Medical Marijuana Companies Say They Could Jump-Start Recreational Market

As New York considers legalizing marijuana for adult, recreational use, medical cannabis companies are urging the state Legislature to hand them a stake in the new market, saying the burgeoning industry will lag without their help.

Rather than wait for new cannabis cultivators to build from the ground up, medical cannabis companies say they could use their existing infrastructure to give the new market a boost.

Two reports commissioned by the New York Medical Cannabis Industry Association argue that allowing medical cannabis companies into the recreational market in New York as soon as possible could give the industry a boost, and jumpstart new job opportunities.

“By utilizing the knowledge and infrastructure of the existing providers, New York can bring much-needed economic growth to the state at a critical time in its recovery while also cementing its reputation as a progressive leader,” said Ngiste Abebe, the group’s president and the vice president of public policy at Columbia Care, a medical marijuana company.

Democrats in New York are currently in the midst of negotiating a system for regulating and taxing the production and sale of marijuana for adult, recreational use.

After failing to strike a deal on the issue in the last few years, Democrats involved in negotiations on the issue have been confident in recent months that they can come to an agreement for full legalization by the end of March.

While lawmakers were previously expected to include a deal on legalization on legislation in this year’s state budget, due April 1, recent reports have indicated that the Legislature could strike a deal outside the spending plan, and without input from Gov. Andrew Cuomo.

Cuomo, who has a competing proposal for legalizing marijuana, has clashed with lawmakers in recent years over how tax revenue generated by the new industry should be used.

And Democrats in the Legislature had failed to strike a deal amongst themselves, also because of disagreements over tax revenue, but also due to concerns over tax rates on the drug and how to detect if individuals are driving while impaired.

But this year is proving to be different. New York is under new pressure to legalize marijuana; New Jersey, Vermont, and Connecticut have all now legalized the drug, and lawmakers are looking for new ways to generate long-term revenue for the state.

Reports have pegged the annual revenue potential of the recreational marijuana market in New York from around $300 million to more than $700 million, depending on demand. 

Regardless of where the peak is, the state wouldn’t reach its maximum revenue potential from the recreational marijuana industry until at least three to four years into legalization, analysts have predicted.

That’s where medical cannabis companies come in. They say that, since they already have the infrastructure in place, they could help supply the state’s new recreational market at the start until more cultivators come online. 

Those companies already have the means to grow more cannabis, they’ve said, and they have the equipment in place to test potency, package the products, and deliver them to retailers. 

But they would need permission from the state Legislature to do it. Some lawmakers want to keep the medical and recreational marijuana industries separate.

One of the reports commissioned by the NYMCIA argues that, allowing existing medical marijuana companies to jump-start the recreational market could immediately generate tax revenue that could be reinvested into new cannabis companies.

“In the initial ramp-up period, these new locations can generate and initial tranche of tax revenues, from which the state can build a stable base for social equity applicants to build,” one of the reports says. 

Lawmakers have made it clear that part of the tax revenue generated by the new industry should be used to give new cannabis companies a boost, particularly those established by people of color, and in communities disproportionately impacted by the state’s drug laws.

From there, medical marijuana companies say they would be fine with taking a step back, and allowing new equity applicants to make up the majority of the market.

They’re also trying to make the case to lawmakers that allowing medical cannabis companies into the recreational market right off the bat could create jobs faster than anticipated.

If the drug is legalized this year, one of the reports projects that about 8,000 new jobs could be created next year if medical companies are allowed to lend a hand with the recreational market. And they expect 10,000 additional jobs each year after until 2027.

A lot of that will depend on what the Legislature includes in a final deal on legalization. If lawmakers come to an agreement, it’ll likely be announced in the next few weeks.