Cannabis marketing complications, 4/20 plans, and advice for women breaking into the industry

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Jeffrey Hoffman is a New York City-based attorney who hosts “Ask Me Anything about Cannabis Legalization in New York” each week on LinkedIn. Hoffman and NY Cannabis Insider have partnered to bring those sessions into print in a Q&A format.

Hoffman’s practice focuses on cannabis industry clients, including licensees in the adult-use market, practitioners in the medical cannabis space, and cannabis adjacent product and service providers. He has a particular interest in social and economic equity cannabis license applicants, and he also informs and assists those convicted of cannabis offenses in getting such convictions expunged from their record. He can be reached at info@420jurist.com.

The following AMA from March 12 has been edited for length and clarity. Hoffman’s next AMA is on April 19 at 4:20 p.m.

Is it medical marijuana that is legal or is it marijuana in general?

It depends on what state you’re in. We like to talk about New York. In New York, for medicinal cannabis, you have to get a card through a doctor or various other types of practitioners.

Then you can go into a medical dispensary and buy medical cannabis here in the state of New York. It’s less expensive than adult-use cannabis, so that’s the primary reason why folks may wanna still do that. Obviously, if medical cannabis costs more than just standard adult use, I don’t know why anyone would do that.

That is the case for now. There’s a bill in the legislature that would allow all health insurance providers in New York to cover medical marijuana. I would like to see that strengthened a bit.

It’s been a while since I looked at the most recent revision – ideally they will actually require the publicly funded insurance to cover it. So I would imagine all of the medical cannabis folks would immediately go on to those plans if it would cover their medical cannabis.

So that’s what’s going on right now in New York as far as medical, which has been legal for several years. This is typically what happens in most states — medical is their initial law, which is still very restrictive. It is limited to things such as cancer, other wasting diseases, and other very serious medical conditions.

Typically, there’s either one or two step downs from this. The first step down is to broaden the conditions that are allowed. And then the final step down, which is where we are here in New York, is where you say any medical condition where the medical practitioner believes cannabis would be beneficial.

So that’s the medical side. What has happened more recently is the adult-use side. That was legalized by the legislature March 31, 2021. The sitting governor at the time did not appoint the Cannabis Control Board for the remainder of his shortened term.

He was eventually forced from office. Now, Governor Hochul appointed the Cannabis Control Board, so hallelujah. And thank you to her for that. The Cannabis Control Board then got going, in late fall of 2021. They then finally gave CAURD licenses for the first retail.

With temporary delivery licenses only being permitted for 12 months, what happens when the permanent retail locations open?

It’s not clear exactly how that’s gonna work out. I would bet it changes between now and when all that happens. All dispensaries – not just the CAURD folks which are getting out in the wild now, but it looks like all dispensaries – will be able to both do delivery and have onsite consumption.

It’ll be up to the licensee to decide if they wanna have those additional capabilities. There was a very informative email that was sent out. I posted it on LinkedIn a couple weeks back. That email went out right before they started giving out the licenses in November, and that gave very clear guidance that dispensary licensees will be able to do delivery and onsite consumption.

It looks like in the regs, it’ll be the same as the delivery licensees in that you’ll be able to have 25 FTEs, full-time equivalents, depending on how many hours an FTE is. If it’s 40 hours, that’s 1000 hours, if it’s 30 hours, it’s 750. We’ll just have to see which way they wanna go with that.

That’ll be the maximum number of hours per week that the dispensary licensee themselves will be able to offer delivery services. If you need overflow delivery or more delivery, that is what the delivery licensees are for.

We spoke about this a week ago when they gave out the licenses, and I really think you gotta do something more for those delivery licensee folks, right? It’s an equity license. It’s one of the three licenses that are specifically to be promoted to equity folks. If you look at New York City, the traditional legacy market here is people growing it and people are delivering it or selling it in the open air.

So legacy in New York City is delivery. I just think that you’re crippling the delivery licenses – only letting them basically be Uber Eats for the dispensaries is a really bad idea. If you wanna get those folks that are in legacy selling, give them a delivery license and a 500 square-foot storage space that they can have for their own inventory. I just think that’s the way to go.

