On Tuesday, the state Office of Cannabis Management voted to expand their licensing program, making it accessible next month to a broader range of applicants, including non-social equity applicants and the big, multi-state operators like Cresco Labs. It is believed that the OCM’s approved resolutions on Tuesday will see dispensaries and consumption lounges open by the end of the year.

The pressure for this action had been building remorselessly for months while the state’s Cannabis Control Board and the OCM struggled to implement its Conditional Adult Use Retail Dispensary (CAURD) rules meant to promote social equity by letting smaller, local and equity-based players get a leg up into what’s expected to be a multi-billion-dollar market.

That meant the big guys were held back. But the process was slow and halting — there are only 24 operational legally-licensed dispensaries in the whole state at this point, out of the 463 licenses granted after nearly nine months since the first sale in December.

Hence, the illegal market simply exploded. Non-licensed pot shops have proliferated, been shut down, reopened, been shut down again — a whack-a-mole background to the earnest discussions at the board level.

Essentially between lawsuits and difficulties of various kinds, the entire process had ground to a halt. “Only in New York,” people were saying, noting how Massachusetts and New Jersey had opened their legal cannabis markets with minimum fuss years back.

Meanwhile in Wawarsing, observers and officials grew increasingly frustrated and anxious that the push for social equity would end up ruining Cresco Labs project to repurpose the old Channel Master/Schrade Knife site and build a large growing and processing facility for the new legal market for cannabis. As many as 380 full-time jobs were possible.

However, the logjam may at last be broken. “Today marks the most significant expansion of New York’s legal cannabis market since legalization, and we’ve taken a massive step towards reaching our goal of having New Yorkers being able access safer, regulated cannabis across the state,” OCM Executive Director Chris Alexander said in a statement Tuesday. “The regulations finalized today are the result of robust engagement with stakeholders across the state who submitted thousands of comments. This final package truly represents the values of equity and competition that we believe are central to this market.”

Discontent, however, was immediately voiced by applicants in the Conditional Adult Use Retail Dispensary license process. That requires applicants to have been “justice involved”, i.e., convicted in the past of some kind of marijuana-related crime in New York. But, beyond that, applicants need to show some kind of business experience, preferably at a profit.

The CAURD applicants fear that the big companies, like Curaleaf (Market Cap: $2.34 billion. HQ: Wakefield, Mass.) and Cresco Labs (Market Cap $480 million. HQ: Chicago) will take over and dominate the market, much as they do in Illinois.

The logjam can be laid primarily however, to the True Party of Interest rules (TPI) that came out in December 2022. These were designed to prevent cross ownership between the cultivators and processors and the retail side of cannabis — growers cannot legally dispense cannabis and vice-versa. This prevented “vertical integration,” and it was hoped, would keep the retail side wide open for the CAURD applicants. The force behind the TPI was Axel Bernabe, chief of staff and senior policy director for the OCM.

The TPI effectively blocked Cresco Labs from moving forward since they were not given a cultivation license for the adult-use market. Those went instead to participants in the state’s hemp-growing pilot program. Many of them were badly hurt by a previous overgrow of hemp for CBD, for which the market turned out to be significantly smaller than first imagined. Mountains of hemp remained unsold. And similarly, with cannabis. A bumper crop was grown in 2022, but because the licensing was dead in the water, there’s no one to sell it to. It too has grown old and dusty in barns across the state.

No one said it would be easy to move from the fiercely prohibited illegal marijuana market of yore to a reasonable, regulated, safe cannabis market in New York State. That goal has yet to be reached.

Axel Bernabe resigned Tuesday in the wake of the changes that were made to the regulations. He had previously noted that the TPI rules had made it difficult for dispensary operators to raise money. Meanwhile, the big companies pushed for vertical integration since that is the most profitable path.

Bernabe said he believed that keeping the cultivator companies out of retail would have made it easier for the CAURD applicants to raise funding for their projects. The model was perhaps based on the New York State Liquor Authority, which prevents a business owning lots of liquor stores and keeps thousands of mom-and-pop businesses going across the state.

