The latest episode breaks down New York’s Marijuana Regulation and Taxation Act (MRTA). Passed in 2021, the MRTA experienced an uneven rollout due to legal challenges and the rise of illicit markets. Yet, state officials are looking at new ways to support the marijuana industry, empower entrepreneurs, and protect consumers. New York State Senator Jeremy Cooney, chair of the state Subcommittee on Cannabis and co-chair of the Marijuana Task Force, joins the podcast to shine a light on the work being done at the state level and emphasizes the intricate balance between market regulation, taxation, and rectifying the harms of the failed war on drugs.
Guest:
Honorable Jeremy Cooney, New York State Senator
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Transcript was generated using AI software and may contain errors.
Alexander Morse 00:01
Hey there and welcome to Policy Outsider presented by the Rockefeller Institute of Government. I’m Alex Morse. We have a special episode for today as we will be breaking down New York’s recent legislative milestone, the New York Marijuana Regulation and Taxation Act, or MRTA. The MRTA not only legalized adult use recreational cannabis, but uniquely addresses social justice issues related to past marijuana convictions. The MRTA, has had a bit of a rocky start due to legal challenges and the rise of illicit markets. However, state officials are looking at new ways to support the marijuana industry, empower entrepreneurs and protect consumers and to shine a light on the work being done at the state level, Senator Jeremy Cooney, chair of the state Subcommittee on cannabis and co-chair of the Marijuana Task Force joins the podcast and emphasizes the intricate balance between market regulation, taxation and rectifying the harms of the failed war on drugs. From drafting new legislation to interagency coordination to enforcement practices. The conversation provides a comprehensive overview of the complexities and potentials of the cannabis legislation in New York State. Coming up next.
Alexander Morse 01:36
New York State Senator from Rochester, New York, Jeremy Cooney, thank you so much for joining today.
Senator Jeremy Cooney 01:40
Thanks for having me. Alex.
Alexander Morse 01:42
Really happy to have you here to talk about New York State’s marijuana legislation, some of the obstacles it’s faced in its first few years and what are some of the hopeful solutions that you are looking forward to. But for a little bit of table setting, can you please provide a an overview of the New York Marijuana Regulation and Taxation Act and some of its key components that make it unique compared to other states?
Senator Jeremy Cooney 02:03
Sure, I’d be glad to. And thanks for actually spelling it all out. Marijuana Regulation and Taxation Act, we call it the MRTA. So you may hear that referred to a few times during our podcast time. But the MRTA was really groundbreaking for New York because it really did two things. It obviously legalized adult use recreational cannabis in the state of New York. But it also had a large social justice component to it, which is ultimately what I think certainly when I voted for it on the floor of the Senate, and what my colleagues thought it was really the main driver for why the MRTA was finally passed years after it was first written. So the social justice component is really twofold. One it talked about past marijuana convictions. This of course, at the state level, so only New York State conviction, so it expunged those issues. But that moving forward, it recognized the harm that was done during the failed war on drugs, so decades of disinvestment across the state, over policing of certain populations, and then found ways to repair that harm, by incentivizing the benefits of this new adult use recreational market to potential licensees in the future. In other words, those who were harmed the most should benefit the most from the new market. So the MRTA set the framework to create what is now our cannabis Office or Office of Cannabis Management, OCM, and allows us to integrate to existing programs in the state the existing medical or medicinal marijuana, which came out of the Department of Health into OCM. And then this new adult use recreational program, merged them into one agency, and now they’re following the MRTA as they get the market up.
Alexander Morse 04:02
Well, thank you for that overview. I think that was a really concise, succinct answer about how marijuana is being regulated, but also mentioning that social justice component, which is the hallmark of the legislation. Now, correct me if I’m wrong, I don’t think any other state has such a social justice component and its legislation is that so?