Do you have any advice for someone wanting to break into the cannabis industry?

You need to start going to every single cannabis event close to you. And if you don’t live close to them, you need to look at the calendar and figure out where there’s places where there are going to be a bunch of events over a small amount of time.

So like next week here in New York, there’s gonna be a lot of events for 4/20 and then more as we get later here in April and then into June. There’s gonna be some pretty big cannabis trade shows, particularly here in New York City. And there’s gonna be lots and lots of events and parties.

That’s why people do happy hour. That’s why people take clients out, right? That’s how you build a relationship. So you gotta do that. And I know COVID really kind of got us out of the habit of doing that.

And virtual is okay, but not great, right? I mean, it’s really all about meeting people, right?

Can dispensaries have a cannabis leaf in logo and can said logo be displayed outside of the store?

I think the marketing and advertising regs are draconian. I’m not a fan of that. I think we gotta do it a little bit differently and we have to allow these things.

The cannabis leaf — it’s too draconian. It’s the culture. Part of this whole thing is that we enforced so much against the plant and against the culture, and this is just kind of extending one additional piece of it. The idea that you’re limiting the culture … why should you be able to do that?

They’re not gonna let you use certain words. You won’t even be able to say, “come buy the best sticky buds in the city.”

What are your thoughts on delivery companies being subject to 280E?

If you’re plant touching at all, I don’t see how 280E wouldn’t apply to you.

How are you celebrating 4/20?

There’s an interesting event called the New York Cannabis Freedom Event in Brooklyn. The ticket that I have is for the 19th and the 20th, but most people that I’ve talked to are only going on the 20th.

There’s also a CAURD event that I am going to, but they kind of overlap problematically. I’m definitely going to that though.

So that’s what I’m doing on 4/20.

Well, technically, I think it will also be the CAURD regulations. I think that’s what OCM is kind of intending anyway. I mean, there will be some things specific to CAURD folks where they can’t sell the license for four years.

But most of what you’ve seen that’s applicable to the CAURD folks is guidance, not regulation. And I do think that the regs will apply. When we get there, the regs will trump guidance.

For the regulatory review period, remember the 60 days that we already did that ended on February 13th — that was the public comment period. The 45 days after OCM tells us what their changes are is not another public comment period. It’s called the revised rule-making period. So my bet is what actually happens here is that on May 11th at the OCM meeting, where they give out most, if not all, the remaining CAURD license, I think what they’re going to say is, “Here’s our preview of what we think is gonna be our final regs. We’re not publishing in the state register yet. We’re gonna let everybody say their piece. Maybe we’ll tweak it a bit more, based on everybody saying their piece. And then we’ll release it in the state register. Then we count 45 days and then the application opens a week or two or three after that.”

What is the state of cannabis lounge regs for New York?

We know we need them, and the OCM didn’t give them to us. They’re really focused on the seven they did give us regs for, and they could release the first lounge or onsite regs, and delivery, perhaps here at the meeting in May.

For those two licenses, I know why they waited. Those two are gonna just be tricky, particularly onsite consumption.

Does New York have or is it going to have a caregiver programming to grow for patients?

I believe they already do. Go to the OCM website and check it. You can do home grown medical cannabis now.

The clock is ticking on adult-use home grow. Dec. 29, 2022, was the date of the first sale of adult-use cannabis in the state of New York. The clock is ticking for OCM to give us the regs. All they really need to do is take the medical regs, strike the word medical, change it to adult-use, and those are the regs.

So, Mr. Bernabe, Mr. Alexander, Mr. Sheridan, what are you guys doing? Let’s get some homegrown regs for me. I’m gonna do it anyway, but let’s make it legal, right?

Any update on the MSO/RO lawsuit?

It looks like the first hearing has been set for sometime in mid-June. The good news is hopefully the OCM is gonna give out all the other CAURD licenses at the May meeting. That part of the lawsuit will be more or less moot at that point – it’s much tougher to take back a license that’s been granted than to stop someone from giving out licenses.

