• February 8, 2023

New York’s 13% cannabis tax may be too high, since state has ‘one of the most sophisticated’ black markets in U.S., expert says

After years of political controversy and advocacy lobbying, New York State has legalized adult recreational cannabis in a bid to shake up the industry, inspire other states to follow suit and start a fire to reform the U.S.’s still strict cannabis laws . However, some experts say the state’s 13% tax may be too high to compete with New York’s resilient black market.

Governor Andrew Cuomo signed the bill early Wednesday and called it a historic day for the state expected to become the second largest cannabis market in the United States after California.

“New York is such a juggernaut and influencer that it will have a ripple effect across the east coast,” said Rob DiPisa, co-chair of the cannabis rights group at law firm Cole Schotz.

Charles Gormally, agreed with the co-chairman for cannabis law at Brach Eichler. “New Yorkers are a huge advocate of legalized cannabis, so it is a welcome relief to citizens that this state is pushing the creation of a regulated adult cannabis marketplace,” Gormally said. “There seems to be a real obligation to move swiftly, possibly motivated by the fact that it is moving the market to states like New Jersey, which are on their way to creating a regulated and taxed market for cannabis. ”

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New York’s law, known as the Marijuana Regulation and Taxation Act, allows adults 21 and older to buy marijuana and grow up to six plants at home. The state’s existing medical cannabis operators are allowed to operate three adult stores and co-locate them with their medical pharmacies.

The bill is heavily focused on social justice and ensures that communities and individuals who have suffered most from the years-long “war on drugs” can and will benefit from legalization. Convictions for non-violent crimes related to cannabis are overturned, and people who have previously sold cannabis illegally can apply for licenses.


“The legal market needs a trifecta of the same product, services and costs that is reasonably competitive with the black market.”

-Rob DiPisa, Cannabis Rights Group, Cole Schotz

“Not only does the MRTA legalize adult marijuana use, it also allows for decades to disproportionately attract black people, ensure they are included in the legal marijuana industry, and reinvest in education and communities that have been harmed” Congregation spokesman Carl Heastie said in a statement from Cuomo’s office announcing the deal.

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It is critical that the program provide individuals in these communities with low or no interest loans and incubator programs that provide them with the financial resources to establish themselves in the industry.

“This sets new standards for social justice and is an important part of eliminating the black market,” said DiPisa. “They need to provide an entry point for people who have been in the industry for years. Without that, the black market will continue. ”

Individual investors on Reddit’s popular WallStreetBets forum have been talking about marijuana stocks and taking stocks of some US-listed cannabis companies on a roller coaster ride.

The black market is New York’s biggest challenge as it is one of the most demanding in the country and has included services like home delivery for years, DiPisa said. New Yorkers, in some instances, have relationships with dealers that span a decade or more and will expect a great deal of convenience and personalized service from the legalized cannabis business.

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Additionally, “Consumers are much better educated, they like to see reviews and QR codes to know exactly what is going on in their bodies,” he said. “There are already products on the black market from other countries that are used by adults. The legal market needs a trifecta of the same product, services and costs that is reasonably competitive with the black market. “


New York state cannabis products are subject to a 13% tax, of which 9% goes to state coffers and 4% to local authorities.

Cannabis products are subject to a tax of 13%, of which 9% goes to state coffers and 4% to local authorities. A wholesale tax of half a cent per milligram for flowers, eight tenths of a cent per milligram for concentrated cannabis, and 3 cents per milligram for food is levied on products based on potency rather than weight. This is a big improvement on the original 20% tax plan. According to experts, this would have crushed the sector and allowed the black market to continue to thrive.

“It’s a step in the right direction, but it can still be too high,” said DiPisa, who expects the black market to coexist for at least the next five to ten years. “But the legal market has to start somewhere and we’ll see what happens over time.”

Cuomo expects the legalization to create more than 60,000 jobs, boost economic activity by $ 3.5 billion, and generate tax revenue of more than $ 350 million once the program is fully up and running. The money is urgently needed the $ 15 billion deficit facing the state, Revenues have been decimated by the coronavirus pandemic.

The program will also create a new state regulator to monitor products. A portion of the proceeds will be redirected for reinvestment in communities hardest hit by draconian drug laws in the form of education, drug treatment and prevention programs.

Nathaniel Gurien, managing director of Fincann, a consulting and advisory firm specializing in cannabis banking and payment systems, said minority investors should think more fully about how to get into the sector.

“The hunt for cannabis licenses can be fools gold, especially for minority candidates, once federal legalization allows every supermarket in the corner to sell pre-rolls,” he said. “It might be smarter to apply current skills [and] Experience combined with newly acquired skills [and] Capital from share programs to establish a niche business, [for example] Tourism, professional services, equipment, horticulture – the possibilities are endless, the barriers to entry are low, and the prospects for long-term prosperity are greater. ”

Cuomo said he expects the sector to go live in 2022, but it could take longer. Members of the new regulator need to be appointed, rules worked out and approved, and licenses issued. The state must also expand cultivation and grow more cannabis, which is limited for the time being to plants grown for the medicinal market.

New York is the 17th state to legalize adult cannabis and is expected to step up reform efforts. Cannabis is still classified as a List I drug at the federal level and is grouped together with heroin. Senate majority leader Chuck Schumer said he would enact reform laws a key priority in the current Congress, Strengthening hopes of an end to the federal ban.

Cannabis stocks, including Canadian licensed producers, rebounded on Wednesday with the cannabis ETF
THCX, + 1.17%
by more than 2.6%. Curaleaf Holdings Inc.
CURLF, -0.66%

CARE, -1.56%
up 2.9%, Cresco Labs Inc.
CL, + 3.02%
rose 5.4% and Trulieve Cannabis Corp.
TCNNF, + 1.38%

TRUL, + 1.35%
was up 3.9%.

Greenlane Holdings Inc.
GNLN, + 8.95%
up 24% after announcing a merger with KushCo Holdings Inc.
KSHB, + 6.50%
to create a leader in cannabis accessories.

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