Do NY’s new cannabis retail rules leave legacy behind? Plus, what to know about the potency tax & 280E. – newyorkupstate.com

Editor’s Note

I really hope you enjoy this week’s issue because we put a lot of work into it.

So let’s get to it:

First off, we have a deep dive into the concerns industry insiders have over the state’s proposed rules around conditional retail licenses. I stress proposed because the attorneys, operators and other experts interviewed for the article shared their insights in order to get these issues out in the open before the regulations are finalized. Call it “harsh yet constructive” feedback.

Next, reporter Sean Teehan spoke to attorneys, tax experts, businesspeople and consultants to better understand the debate around two controversial tax issues: The marijuana potency tax and Section 280E of the IRS code. What he learned from the tax experts in particular may be illuminating for small business owners.

Sean also interviewed two women business owners in the Shinnecock Indian Nation about their plans to operate seed-to-sale marijuana companies.

Freelancer Tom Wanamaker explores in his article how police departments across New York State are increasingly relying on Drug Recognition Experts (DREs) to determine whether drivers are guilty of operating while high. The problem, as one senior counsel with the NY Civil Liberties Union points out in the story, is that “the idea that DREs will lead to increased road safety is not grounded in science.”

Also inside: Peter Su, Senior VP with Green Check Verified, talks about the banking implications a business owner can expect if they participate in the black market; Pantheon Collective founder and CEO Tyme Ferris talks LGBTQ+ inclusion in social equity; and Ngiste Abebe, president of the New York Medical Cannabis Industry Association, weighs in on our investigation last week about unspent medical marijuana funds.

Lastly, an update about our March 31 event: We just confirmed that Senator Jeremy Cooney will be our keynote speaker. So don’t miss it!

As always, we’re open to any feedback, story ideas, criticisms, etc., at cannabis@nyup.com, by phone at 315-282-8576, or on our social media channels:

‘The world is watching’: Experts dissect NY’s proposed retail regs

by Brad Racino, NY Cannabis Insider | @bradracino

When New York’s cannabis office released draft rules earlier this month reserving the first wave of marijuana dispensary licenses for those most affected by the War on Drugs, politicians and progressives alike praised the state for its bold move.

“Offering the first retail licenses to people who have been convicted of marijuana-related offenses is a big step in the right direction,” said State Sen. Liz Krueger, “and will set the marketplace on a path where social equity applicants can compete successfully.”

Yet attorneys, business owners, and other industry experts told NY Cannabis Insider that the proposed regulations need a lot of work, and as currently written, don’t welcome into the fold the very people the state aims to uplift.

“I think that they have succumbed to the pressure of ‘go, go, go,’ instead of ‘take the time and get it right,’” said Ruben Lindo, the founder of BlakMar Farms and a former director of the Hudson Valley Cannabis Industry Association.

“This is the result of giving a baby that’s been screaming for 40 days a pacifier,” he said. “Meanwhile, the baby’s starving — a pacifier is not going to do.”

NY Cannabis Insider forwarded many of the experts’ concerns to Freeman Klopott, the spokesperson for the Office of Cannabis Management. Klopott responded:

”We’re thrilled to hear the ideas and response from New Yorkers about the regulations we proposed earlier this month and look forward to an ongoing dialogue when they post on the state registry for a 60-day public comment period, which is expected to occur March 30.”

He continued, “Still, we’d remind everyone that this is just a start as we’re working on regulations for the entire market and building support across all license types to ensure equity applicants have every opportunity to not only obtain a license, but also build businesses that succeed over the long-term.”

Experts interviewed acknowledged the unique challenge facing the state: Developing a first-of-its-kind program that addresses the disparate impact overenforcement has had on Black and brown populations while also setting up for success a complex ecosystem that is influenced by a variety of stakeholders — political, corporate and legacy, to name a few.

However, all those interviewed — six cannabis attorneys, a legacy operator, a consultant, and a business leader and advocate — want to see the state address their concerns with the draft regulations as soon as possible.

Some believe it’s essential to save an industry that has barely begun.

“If we get it right, the world is watching us,” Lindo said.

“If we don’t get it right, it’s a failed, flawed program and it will never, ever, ever take shape.”

A new class

Front and center in the state’s proposed rules for conditional retail licensing is priority for “justice involved” individuals or businesses, roughly summarized as someone formerly convicted (not arrested) of a marijuana-related offense, or someone with a direct relationship to that type of person.

However, the voluminous Marijuana Regulation and Taxation Act passed last year makes no mention of this applicant pool.

Therefore, the state’s recent actions may create a new license class — one reserved for a narrowly defined subset of people — and open the door to potential lawsuits.

“This is going to be ripe for litigation, I fear,” said Dave Holland, an experienced cannabis attorney, president of the New York City Cannabis Industry Association and executive director of Empire State NORML.

If the goal of prioritizing people under conditional licenses is to make sure smaller players have a competitive opportunity in a market that will include multistate operators and big money, Holland said, these new rules define specific individuals who “may not be the people that were envisioned to do that under the MRTA.”

Holland and his organizations played an active role in drafting policy recommendations and lobbying for the MRTA, and he said he respects and is friendly with several of the people who are responsible for crafting the new regulations.