We saw this with the Variscite lawsuit. Initially, they stopped licenses from being given out in the five enjoined regions – it would’ve been much tougher for that judge to say, “Those licenses that have already been given out, let’s pull those back.”

It is very, very tough to do that. So, OCM, let’s give out the rest of those licenses here in May.

How is the illegal market affecting the emerging legal market?

It is crushing it. We don’t have that many licensed dispensaries open yet. And the ones that are open are doing quite well. But that will change as more legal stores open. If there’s going to be more licensed stores, they’re gonna be closer to more illicit stores.

There’s a lot of noise about what the state’s gonna want to do about the unlicensed ones. We could have a tax holiday until the end of 2024 and that would really, really help. Governor Hochul and the legislature just need to appropriate money for the cannabis industry for that, period.

Let’s pass a law. If you have a certificate of occupancy in the State of New York, by law, we can inspect your premises for illegal cannabis. It’s very easy for the legislature to pass that law. And we go after the landlords.

If I was running for mayor, my platform would be to close down all the illicit stores and turn them into affordable housing in New York City.

Is the CAURD program funded?

They got the state appropriated $50 million. They’ve spent a lot of it. They do not have the other $150 million. When I was up in Albany a week and a half ago, I was telling legislators that they needed to go ahead and appropriate the money. Do not try to wait on private funding. It’s not coming.

What will the legalities of pop-up events be since we are entering that season?

As long as you are somewhere where the people could otherwise smoke a cigarette, and as long as you are not selling to them, you could consume. But as far as having a popup where there are vendors selling cannabis, that is illegal.

We do want farmers’ markets eventually, and I do think the OCM is thinking about them, but nothing yet.

What are some of the biggest changes you anticipate or would like to see in the revised regs?

Don’t make the micro. Make it optional.

And again, I’m not saying that the micro people are not able to. It’s not that they aren’t capable. But especially here in New York City, your grow has to be in the same county as everything else you do.

If you are in Harlem and you wanna have your retail place for your micro in Harlem, you must grow your cannabis in New York County, or Manhattan, which is the most expensive real estate in the United States. So why would we want equity minority business owners, if they’re gonna be challenged enough in opening and running their businesses, to have to grow?

These people that have never cultivated — they already have businesses doing tinctures and doing edibles, as well as other things.

That’s the problem. They would have to grow here in New York City. So you’re gonna take people who already have a cannabis business, but have never grown. You’re now gonna make them grow and spend all that money on real estate and everything else.

So that’s number one.

Number two is that the fees — application fees and licensing fees for the three licenses that are specifically to be promoted to social and economic equity applicants. It says this in the law, there are three of them, the nursery, delivery, and micro that are to be specifically promoted to equity applicants. The fees for those three licenses should be waived.

The third thing is that the delivery licensees can hold their own inventory – have a warehouse that they can have their own product in. You can limit it. You can say you can’t be 5,000 square feet like a dispensary. It can be 500 square feet, maybe even 250 square feet. But give the delivery people a small space where they can have their own inventory and they can deliver from that inventory. If you don’t, you just destroy the value of that license.

Give women tips on how to get into the license game

Number one — you will be able to apply as an equity applicant. There’s all kinds of benefits. There are people that are not gonna qualify as equity applicants, and they are going to want to partner with people that do. So that is a phenomenal way for you to get into the market and for you to get capital.

But you have to be strong, because you’re the 51% owner and you get to tell whoever brought the money to the table that it’s your company, right? You want to be friendly with them and you want to take input from them. But regardless of how much capital they bring to the table, it’s yours. You’re the 51% licensee.

So I think that’s an outstanding way for a woman entrepreneur to get into the cannabis industry, right? New York State is giving you beneficial treatment for licensing. You should take advantage of it. You still need capability, you still need financing, you’re gonna need all of these types of things. But the state has very specifically said, ‘we want to encourage women entrepreneurs and women-owned businesses to apply for these cannabis licenses.’ They’re very clear about it. So I encourage you to do that if you think that is your route.

If you think that’s not your route and you wanna become an ancillary service provider, you gotta do what I said before. You gotta be on the scene with these businesses you want as customers. The key is, you gotta figure out what your expertise is.

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