New York Must Figure Out How to Fix Cannabis Mess, Hochul Orders

Gov. Kathy Hochul has told New York officials to come up with a fix for the way the state licenses cannabis businesses amid widespread frustration over the plodding pace of the state’s legal cannabis rollout and the explosion of unlicensed dispensaries.

The governor has ordered a top-to-bottom review of the state’s licensing bureaucracy, to begin Monday — weeks after she declared the rollout “a disaster” and called off a Cannabis Control Board meeting when she learned the body was prepared to hand out only a few licenses.

The main goal of the review, to be conducted by Jeanette Moy, the commissioner of the Office of General Services, is to shorten the time it takes to process applications and get businesses open, officials said.

The state Office of Cannabis Management, which recommends applicants to the board for final approval, received 7,000 applications for licenses last fall from businesses seeking to open dispensaries, grow cannabis and manufacture products. But regulators have awarded just 109 so far this year. The agency has just 32 people assigned to evaluate the applications.

Ms. Moy has “a proven track record of improving government operations,” the governor said in a statement, and will provide a playbook to turn around the cannabis management office “and jump-start the next phase of New York’s legal cannabis market.”

In an interview, Ms. Moy said her goal was to work with the cannabis management office “to identify ways in which we can support them as they look to streamline and move forward some of the backlogs and challenges that may be faced in this industry.”

The two-year-old agency, whose executive director is Chris Alexander, an activist lawyer who helped write the state’s marijuana legalization law, is facing mounting lawsuits and criticism over its process for awarding licenses. Applicants have filed lawsuits accusing the agency of overstepping its authority, giving conflicting guidance and discriminating against white men in its push for diversity.

Mr. Alexander acknowledged that there was more his agency could do to improve the licensing experience and said he believed Ms. Moy “would help us get where we need to be.”

Lauren Rudick, a lawyer who has helped clients submit over 100 license applications, said she welcomed the review and hoped that it would lead to the creation of a transparent process for submitting applications and resolving issues that arise along the way.

She said the licensing process was inconsistent in its guidelines and communication with applicants and lacked a process to resolve conflicts. She has watched with frustration as clients who took painstaking steps to do everything right were passed over for licenses that went to people who cut corners and seemed to benefit from personal relationships with agency officials, she said.

“We want to have a system that is repeatable and predictable, so that when someone comes to us for licensing, we can give them a sense as to what they can expect,” she said. “But as of right now, it’s ‘be flexible and pivot or die,’ because we just never know what the state is going to throw at us.”

The rollout has been delayed for months at a time by lawsuits, the state’s monthslong rule-making process and the state’s failure to provide the start-up loans and real estate that it promised to the first 150 dispensaries. The hiccups have left some businesses in financial distress and have hurt efforts to use a $5 billion industry to help small businesses and to repair communities hurt by the war on drugs.

Although officials have issued about 500 licenses for retail dispensaries since November 2022, just 85 legal stores have opened across the state. Only 10 of those dispensaries have received state real estate and financial assistance. The stores are far outnumbered by their unlicensed competitors, more than 1,500 of which have set up shop in New York City alone.

The rogue stores have defied orders to shut down, creating confusion among consumers and prompting worries that they were selling unsafe products to adults and children. Their rapid proliferation has fed frustration over the state’s slower approach to opening stores.

A top official at the cannabis management agency was placed on administrative leave last week after the owner of a processing company accused him of retaliating against her for speaking out in a report published by New York Cannabis Insider. The complaint against the official, Damian Fagon, the agency’s chief equity officer, was referred to the state inspector general’s office for investigation.

Mr. Fagon declined a telephone request for comment on Sunday. In his role, Mr. Fagon oversees the state’s efforts to reach the social and economic equity goals enshrined in the legalization law, which aims to have half of all licenses go to people harmed by anti-cannabis policies; women; racial and ethnic minorities; distressed farmers; and disabled veterans.

His accuser, Jenny Argie, said in an interview that Mr. Fagon retaliated against her company, Jenny’s Baked at Home, after New York Cannabis Insider published parts of a conversation with him about the state’s failure to punish bad actors, which she had recorded. A month after the article was published, her products were recalled — a first for the state — and her business has been temporarily shut down, she said.

Ms. Argie, one of hundreds of business owners who pivoted to the state cannabis program after the hemp industry went bust, said that the state’s recent actions have left her with no money to run her business and have ruined her reputation.

“What kind of government office are we running here?” she asked, adding, “I’m hoping that eyes get put on this — that if they can get rid of these people, we can start over and fix the problem.”

Annette Fernandez, a legalization activist and a managing partner of High Exposure Agency, a cannabis business development firm, said the retaliation claim was concerning because it might have a chilling effect on the industry’s willingness to give regulators feedback. She defended Mr. Fagon and said that sidelining him would distract from the state’s plan for equity, which was the goal that legalization activists had fought for the hardest.

“Regardless of his hubris,” she said, “he’s still the No. 1 advocate for equity.”

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