However, he said, “there’s a lot that I cannot wrap my head around.”

Jeff Schultz, a partner at Feuerstein Kulick who advises cannabis industry operators, agreed with Holland that some lawyer is likely to sue over the rules as currently written.

But, he added, “Anybody who is litigating the legality of this licensing round for the sake of slowing things down, I wish those people the worst of luck, because this program needs to get off the ground immediately.”

Despite their concerns over the state’s proposed rules, both attorneys said they appreciate the magnitude of the work ahead for the Office of Cannabis Management and Cannabis Control Board, and both made it a point during their interviews to express the admiration they have for the state’s efforts.

“They are trailblazing in this industry with solutions for restorative justice that no one has applied yet,” Schultz said, though he recognized that’s also what makes the endeavor a double-edged sword.

“While it’s an amazing effort and task, it’s also a monumental task,” he said.

Discouraging legacy

Those interviewed are also concerned about the disclosures required for the first round of licensing: Ownership structures, organizational documents such as certificates of incorporation, documentation that the applicant will obtain insurance, the name of every financial institution linked to an applicant’s business, and audited financials.

Both Holland and Schultz told NY Cannabis Insider that mandating that level of disclosure without offering some form of amnesty discourages the same legacy operators the state says it’s hoping to incorporate.

For example, if during an audit — proof of which is required to apply — an accountant finds something amiss, “it’s disclosable to the IRS,” Holland said.

“So, then you’ve opened yourself up to various tax consequences,” he said. “There’s no way for them to disclose that without walking into a theoretical indictment.”

Schultz strongly suspects the state is aware of this issue, but until the application comes out, “it’s unclear how applicants will walk the tightrope between disclosing their professional history and creating potential legal exposure for themselves,” he said.

While including legacy operators among the first wave of applicants is not only equitable, experts said it’s also a smart way to jumpstart the New York cannabis industry with proven and knowledgeable people.

Legacy operators have worked “in a highly competitive marketplace under scrutiny, under penalty of life and liberty,” said Lindo of BlakMar Farms, who is currently converting 40,000 square feet of a building in the Seneca Territory into a cannabis education and cultivation center.

“And if they were successful in doing it under those circumstances, can you imagine how successful they will be when they’re able to operate within the confines of a well-regulated industry that has an open and competitive marketplace that allows them to bring their brand, customers and knowledge into the marketplace?”

Not welcoming them from the onset is, according to Lindo, a historically bad idea.

“Every time we leave the legacy market behind, they get organized, and they get stronger — it’s happened in every single jurisdiction where cannabis has gone legal,” he said, adding that he believes — like Holland and Schultz — that offering amnesty and “safe harbor” is the way to go, and will lead to more sophisticated products, delivery methods, “everything.”

“Let them come in with that knowledge and help bolster this industry,” he said.

The language of criminal history

Since former Gov. Andrew Cuomo signed a bill decriminalizing recreational marijuana possession in 2019, the state has removed from criminal search history results more than 300,000 convictions for low-level marijuana possession and sale, according to a spokesperson for the Division of Criminal Justice Services. In addition, everyone in custody for solely a marijuana conviction has been released and has had those convictions expunged.

“I can’t front, they’re doing a better job than most when it comes to that,” said Charles Johnson, an attorney and CEO of LeafSpotz, a Black-owned B2B cannabis transportation and logistics software company in New York.

“For instance, in New Jersey, you’re still seeing expungement clinics,” he said. “Here, it’s supposed to be automatic.”

In a way, the new conditional regulations piggyback on that progress: An applicant for a retail license must have been convicted of a marijuana-related offense in New York State prior to the March 2021 signing of the MRTA. Or they must have had a parent, legal guardian, child, spouse, or dependent who was convicted before that time.

However, as several lawyers pointed out, a conviction is very different from an arrest, and neither the MRTA nor the new regulations address that discrepancy.

“That’s another issue that I have a problem with,” said Lauren Rudick, the co-founder of Hiller, PC’s cannabis law practice. “Because an arrest can be just as destroying for someone’s life as a conviction, depending on where they’re from, and what the circumstances are.”

“And that should be fleshed out,” she continued. “And there should be a little bit of a call to action, because right now, we’re rulemaking in New York, and people have the opportunity to put forth some testimony.”

Also, what constitutes a marijuana-related offense? Tom Hughes, a senior associate at Lippes Mathias, said his firm has heard that question from a “tremendous amount of people” since the regulations were published.

Does a marijuana-related offense include offenses that have been reduced to something non-marijuana related, or non-convictions where people have had money or property confiscated in relation to the suspicion of marijuana-related activity?

“Anyone who takes the time and effort to move forward with this is putting a significant amount of capital at risk to begin this process,” said Hughes, a co-team leader of the firm’s cannabis practice group.

“And before they do that, it would be nice to have some additional clarification on exactly who the people are that qualify,” he said. “It doesn’t seem like it should be a vague term, but as we started to get all these questions, we realized that there is some specificity lacking, and some clarification certainly is needed.”

Another question posed by legal experts interviewed: What about people with out-of-state arrests?

