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While New York’s legal adult use market is facing difficulties in getting off the ground, as we detail below, those with conditional cultivator licenses have harvested their outdoor crops and are now in discussions with potential buyers as they sit on inventory, waiting for the green light to be able to sell.
Although not market-tested, one source in possession of a conditional cultivator license relayed possible price ranges for wholesale product, based on discussions between potential buyers and sellers. The source told Cannabis Benchmarks that he expects smokable flower to sell initially for between $1,500 and $3,000 per pound, pre-roll grade flower to be priced at between $800 and $1,500 per pound, and for biomass for extraction to go for between $300 and $1,000 per pound, probably averaging about $500.
Again, no legal adult use commerce is allowed to take place currently, as retailers have yet to become fully licensed and operational. Meanwhile, as we discuss just below, a lawsuit appears as it will delay the licensing process for nearly half of the first crop of retailers. Delays in getting the adult use market up and running could put downward pressure on prices, as flower and other plant material will degrade in quality with extended storage. Additionally, if only a small number of retailers are able to open initially, prices could also be driven down as sellers compete for limited shelf space.
Regarding the aforementioned lawsuit, Michigan-based cannabis firm Variscite has won a stay on the issuance of 63 of New York’s 150 Conditional Adult Use Retail Dispensary licenses (CAURD) in localities across the state, according to the New York Times. Under current rules, CAURD applicants must have a cannabis-related conviction in New York State and be either a resident of the state or have their corporate headquarters in the state.
The Michigan firm is suing under the U.S. Constitution’s Dormant Commerce Clause, which has proven to be an effective basis for challenging state laws that limit non-state residents’ participation in new cannabis markets. Variscite maintains the CAURD application rules violate the interstate commerce clause and claim the state could achieve its social equity goals by other means, but Variscite would suffer irreparable harm if the firm waited for the non-justice-involved application window to open. The owner of Variscite has been convicted of cannabis offenses, but not in New York, nor is he a New York resident. The company applied for a CAURD license but was unable to obtain one.
The judge sided with Variscite and prohibited the state from issuing licenses in Brooklyn, the Mid-Hudson area, western New York, the Finger Lakes, and central New York – areas apparently contemplated for business location by Variscite. The judge’s decision will effectively deny the awarding of licenses to 63 of the 150 successful CAURD applicants. It is likely the state will challenge the judge’s ruling.
New York’s adult use cannabis industry was never going to be easy to stand up and the lack of communication from the Office of Cannabis Management (OCM) has sparked speculation about when the first retail outlets might open. In addition to the lawsuit cited above, Politico is stoking fear the industry may face tough sledding due to the proliferation of illegal cannabis sellers in New York and lack of enforcement against them. OCM begs to differ, citing law enforcement actions from “Cheektowaga to the City of New York.”
Nevertheless, the article sees a confluence of events that will undermine New York’s legal cannabis market before it opens, including the California to New York cannabis pipeline. A spokesperson for New Frontier Data stated plainly that “we have not been successful in California getting people to adopt the regulated market,” inferring New York will likely suffer the same fate due to expansive and entrenched networks of illicit cannabis distribution and retail. Furthermore, New York is losing investment dollars, the article notes, saying the botched Ascend Wellness deal was due to “concerns over the state’s establishment of the recreational market and insufficient policing of the illicit market.”