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New York Joins Pot Party

Summary:
By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans. New York became the fifteenth state to join the pot party when governor Andrew Cuomo signed legislation on March 31. As The City explains: The historic law, the culmination of drawn-out, fierce negotiations in Albany, will allow people to possess up to three ounces of pot and grow a limited amount of cannabis at home. The measure also will expunge the convictions of people whose offenses wouldn’t have been crimes under the new law. But the law’s centerpiece is a set of social equity provisions that should pour 40% of tax revenues from legal weed sales into communities long-devastated by over-policing and offer marijuana business opportunities to

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By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

New York became the fifteenth state to join the pot party when governor Andrew Cuomo signed legislation on March 31.

As The City explains:

The historic law, the culmination of drawn-out, fierce negotiations in Albany, will allow people to possess up to three ounces of pot and grow a limited amount of cannabis at home. The measure also will expunge the convictions of people whose offenses wouldn’t have been crimes under the new law.

But the law’s centerpiece is a set of social equity provisions that should pour 40% of tax revenues from legal weed sales into communities long-devastated by over-policing and offer marijuana business opportunities to traditionally underrepresented groups.

New York’s legalization applies to adults only, and anyone under the age of 21 is still prohibited from partaking of the evil weed.

So,  while you can now legally smoke pot in NY state, you cannot yet legally buy it. How’s that? Well, as New York magazine explains, that’s because it’s not yet legal to sell cannabis in the state.

The WSJ reports that it’s expected that retail sales won’t begin until 2022, as state officials need time to formulate regulations covering legal sales.

Cuomo first proposed legalizing marijuana in 2018, but previous efforts were derailed, in part over disagreements on how tax revenues should be spent. Cuomo embraced sin taxes in his latest state budget proposal, to  offset COVID-related costs, and made a renewed bid for legalization, as I wrote in January (see Cuomo Embraces New Sin Taxes to Replace Some COVID-19 Fiscal Shortfalls; Full Legalization of On-Line Betting and Adult Cannabis Use to Feature in 2021 State of the State Proposals.)

Another factor behind the move was the successful November 2000 referendum to legalize marijuana in New Jersey. Once that particular cat was out of the bag, New York would have found it difficult to enforce p anti-marijuana laws, as New Yorkers could score a stash by crossing the border.

This was a reversal of the longstanding NY/Nj divergence on the minimum drinking age.  I checked my facts with my 86-year mother, who recalled that she and her classmates at her NJ high school crossed the border to NY on her prom night, so they could drink legally. By the time I turned eighteen, NJ had dropped its legal drinking age to eighteen, but then in response to anti-drunk driving pressure, increased the age again, by one year each year, beginning as of July 1. Anyone reached the qualifying age before July 1 was grandfathered in and could continue to drink legally. I remember this situation well, because my birthday falls in June, whereas my cousin’s is three weeks later, in July. I qualified to drink legally despite the annual age increases, but she did not. Later, NY was also forced to raise its drinking age, as were other states that wished to receive federal highway funds. And so I believe the US now has a uniform minimum drinking age of twenty-one, in all parts of the country that allow for legal consumption of alcohol.

Complicated Licensing Regime

Taking pot legal in New York iwill no doubt be a lucrative proposition. The state will soon implement a complex licensing regime for retail sales. This was inevitable, given two of the rationales for the new policy – raising state tax revenues and allowing communities that suffered most  under the previous prohibition regime to have greater opportunities to profit under the new regulatory framework. Perhaps a form of reparations, as it were.

According to the City:

The Marijuana Regulation and Taxation Act (MRTA) sets a goal of giving half of all sales licenses to those who qualify as “social equity applicants.”

That includes:

  • Women-owned businesses
  • Businesses owned by people of color
  • Minority or Women Owned Business Enterprises, defined as a business in which women and/or people of color own at least 51% of the company
  • Small farm operators in financial hardship or farms operated by someone in an underrepresented demographic
  • Service-disabled veterans
  • People from areas negatively affected by past cannabis prohibition.

Jerri-Lynn here. The intention to redress past prohibitions are provisions are reinforced by the following provisions. Again, according to The City:

Applicants who fit one or more of those categories will be given additional priority if they:

  • Make 80% or less of their county’s median income. In the case of New York City, 80% of median income is $63,680.
  • Come from an area disproportionately impacted by past enforcement of cannabis laws
  • Were convicted of a marijuana-related offense before the bill was signed into law.

The City includes a further overview of measures the state intends to take to support entrepreneurs who go into the pot business. These are intended to compensate for the difficulties these businesses might face, due to continuing federal prohibitions on marijuana. In

New York State’s Urban Development Corporation will receive additional funding to provide assistance to social equity applicants — including creating a small business incubator that will dole out low- and no-interest loans to help pay for start-up costs.

“That’s the big missing piece of the puzzle that we haven’t seen in other states,” said Melissa Moore, the Drug Policy Alliance’s New York director.

“You can do priority licensing for social equity, but if there isn’t an avenue for people to be able to access capital it becomes a moot point because of federal prohibition it’s just about impossible for people to access the normal type of small business loans that would generally be available,” she added.

Nathaniel Gurien, CEO of a Manhattan-based cannabis consulting firm, told THE CITY the incubator, which will give financial advice to applicants, is crucial to the success of social equity efforts.

Gurien said the educational component could help everyday New Yorkers who may want to use existing skills to pivot to legal pot sales.

“Like in Times Square, you have all these tour bus hawkers,” said Gurien. “Some of those guys who may live in The Bronx and qualify for minority equity licenses, they can get a decent low-interest loan from one of these business development [agencies] with cannabis-related funds.”

The City includes further details on how the legislation is expected to assist underserved communities. In the interests of keeping this post to manageable length, I won’t discuss those further her, but refer interested readers to the full article.

Expungement of Past Convictions

As I wrote in my January piece, a key element of the new law is further expungement of previous marijuana convictions  There the devil is in the details, and as The City reports, some have have yet been determined:

The act is short on details and Cuomo’s press office didn’t respond to questions. But the legislation sets forth a timeline of expunging records within two years after the bill’s signing.

The new law builds on one the legislature passed in 2019. It now will provide for an expanded expungement of convictions for marijuana or concentrated cannabis offenses.

Expungement will apply not only to marijuana possession offenses, but also to some sales convictions: Per New York magazine:

And as Gothamist explains, if you were convicted of selling small amounts of weed — anything less than 25 grams — that conviction gets automatically expunged, too.

Stymie Illicit Drug Trade

Some proponents supported the legislation as a means to stymie the illicit drug trade. Per the WSJ:

State Sen. Liz Krueger, a Democrat from Manhattan who also sponsors the bill, said the law would end disparate enforcement practices that have disproportionately hurt communities of color. She said during a floor debate that the bill would reduce the illicit drug market.

“Right now, we have an enormous system of drug distribution in this state that is controlled by cartels,” she said. “To have a legalized system—which is the proposal of this legislation—ensures that the drug is safe from seed to sale.”

The Bottom Line

Proponents have many ambitions for supporting marijuana legalization in New York.  How well these will be achieved – or indeed, whether they will be achieved at all – depends on the details that state officials must still work out during the next eighteen months or so.

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