Shultz, the attorney with Feuerstein Kulick, said he interprets the new rules as disqualifying anyone with an out-of-state or federal conviction.

He told the story of one of his clients who lives in New York, who is beloved by his community, who spent over five years in prison, then emerged to become a very successful businessman. But his arrest and conviction were out of state.

“I can’t think of anybody more qualified than this person,” Schultz said. “This is someone who literally owned a very profitable business, got arrested for a non-violent cannabis offense, spent time in prison, rehabilitated, is back out and running a successful company — and he doesn’t qualify.”

“I don’t know what the public policy is behind that,” Schultz said, adding that he expects the issue to be raised during the regulations’ 60-day public comment period.

In general, the experts NY Cannabis Insider interviewed for this story remain optimistic about the future of New York’s cannabis industry. They just want to get these concerns out in the open while there’s still an opportunity to remedy them.

“For me, most of these issues — they require clarification,” Schultz said.

“I’m not saying that they’re wrong. They are just ambiguous.”

— Lauren Rudick and Charles Johnson will speak about strategizing, pitching, and securing capital for cannabis businesses at our upcoming conference on March 31.

Get tickets now for our March 31 conference!

Tickets for our NY Cannabis Insider conference on March 31 are now available! Hear expert guidance about financing your cannabusiness, sourcing and securing financial capital, understanding (and possibly changing) your area’s opt-out status, and working with and respecting Native American cannabis operations.

Our stellar lineup of speakers includes:

• Christine De La Rosa, The People’s Ecosystem
• Chenae Bullock, Shinnecock’s Little Beach Harvest
• Mary Jane Oatman, Indigenous Cannabis Coalition & THC Magazine
• Matthew Leonardo, Hinman Straub P.C.
• Lauren Rudick, Hiller, PC
• Charles Johnson, LeafSpotz
• Peter Su, Green Check Verified
• Emily Leander, GreenWrap Insurance Services
• Louis Beierle, LeafLink
• Mark Byassee, FingerLakes Cannabis Company
• Ellie Siegel, Longview Strategic

Our virtual platform offers conference-goers the ability to network between panels, which is an excellent opportunity to connect with other industry professionals.

See our past speakers and topics and purchase tickets to the March event here.

While sponsorship for this event is sold out, we are now soliciting sponsors for our May 20 in-person conference in the Capital Region. Contact Lindsay Marlenga, senior marketing director, for more information.

Getting into the weeds of the potency tax and 280E

by Sean Teehan, NY Cannabis Insider | @SeanPTeehan

As New York works to get its legal adult-use cannabis industry off the ground, advocates and businesspeople in the space are concerned with two controversial tax issues.

The first is a potency tax on businesses based on THC content, the second is an IRS code known as Section 280E, which prevents cannabis businesses from writing off certain expenses.

Many in the industry think both measures are misguided, but tax experts interviewed by NY Cannabis Insider warn about the possible repercussions of repealing these policies.

New York’s marijuana potency tax

New York’s potency tax structure for the cannabis industry is a departure from earlier legal cannabis states like Massachusetts, but in line with Connecticut, which also plans to tax marijuana partially based on THC content.

New York’s Marijuana Regulation and Taxation Act taxes distributors:

• Half a cent per milligram of the amount of total THC for flower
• Eight-tenths of one cent per milligram for concentrates
• Three cents per milligram for edibles.

That’s in addition to a 9% sales tax and possible further municipal taxes.

“I think that the THC potency tax has all negatives — I think it has no redeeming qualities,” said tax attorney Jason Klimek, co-leader of the Cannabis Team at law firm Barclay Damon.

Klimek, who is also a member of the New York State Bar Association Committee on Cannabis Law, told NY Cannabis Insider that a major problem with the potency tax is that it could drive New York’s weed prices higher than those in other states.

He reasoned that since New York will have a sales tax in addition to the potency tax, the overall tax rate for flower cannabis could reach 30% – or possibly 55% for edibles – compared to Massachusetts’ maximum 20% rate, which is tied to sales.

That could mean average retail prices of $70 per eighth of flower in New York, Klimek said, which is more expensive than legal weed in Massachusetts and about double the price that can be found on the illicit market, putting state licensed businesses “at a competitive disadvantage.”

Regulators may also struggle with people trying to game the system, Klimek said.

For example, the buds at the top of a cannabis plant often contain more THC than those at the bottom. This could tempt some businesses to seek a lower tax rate by testing samples from the bottom – where the THC content is lower – while still selling a high THC product.

Aside from the possibility of inaccurate reporting, the government’s laser-focus on THC could create a false impression to customers that the molecule is the only important metric to a user’s experience, said Sally Nichols, president of THC CBD for Bloom Farms, a California-based company that sells hemp in 37 states including New York and cannabis in California.

“Out of the gate, we will be educating New Yorkers that THC is the driver of their experience, and we all know that is not entirely true,” said Nichols, who pointed out that cannabinoids like CBD and terpenes are important parts of user experience.

She added that she can’t think of another consumer agricultural product that’s taxed based solely on a single molecule, and that innovation around cannabinoids like THCV, THCA, relabeled Delta-9 THC and others could complicate the tax structure.

