‘Financial Slavery’ - Weed Retailers Rail Against State Cannabis Rollout

Greenwich Village licensed dispensary Smacked was undergoing renovations to comply with state regulations, May 25, 2023. | Ben Fractenberg/THE CITY

By Gabriel Poblete and Rosalind Adams, The City

This article was originally published on Jun 7 4:18pm EDT by THE CITY

NEW YORK - State officials in charge of New York’s slow-to-start retail cannabis rollout met with license-holders Tuesday in an attempt to address frustrations about the pace and cost of opening start-up businesses under the state’s complex system. 

Leaders of the state Office of Cannabis Management (OCM) and Dormitory Authority of the State of New York (DASNY) offered new encouragement about the retail license program. Meanwhile, holders of state licenses to sell cannabis called for more transparency and flexibility in the highly secretive process for awarding retail locations and financing store build-outs through a private investment fund.

The two-hour meeting, held at CUNY Law School in Queens and online, came a few weeks after holders of some of the state’s more than 200 issued Conditional Adult Use Retail Licenses wrote leaders of the state program to urge changes to a program that they described as “monopolized by DASNY and the Fund by way of financial information, service providers, and access to real estate.”

The May 9 grievance letter, first reported by New York Cannabis Insider, highlighted high rents and buildout costs and secrecy and delays in location approvals. Combined with a thriving illegal cannabis market, the signatories said the program’s management would make it impossible for their fledgling businesses to succeed.

They also called it “unconscionable” that the Dormitory Authority wields the power to approve or reject locations proposed by license-holders while working to secure its own.

One New York City licensee who spoke with THE CITY has complained that he lost out on a lease that had received OCM approval, after the landlord was approached by someone working with DASNY.

The state committed to distributing the first licenses to businesses led by people with cannabis-related convictions in their past.

During the meeting, DASNY CEO Reuben McDaniel III disputed the notion that the NY Cannabis Social Equity Investment Fund Program (the Fund), a partnership between the Dormitory Authority and a private investment group that pledged to raise $200 million, is a monopolistic entity, or that there is any conflict in the Authority’s control over locations. 

“When people use terms like “monopoly” or “Fund interest” versus “CAURD interest,” he said to the licensees, “forget all that, we are all on the same page. Our goal as a collective is to get as many of you up and operational between now and the end of 2023 as possible.” CAURD means Conditional Adult-Use Retail Dispensary.

“The commitment to support is one that is unwavering. It’s in the statute, it’s in the law, it’s our guiding principle to not just put you in the position to succeed, but to ensure that success through our continued investment in you,” said Chris Alexander, executive director of the state Office of Cannabis Management. 

Rage and Heckling

At the meeting, McDaniel announced several changes that related to grievances expressed in the letter. The Dormitory Authority and Office of Cannabis Management pledged to launch an online search tool to let licensees to know if their proposed retail site is at a permissible distance from schools, houses or worship and other dispensaries, and committed to a $1.3 million cap on the cost of New York City dispensary build-outs ($1.1 million upstate).

Meanwhile, a new $5 million program would provide loans of up to $100,000 each for capital costs at 5% interest for licensees who lease stores on their own, outside the Dormitory Authority sublease program. 

Statewide, a mere 12 businesses are currently selling cannabis products under state licenses, just four of which opened with Fund support. Launched with $50 million in state money, the Fund has yet to announce that it’s raised any of the $150 million it is supposed to generate from the private sector. 

Originally, all CAURD license-holders were obligated to sublease retail space procured by the Dormitory Authority. But after delays in securing locations, OCM at the end of last year began to allow retailers to lease their own locations, subject to DASNY approval.

“We want to work with our CAURD licensees in real time on navigating through the issues that you all have in getting to market and make sure you get to market as quickly, efficiently, as effectively as possible,” said McDaniel.

During a question-and-answer period, several participants shared anecdotes about how they submitted locations for approval and received the green light from OCM, only to then be told by DASNY that their storefront conflicts with a prospective state-leased site because of the 1,000-foot-distance requirement between cannabis stores.

One licensee, Carson Grant, summed up circumstances around his Fund-supported Queens retail location as “financial slavery.” 

“This entire process has been catastrophic,” Grant said. “Everything about the onboarding process has been extremely unprofessional and to me downright shady.”

Questions about the build-out process, including the costs of building stores as well as the rights Grant has over the space as a sublessor, have gone unanswered for months by Dormitory Authority staff, he said. Grant stated that licensees like him that are going with Fund sites will be tied down with 10-year terms.

“You guys keep saying ‘transparency.’ I don’t know what anything costs. I don’t know what a light bulb costs,” Grant went on. “Just tell us the numbers! That’s all I’m asking for!”

McDaniel approached Grant to shake his hand, and asked to speak with him one on one. But this only inspired renewed jeers from other license-holders.

Another CAURD licensee based upstate, Galina German, started calling out toward McDaniel as he approached Grant.

“You haven’t been able to raise any money. You’re saying the same thing again that you said on January 6th,” said Galina. “You haven’t raised a single dollar. Why should we believe you now?”

McDaniel bristled at the charge: “I’m happy to speak with you respectfully and answer all your questions. This is not an easy process.”

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