormous.

Are there successful models that can be followed to improve the program, in other states or in New York?

I think the tax policy we set up for the bill is too complex for us to probably use. I negotiated this bill with the Cuomo administration. He was very hostile to the bill and shot it down endlessly, and on the eve of his resigning office, he decided he wanted to get this bill done. He thought if he did, everyone who was mad at him would say “never mind.” But it gave us an opening with our colleagues in the Assembly to actually negotiate a bill heavily in our own favor.

We need to tax at a level that brings in the revenue that we need from it, but we don’t want to overtax. As our industry is developing, we need to make sure we’re competitive against the illegal market. There’s lots of room to make adjustments in the cannabis tax policy world. I’m committed to that.

Also, the costs for medical cannabis were always more expensive. We have higher standards for the products and how they’re created and used. Unfortunately, unlike other medicines, insurance cannot cover it because of the federal prohibitions dating back a hundred years ago. You can get an insurance company to pay for morphine and opioids, but medical cannabis is not covered. So medical cannabis is the only medication in New York that we tax. I don’t get why we’re doing that. I would love for us to take that on.