“If you’re only going to look at THC and you’re going to tax based on THC content, you’re going to create an environment where only THC is valued,” she said.

The tax could also put a squeeze on local cultivators, said Kaelan Castetter, founder of business consulting firm Castetter Cannabis Group and co-founder of the New York Cannabis Growers and Processors Association. That’s because the potency tax will be imposed on distributors who will seek out lower prices to offset the burden, and large multistate operators are in a better financial position to offer lower prices than smaller cultivators only working in New York, Castetter said.

This problem could become more pronounced as the market matures, he added. Legal cannabis markets typically begin with high prices that recede as supply increases. Since the THC tax isn’t tied to sales prices, cultivators will pay the same tax rates even as the price for which they’re able to sell their goods falls.

“Really, you’re setting up cultivators to be in a position down the line where they’re not able to eke out a profit, and the ones that will are the biggest ones,” Castetter said.

However, not everyone thinks the potency tax is an altogether bad idea.

Lauren Rudick, co-founder of law firm Hiller, PC’s cannabis law practice, told NY Cannabis Insider that the tax could encourage innovation by incentivizing growers and sellers to offer products that are lower in THC but create a better user experience by balancing other cannabinoids and terpenes. It also presents an opportunity for the industry to better educate customers who may think THC levels are solely responsible for the experience a product induces.

“I see this as a tremendous opportunity for people to become educated on the endocannabinoid system,” Rudick said. “I think it’s going to spur some really unique product development.”

Taxing based on THC potency also makes a lot of sense from the state government’s perspective, said Ulrik Boesen, director of excise tax policy at The Tax Foundation, an independent tax policy nonprofit.

Since THC is one of the few commonalities between flower, concentrates and edibles, it seems logical to tax based on the molecule, Boesen said. Additionally, it’s in the state’s best interest to avoid pinning tax revenues to sales, as prices will likely start out high, but fall as the market matures.

“It’s really hard for states to forecast revenue if it’s based on the price of a volatile commodity. It’s much easier for them to forecast volume,” Boesen said. “If you do price-based tax in a state, the revenues are going to go down, too, and it’s an issue, because most states are earmarking this revenue for specific purposes.”

Patrick Oglesby, founder of the tax policy nonprofit Center for New Revenue, said he thinks it’s important for states to experiment with different cannabis-taxing methods.

Federal legalization will probably happen eventually, he said, so states can serve as laboratories that find the costs and benefits of different approaches.

How does 280E affect a businesses’ bottom line?

Oglesby also believes many small cannabis businesses might want to rethink their position on Section 280E.

That part of the tax code prohibits those engaged in the business of trafficking certain controlled substances – including cannabis – from writing off many business expenses on their taxes.

The section is largely reviled in the cannabis industry, and New York lawmakers are considering legislation that would enable cannabis businesses to write off some of the same expenses as other legal industries on their state taxes.

Castetter said that while the state legislation won’t amount to huge savings for marijuana businesses here – since their federal tax bills are higher – it does send the message that the state supports cannabis entrepreneurs. And like many in the industry, Castetter ultimately wants 280E repealed on a federal level.

However, Oglesby thinks getting rid of 280E puts smaller businesses at a further competitive disadvantage with large multistate cannabis corporations.

Businesses in the industry are already allowed to deduct “cost of goods sold” from their federal taxes despite 280E, Oglesby said. This means a cultivator can deduct things like the cost of fertilizer, greenhouses, and other expenses related to growing marijuana.

However, 280E prevents businesses from deducting costs related to things like advertising and a large number of retail employee salaries, which are costs more heavily incurred by larger companies, he said.

“It turns out that small businesses in general have a lot less of these selling expenses than big businesses do,” Oglesby said.

Castetter said he understands that reasoning, but said large cannabis companies are also adept at separating their business into subsidiaries to lessen their overall tax burden.

The state’s registered operators “are definitely in a better position on 280E, and vertically integrated operators in general,” Castetter said.

He added that it can be difficult for cultivators to document costs of goods sold, and may still be unable to write off certain costs.

—Sean Teehan is a reporter for NY Cannabis Insider. He can be reached at 508-498-6884 or by email at steehan@nyup.com.

A slightly different take on unlicensed cannabis sales [Guest column]

by Peter Su, Senior VP at Green Check Verified

Recently, stories of unlicensed cannabis sales in New York have been making the rounds. To the operators of such businesses, I have some advice:

Don’t do it, it’s not worth it.

Fear not, I don’t intend to expound on the usual arguments for or against. I would like to point out something else, just as food for thought: These few months of unlicensed sales may ruin your future in the industry because it may prevent you from getting banking.

Perhaps you have heard? In most states, there are just a handful of banks or credit unions servicing the cannabis industry. This relative lack of competition coupled with a heavily regulated industry means financial institutions are highly selective and have stringent onboarding processes.

It will be no different in New York State.

While every financial institution will undoubtedly have its own set of criteria and considerations when it comes to onboarding, I’m not aware of any that do not run some sort of a negative news scrub.

Consider this: Even after putting a cannabis business through a lengthy onboarding process with enhanced due diligence, there still remains a very potent and ongoing risk — inversion/diversion. That is to say, the practice of either legal goods entering the black market, or black market goods entering the legal market.