“This has undoubtedly been the most humbling experience of my professional career,” Bernabe stated. “It’s been the most challenging, bar none … It’s also been a privilege to be able to contribute substantially to the vision for an equitable, small-business-driven market in New York.”

The two sides in the struggle also released statements Tuesday defending their positions.

The Cannabis Association of New York, which represents small businesses, complained bitterly that the door has been “opened for big cannabis to come in and compete with New York-based business.” They called for Gov. Kathy Hochul to convene a special session of the legislature to push the CAURD and TPI into statutory law. That would allow conditional licensing to continue.

From the other side, the New York Medical Cannabis Industry Association, which represents, among others, companies that bought up early licensees for medical cannabis and includes Cresco Labs, Curaleaf, Columbia Care etc., said the changes should be applauded.

“The Cannabis Control Board’s approval of adult-use regulations demonstrates positive forward momentum. Today marks a pivotal step toward expanding and sustaining the state’s medical program and creation of an economically viable and equitable adult-use cannabis industry in New York. Once up and running, this market will help squeeze out illicit operators putting consumers at risk, provide growers with more opportunities to sell their products and generate tax revenue for communities disproportionately impacted by the cannabis prohibition.”

Essentially, the big companies, which already are in the New York State medical cannabis market can now move to operate in the “adult-use” market, formerly known as “recreational.”

The CCB’s chair, Tremaine Wright, appeared to want to float above the fray on Tuesday. “This is a defining moment for New York State’s commitment to entrepreneurship and fostering a truly diverse cannabis marketplace,” she stated. “Our pledge to social and economic equity will continue to take center stage, ensuring that individuals and communities from all backgrounds have a fair shot at success in this burgeoning industry.”

Looking over to Albany, the state Senate last week scheduled a hearing to discuss all this on Oct. 30. By then, it’s thought that the OCM will already have granted a number of licenses.

“We are happy that the regulatory process continues to move forward with new guidance for participation for the New York license holders — we are currently evaluating the different pathways for us to operationalize from both a timing and budgetary perspective," said Jason Erkes, Spokesperson for Registered Operator Valley Ag/Cresco Labs. "We continue to progress in the current phase of construction in our Ellenville manufacturing and cultivation facility — while watching the ramp up and demand build in the New York recreational cannabis market."

It should be noted, however, that while applications for licenses to cultivate, manufacture and sell adult-use cannabis will open to a broader range of applicants in October, there may still be regulations within the law that impose space and other such limits on growers and facilities, thereby still limiting large-scale corporations. That side remains to be seen.

“We have been extremely disappointed that the $75 million investment in the Schrade site for Cresco has remained unfulfilled and the site remains vacant,” Ellenville Village Mayor Jeff Kaplan said Wednesday. “We are hopeful that this measure and these changes will finally create some jobs for our community.”

Following up on all this from a local level, a meeting was called by Cresco and was held Tuesday morning in Ellenville at Morning Sunshine, with Johnny Frost of COFFE, Maude Bruce of the Ellenville NAACP, Steve Kelley of Ellenville Regional Hospital, Paul Tuzzolino representing the town, Kristen Osterhoudt of the Ellenville-Wawarsing Chamber of Commerce, and Natalia Moena of Morning Sunshine. In addition, representatives from Cresco Labs and the offices of U.S. Chuck Schumer and U.S. Sen. Kirsten Gillibrand were there. The meeting was called to impress upon national politicians that the community here is strongly in favor of the SAFE Banking Act which, as it's currently drafted, would protect banks and credit unions, as well as depository institutions, from being penalized by federal regulators for working with state-licensed cannabis businesses.

"We enjoyed hosting the offices of Senators Gillibrand and Schumer in Ellenville this week to help educate them on our operations and also discuss the challenges that licensed cannabis businesses face in today’s regulatory climate," said Erkes. "Both senators have been an instrumental leaders on critical public policy issues in Washington and we stressed the importance of the SAFE Banking Act and the further need for access to capital for all license holders."