Commentary: Regulations are stunting cannabis market's growth

New York’s illegal or gray-area marketplace is thriving. These changes will help the legal market compete.

Restructuring New York’s new cannabis market to ensure success should be among the state’s top priorities as the agenda for the legislative session prepares to launch. That’s because too much is at stake for an industry projected to bring in $1.3 billion in sales in its first year -- and over 20,000 jobs in its first three years.

First, the nascent industry is overregulated, overtaxed and undersupported. These rules, while ostensibly well-intentioned, stifle competition and entrepreneurship. Currently businesses along the whole cannabis supply chain, from initial investor to final purchaser, are restricted and separated unnecessarily. There are 11 license categories; cultivators are prohibited from retail point-of-sale ownership or owning processing facilities -- to name a few inane prohibitions. Such separations stifle the ability to build trusted and consistent brands in the marketplace. It’s every man for himself with little cohesion.

Furthermore, the THC tax structure on a range of products from edibles to concentrates to flower is unlike that imposed on any other industry, with no health, public good or safety reason to justify it. In fact, it creates an even more expensive legal product driving the consumer to the illicit or gray market.

One of Albany’s first orders of business this session must be to repeal the THC tax, which is imposed on distributors and is based on the THC content and the form of their product (flower, edible, or concentrate). It's also urgent that the state examine haphazard regulations, many of which may simply be out of\ date and dissociated from the realities of New York’s emerging market.

Officials should also consider adding to the current governorship of the Office of Cannabis Management experts from others states who have successfully brought cannabis economies to market, to learn what’s worked and what has not worked. Finally, the city and state must finance and staff an equivalent of the city’s New York City Economic Development Corporation and the state’s New York State’s Empire State Development -- solely for the cannabis economy. A new economy, especially with social equity companies, requires this level of education, commitment and support.

New York’s illegal or gray-area marketplace is deeply integrated into the city and state, and it's thriving. Head shops, CBD shops, delivery services and open-air marketplaces are thriving, with little to no enforcement – and far lower costs – placing the entire enterprise at risk. Simply, costs levied onto every portion of the market and an absence of capital are automatically placed back on the consumer and force a choice between a too-expensive, lesser-quality product with minimal options in the legal market, and a far less expensive illicit or gray market with a wider selection.

Conventional wisdom for years has told New Yorkers the standard line that has guided the conversation elsewhere: that a regulated, legal cannabis market is the next big thing. That can still be true. But if Albany does not take the upcoming session to make these common-sense fixes, the new industry risks dying on the proverbial – and literal -- vine.

Original Article link: https://www.timesunion.com/opinion/article/cannabisregs-17686001.php

Ranson Shepherd and Joseph Davidsohn are the co-founders of the Wyoming-based Qanvus, a global cannabis infrastructure and management consulting firm.

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