Don’t think a legal business would risk a license? Recent police operations in Oklahoma resulted in the arrest of 13 individuals and netted some 100,000 plants and over $500 million worth of processed marijuana. These were licensed businesses in a medical state. These licensed operations are growing marijuana legally, but selling illegally.

In California, a recent lawsuit brought forth by the cannabis industry against state officials coined the phrase “burner licenses” — licenses applied for and approved, but simply for the facade of a licensed business.

These licensed businesses can legally buy weed bulk on the wholesale market, then move the products on the black market and potentially interstate.

Other examples abound, the point is — it’s happening, and let’s face it, there’s even some incentive to do so.

How does a bank mitigate this risk? Well, it’s a little bit like a credit report: Is there any history to review? What does that history suggest? Presumably, your intention is to join the green rush and pursue one of the coveted licenses from the Office of Cannabis Management.

Put yourself in the shoes of the bank compliance officer reviewing your request for banking. One quick search will turn up the fact that in the not-too-distant past, you openly flouted cannabis licensing regulations, and worse yet, perhaps even ignored cease and desist orders from the OCM itself.

Might this factor into the decision?

— Peter Su is a Senior Vice President with Green Check Verified, which provides technology and advisory services to financial institutions working within the legal cannabis industry.

In wake of legalization, NY police focus on impaired driving

by Tom Wanamaker for NY Cannabis Insider

In their continued enforcement of state laws against impaired driving, New York’s police will increasingly rely on Drug Recognition Experts (DREs) to determine whether motorists accused of driving under marijuana’s influence are actually guilty of doing so.

As scientifically based impairment standards and proven real-time testing equipment for marijuana intoxication remain elusive, New York appears, for now at least, to have gone all in on DREs — a readily available but potentially thorny response.

Freeman Klopott, spokesman for the state Office of Cannabis Management, said that revenues collected under the Marijuana Regulation and Taxation Act will be used to increase the number of certified DREs deployed at law enforcement agencies throughout New York, while adding that the law also directs financial support “to research emerging tools that could be used to accurately detect whether a driver is impaired by cannabis.”

Patrick Phelan, executive director of the New York State Association of Chiefs of Police, welcomes DREs and described them as “specially trained officers to determine whether a person is under the influence of drugs.”

A certified DRE himself, Phelan told NY Cannabis Insider that a DRE candidate trains for two weeks to understand the effects of various drugs, including marijuana, on the human body, and how to recognize when a person is under the influence of a variety of substances.

In practice, a DRE interviews the suspect and arresting officers, then conducts a series of tests, including measuring eye reactions to certain stimuli and monitoring the accused’s blood pressure and pupils, to determine whether an individual is under the influence of a drug, and which drug (or drugs) may be involved.

“There are only a small number of DREs in New York now,” Phelan said. “We need more money for DREs and training to increase their number in the state.”

Some New York police agencies are already moving in that direction.

Sergeant Michael Curley, spokesperson for the Utica Police Department, said his agency foresees “a need for new DREs, which will be funded solely by the department.” He added that through a partnership with surrounding Oneida County, his department has “access to the latest technology and recognition experts to detect impairment while operating a motor vehicle.”

With about 100 trained DREs on staff, the NY State Police are “training all troopers in the Advanced Roadside Impairment Driving Enforcement program, which provides additional training in observing and identifying the signs of impairment related to drugs, alcohol or both,” according to an emailed statement from the department.

The DRE concept, however, does not come without baggage.

‘Debunked’

The original idea of a law enforcement drug assessment was conceived in LA in the 1970s. Then, in the early 1980s, the National Highway Traffic Safety Administration used the LA program as a model for a nationwide effort.

The administration then commissioned two of the three studies debunked below.

Questions about DRE accuracy surfaced in 2013 when researcher Greg Kane published an analysis of three scientific studies frequently cited in court cases involving the accuracy of law enforcement Drug Influence Evaluations (DIEs).

Kane’s research found that all three of them used faulty methodology, and concluded, “The accuracies reported by these studies do not quantify the accuracy of the DIE process now used by US law enforcement. These studies do not validate current DIE practice.”

Further concerns appeared in 2019, when the Boston Globe reported that defense attorneys and civil liberties advocates in Massachusetts — which had legalized recreational-use marijuana three years prior — said their state’s DRE program was “unscientific, deeply flawed, and could punish innocent people.”

The Globe said that the DRE program “has been rejected in numerous cases by Massachusetts judges who ruled it lacks scientific validation. Studies have found that the program’s claims of accuracy are overstated, and that it is biased and prone to false alarms.”

Michael Sisitzky is Senior Policy Counsel with the New York Civil Liberties Union. He told NY Cannabis Insider that his organization is “deeply skeptical” of the use of DREs to determine a motorist’s level of impairment.

“They’ve never been rigorously tested and validated as a means to detect impairment, whether due to marijuana or other types of drugs,” he said. “The idea that DREs will lead to increased road safety is not grounded in science.”

Sisitzky noted that law enforcement officers already have “tools in their toolkit” — namely the standard roadside sobriety tests currently in use — to determine driver impairment.

And while DREs have the word “expert” in their title, Sisitzky called this “misleading” because “it implies expertise above and beyond what they actually have.”

“At the end of the day, [DREs] are offering an opinion, which could run the risk of being informed by their own personal biases,” Sisitzky said. “What we’ve seen is that DREs are not the answer.”

While the use of DREs may present challenges for law enforcement, the greater obstacle — accurately determining a driver’s level of marijuana intoxication while behind the wheel — may leave police officers little choice.

Unlike alcohol, which leaves the human body within a few hours, THC — marijuana’s psychoactive ingredient — remains present in the body (metabolized into fat cells) long after its effects have worn off.

Thus, while blood or saliva tests may detect THC, this does not necessarily indicate that the individual was under the influence at the time of the test.

Research published last December by the Lambert Initiative at the University of Sydney in Australia said that “blood and oral fluid [saliva] THC concentrations are relatively poor or inconsistent indicators of cannabis-induced impairment. This contrasts with the much stronger relationship between blood alcohol concentrations and driving impairment. The findings have implications for the application of drug-driving laws globally.”

The ideal solution for law enforcement is the development of a tool to determine, in real-time, whether an individual is under the influence of marijuana, and one that provides an accurate, fair, and scientific standard of THC intoxication.

“The private sector will take care of that,” Phelan said, referring to detection devices.

In fact, portable THC breathalyzer devices that purport to measure real-time marijuana intoxication are currently in development.

One such handheld device, built by Hound Labs in Oakland, is promoted as a “highly sensitive” and “fair” testing solution that, according to the company’s website, “differentiates between the person who smoked cannabis legally and responsibly at a BBQ on Friday night, versus their colleague who smoked Monday morning on the way to work.”

A spokeswoman for Hound Labs told NY Cannabis Insider that the company’s breathalyzer is not yet available, but “will be over the next several months.”

Cannabix Technologies Inc. is a publicly traded company based in Vancouver that says it has created a handheld THC breathalyzer that performs what amounts to a smell test on a person’s breath.

The tool’s underlying technology “uses microfluidic sensors coupled with machine learning algorithms which operates under principles similar to mammalian olfaction systems,” according to the Cannabix website.

Cannabix did not respond to requests for comment.

None of these tools take into account the growing popularity of THC-infused edibles — candy, cookies, etc. — which have intoxicating effects that cannot be measured by a person’s breath.

Joseph Sinagra is a member of the Cannabis Industry Association chapters in both New York City and the Hudson Valley. He is also the chief of the Saugerties Police Department.

“No, I’m not a user,” he said during a recent interview. “I want to see that this is done right. If it’s done right, I think it’s a good business. It’s a good revenue source for the state and localities.”

Sinagra agrees that law enforcement agencies “don’t have nearly enough DREs to address the issue.” But he laments that they may not be the most effective way to enforce the law, offering the following scenario:

“Maybe I see a blunt or a joint in the car and detect odor in the vehicle,” Sinagra said. “Odor doesn’t give me probable cause, but the blunt or joint does. If there is no alcohol in the person’s system, I bring in a DRE. If the DRE determines drug influence, the person is arrested.”

But the problem becomes that “the DA probably won’t be able to prosecute because we don’t have definite scientific evidence that the person’s intoxication was the result of cannabis,” Sinagra continued.

“So we have to break down where the person was during the previous three or four hours, get witnesses, and put the puzzle together. But how much time and energy are being spent?”

In the end, Sinagra believes that New York State jumped the gun.

“I don’t have an issue with legalization, but we did it before we addressed concerns about real-time detection without roadside instruments to test people,” Sinagra said.

“When it comes to drinking and driving, we have established thresholds. But with cannabis, they haven’t been established. We have no roadside testing equipment available for THC testing. There is no way for a DA to prove when someone is under the influence — there is no real-time detection.

“We put the cart before the horse in New York,” Sinagra said.

State medical cannabis industry association responds to NY Cannabis Insider’s recent investigation

Last week, we published an investigation that showed the state has been sitting on a few million dollars garnered from medical marijuana taxes since the program began in 2014. That money is supposed to fund addiction support and criminal justice services.

After publication, we heard from Ngiste Abebe, the president of the New York Medical Cannabis Industry Association. Here’s what she had to say:

“We were surprised to hear that funds from the medical tax were unspent. It’s definitely a sign that it’s time for New York to stop taxing medical cannabis at 7% and treat it the same as over-the-counter and prescription medicines, which are taxed at zero percent. As for the funds that have already been collected, I hope they can be put toward youth use prevention or to make medical cannabis more accessible for the patients who cannot afford the out-of-pocket costs of getting a medical card.

“New York lags the country significantly in patient participation and access, with similar states like Florida approaching 700,000 registered patients while New York still has only 125,000.”

NY Cannabis Insider will continue to follow this story and report back with any updates.

Seed-to-sale on sovereign lands

by Sean Teehan, NY Cannabis Insider | @SeanPTeehan

Regulators of New York’s adult-use cannabis industry are still working out the nuts and bolts of how they will oversee marijuana businesses in the state, but that’s not the case for Indigenous tribes like the Shinnecock Nation.

According to the Marijuana Regulation and Taxation Act, any of New York’s nine recognized tribes must reach a compact with the state if they want to buy weed from, or sell it to, businesses regulated by the Office of Cannabis Management.

However, each of these tribes, including the Shinnecock, occupy sovereign land on which tribe members and officials vote on and establish their own rules regarding a host of issues, including drug policy.

So far, no tribe has entered into a compact – a negotiated agreement between tribal and state governments – to allow cannabis commerce between companies on tribal territory and businesses regulated by the OCM. And because officials on these sovereign territories operate under different public records rules than New York State, they’re not required to disclose how they oversee marijuana.

Ahead of NY Cannabis Insider’s March 31 conference that will feature a panel about the marijuana industry on Indigenous land, two companies from the Shinnecock Nation spoke opened up about getting their businesses off the ground.

The Shinnecock Nation, which holds some 900 acres near the eastern tip of Long Island, legalized medical cannabis on their territory in 2016, and approved recreational marijuana last September. Since then, businesses like Little Beach Harvest and Shinnecock Hemp have started creating vertically integrated cannabis companies they plan to open in coming months.

This is “a community that has pretty much been left out of every industry that has started in this land,” said Chenae Bullock, managing director of the Shinnecock-owned Little Beach Harvest. “We’re going to be able to do what is best for the citizens of the Shinnecock Nation, and one of the best things is for us to be self-sufficient.”

New York’s MRTA prohibits adult-use cannabis businesses from owning multiple parts of the supply chain – except for microbusinesses and pre-existing medical operators expanding into the adult-use market. That means a company that grows weed can’t distribute it or sell it at retail, and retailers can’t grow or process the products they sell.

That’s not the case for the Shinnecock Nation, where the tribal government has already established rules and regulations for its cannabis sector, Bullock said.

Sovereignty on Indigenous tribal territory dates back hundreds of years in the U.S., according to the federal Bureau of Indian Affairs.

During the 18th and 19th centuries – a period replete with tribal land grabs and massacres of Native Americans – the U.S. government established treaties with Indigenous nations.

These “contracts” established certain rights, benefits, and conditions for tribes that agreed to relinquish millions of acres of their land to the federal government.

The U.S. has an ugly history of ignoring these treaties, but by law they declare tribal governments to be “the supreme law of the land upon which federal Indian law and the federal Indian trust relationship is based.”

Shinnecock officials have opted to allow for vertically integrated marijuana companies, and both Little Beach Harvest and Shinnecock Hemp plan to operate seed-to-sale marijuana companies.

Little Beach Harvest

A joint venture with Vancouver-based TILT Holdings, Little Beach Harvest will operate as a destination retail and “wellness lounge” consumption site, Bullock said. The plan is to create an inviting space where customers spend time learning about cannabis’ healing properties and Shinnecock culture.

“This is an opportunity for us to be able to educate so many people; not only just on the Indigenous perspective of cannabis … but who we are as a people,” Bullock said. “We’re able to show them who we are through wellness.”

As part of the partnership, TILT will spend up to $18 million planning, designing and building a 60,000-square-foot facility for cultivation, processing and extraction; a two-story dispensary; and the wellness lounge, according to the company. The dispensary and lounge will sit on Montauk Highway near Southampton’s business district, Cooper’s Beach, and Shinnecock Hills Golf Club.

Bullock said that in addition to capital, TILT brings to the table experience in running cannabis cultivation, processing and retail operations in multiple states. The corporation is also on board with her vision of using Little Beach Harvest to help teach people about Shinnecock heritage.

“TILT has been extremely open to learning our culture, our story,” Bullock said. “Once your partners understand that, you can work together to really be successful in the entire endeavor.”

New York’s Office of Cannabis Management hasn’t announced any rules regarding commerce between tribal and state-regulated businesses, but Bullock said Little Beach Harvest would like to carry products from New York marijuana companies and provide for New York dispensaries.

“It’s really a win-win for all of us, if that is the case,” Bullock said.

Shinnecock Hemp

About a year after Congress legalized and regulated hemp production with the 2018 Farm Bill, Rainbow Chavis launched Shinnecock Hemp with her family.

Chavis told NY Cannabis Insider that she jumped on the opportunity to start a business focused on the medicinal qualities of hemp and its extracts, but viewed growing and selling marijuana as “the longer-term goal” from the start.

A family business made up of five people, Shinnecock Hemp grows between 30 to 50 pounds of outdoor hemp per year, and sells most of it via the company’s website, Chavis said.

She’s not yet sure how much weed they’ll grow when they shift to marijuana, but the company recently hired a growmaster with over 35 years of cannabis growing experience, Chavis said. Shinnecock Hemp is currently researching which strains they should grow and what clientele they should seek, and can be fully operational in the next four to six months, she said.

“We’re going through those kinds of figures to see what we’re going to be able to grow this year,” Chavis said. “Our team has really come together; it was just beautiful how it all evolved, and everybody has their own expertise.”

LGBTQ+ in social equity: A conversation with Pantheon Collective’s Tyme Ferris

When New York passed the Marijuana Regulation and Tax Act, legislators made it a point to put social equity front and center of the newly legal adult-use cannabis market. But Tyme Ferris sees a gaping hole in that effort.

As the founder and CEO of Pantheon Collective – which plans to apply for a microbusiness license in New York – Ferris is trying to persuade lawmakers to include LGBTQ+ individuals in the industry’s social equity status.

Groups currently eligible for that status in the state’s cannabis industry include people disproportionately harmed by enforcement of cannabis prohibition, minority- or women-owned businesses, distressed farmers and service-disabled veterans.

“If we’re looking at this picture from communities that have a direct line to an impact from cannabis prohibition, LGBTQ+ absolutely has to be on that list,” Ferris said.

Ferris has met with state legislators and members of Gov. Kathy Hochul’s staff, urging them to open social equity status to LGBTQ+ individuals, he said.

Ferris sat for an interview with NY Cannabis Insider about that effort, and its wider implications.

This interview has been edited for length and clarity

NY Cannabis Insider: Can you tell me about the work you’ve done to try to get LGBTQ+ included in New York cannabis social equity status?

Tyme Ferris: When my business partner and I first started coming up with our vision, we were looking at a landscape very typical to other states that have become legal. New York started rolling out its social equity program, and we saw the verbiage, we saw that they decided to define it specifically as communities disproportionately affected by the prohibition of cannabis and its enforcement. And then it started listing some of those communities, and for the first time I had this realization – myself and my business partner, Tom Kupiec – we’re like, ‘Well, if they’re going to start listing something like that, and if we’re looking at this picture from communities that have a direct line to an impact from cannabis prohibition, LGBTQ+ absolutely has to be on that list.

NYCI: Why is that?

We LGBTQ+ individuals are incarcerated and approached by police at a significantly larger level than our heteronormative counterparts. Yes, our BIPOC brothers and sisters in the LGBTQ+ community are on the top of that list. But our transgender brothers and sisters, regardless of color, are often abused through various forms of police brutality, and cannabis is just one way to throw us weirdos from the LGBT community in prison, to penalize us, to use us as scapegoats and to attack us because cannabis is easy to smell.

Additionally, the HIV and AIDS epidemic of the ‘80s: We’ve known for a substantial amount of time that marijuana can at least alleviate a majority of the symptoms of those with HIV/AIDS. The long and the short is that this is a simple, homegrown medicine that should have been available to us. And willingly, by those that represent us, New York chose until 2015 to ignore that fact, and deny that medicine for people.

NYCI: You’ve been meeting with legislators and officials from Gov. Kathy Hochul’s office about including LGBTQ+ people in social equity status for the cannabis industry, right?

We’ve been having meetings with everybody under the sun that we can get.

NYCI: How have those meetings been going?

As soon as we start explaining the history of it, and we roll this argument out, you see the light bulb go off in everyone’s heads, you see that they are receptive to it, and they’re realizing, ‘Oh, yeah, I had no clue of this. But you’re right!’

NYCI: Tell me about the reception you’re getting with this argument within the LGBTQ+ community

We’re trying to figure out how to educate our own community as to our history and our plight. I recently met with the new director for the Capital Region Pride Center, and he brought up this excellent point that this power vacuum that’s happening in the LGBTQ+ community is also a result of the HIV/AIDS crisis.

We lost thousands of individuals in New York State alone who would have been our politicians, our government representatives, our activists or business leaders, who all perished as a result of the virus. We’ve achieved marriage equality, and surrogacy rights; that’s great, but we’re still not on the same playing field as our heteronormative, cisgender, white male counterparts.

NYCI: How could inclusion of LGBTQ+ people in social equity status for New York’s cannabis industry further other efforts for LGBTQ+ inclusion in things like minority and/or women-owned business enterprise (MWBE) status?

This will help force them into a stance where they have to acknowledge us. They have to work to incorporate us, our culture, and who we are into our communities. And then it’s just about building better business. So many bright and brilliant LGBTQ+ individuals that oftentimes get shadowed by our peers don’t get the opportunity to rise up the ranks for companies or start their own companies in the manner that others can.

NYCI: Why is MWBE status important to the LGBTQ+ community?

So many bright and brilliant LGBTQ+ individuals often get overshadowed by our peers, and don’t get the opportunity to rise up the ranks for companies or start their own companies in the manner that others can. Getting us added to the MWBE would help secure that ability. When we talk about LGBTQ+-owned businesses, people tend to shop at LGBTQ+-owned businesses, and hire more LGBTQ+ people. And it just, communally, works. And I can’t help but constantly point out that when we rise up LGBTQ+ individuals, we are helping to rise up all of our related groups.

Coming next week

We are already hard at work on next week’s NYCI issue. Here’s a sneak-peak of what’s in store:

• Is there actually a gifting loophole in New York? How district attorneys across the state are interpreting the law relative to the OCM
• Veterans and cannabis: A conversation with Ananda Farms’ Sarah Stenuf
• How one cannabis entrepreneur is positioning his brand to nurture the growth of minority-owned retail license holders
• And much more.

Lastly: Speaking as the event moderator for our upcoming March 31 conference, I promise you it’s going to be well worth your time. Get your tickets here.

—Brad