Senator Jeremy Cooney 04:21
I would agree with you. I think what New York has the advantage of is that we were the 15th state in the nation to legalize adult use cannabis, which means that we have other states like Colorado and Michigan, and others to learn from when we were crafting this policy. So even though the MRTA was proposed a number of years ago, we were watching and learning what was happening in California, what was happening in Washington, what was happening in Colorado, and we tried to find ways to respond to where those programs may have fallen short. And one of those components for example, in our social equity side, is making sure that licensees reflect the communities that were most harmed by the failed war on drugs. So for example, some of the criticism in the state of Illinois was that the licensee holders in the new adult use cannabis market within Chicago and beyond we’re predominantly white men. And so how can we be different here in New York state? So we prioritize that in the MRTA legislation by saying that 50 percent of all non-conditional licenses are a little bit in the weeds here, excuse the pun, but 50 percent of all non-conditional licenses have to go to social equity candidates, and we defined what is a social equity candidate in the MRTA. So that was a big change for New York versus other states. And I think ultimately, we’re going to be more successful in creating a more equitable cannabis market. In the United States, by virtue of what New York is doing.
Alexander Morse 05:58
Looking along the way to New York success in that equitable market, there has been a bunch of legal challenges that have risen from the complexities of the social justice component: who’s eligible for licensees, and who’s regulating some of the industry. Can you talk to you a little bit about what the state of the marketplace is today?
Senator Jeremy Cooney 06:16
Yeah, and I think this is where we hear a lot in the media about the frustrations of the slow rollout. So what does that really mean? And and, you know, we look at, across the state of New York, we’re talking about Manhattan, or upper I’m in upstate New York, Western New York, Rochester, Buffalo. We don’t have a lot of these licensed dispensaries that are open. So it’s hard for a consumer to walk in off the street and purchase legal cannabis in the community, whether you’re upstate or you’re downstate. And because we don’t have as many dispensaries open, there’s a backlog in the entire supply chain, all the way back to our cultivators, our farmers who are putting seeds in the ground. So there’s a lot to unpack there. Part of the delay is these legal challenges that you referenced Alex, and as a lawyer myself, I can tell you, intellectually, it’s very interesting of how these regulations and how the MRTA is being challenged in both our federal and state court systems. But it’s also frustrating to be as a lawmaker to not see this program unroll in a smooth fashion because of the start and stop nature of litigation. So, for example, we talked about social equity before, what are the categories of persons that will benefit from the social equity component, are those previously justice involved with a cannabis conviction in New York State. But that last part is the key in New York State. When you are creating a market for goods or services, and you are preferencing an individual with a New York State only based conviction, it could trigger some federal interplay. And so litigants have brought up the United States Commerce Clause, and the violation of that clause by virtue of having a requirement that the conviction have been a New York State only conviction, right. And that has been looked at by judges and litigated by the state and of course, by these private artists. But in that process of that, there were injunctions put out, meaning that there was no action that could take place by the state of New York. They could not issue licenses for these dispensaries, or dispensaries that had already applied had to kind of wait, which caused a lot of time delay, headache, frustration. And then as a result of that, unfortunately, and it gets back to your question about what what is the state of the cannabis market in New York, unfortunately, the illicit stores saw an opportunity and started popping up all over the state. From Long Island, to the five boroughs, to Hudson Valley, and upstate and beyond. So now we have another challenge, which is how do we support the legal market with cannabis products that are tested and safe for consumers that we collect taxes on? Right, and then as taxes get reinvested back into the communities. That was part of the MRTA. And how do we fight the illicit stores, which we don’t know what they’re selling, or who they’re selling to? or who they’re marketing to, or what the product contains? Right? So it’s a big challenge now is around enforcement. So those are the issues, I think, as of today that we’re really focusing on is how do we get more stores open? And how do we deal with enforcement to shut down the illegal stores?
Alexander Morse 09:56
I think that entire answer was fascinating that identified the layers that are involved in this. From the backlog in agriculture, to some of the legal challenges that are holding up licenses, and and all of a sudden now we have illicit stories coming out. But I’m glad you brought that up. Because as part of, I think it was last year’s state budget, new enforcement penalties were authorized. Right, and what are those penalties? And how are you working with interagency coordination? Whether it’s office, cannabis management, the state tax department, attorney general, law enforcement or entities that I’m missing, how are you working with them to enforce these penalties to help curb illicit marijuana or cannabis sales?
Senator Jeremy Cooney 10:36
Absolutely, this is a tough issue for us, because it’s very complex. It may see simple that, well, you have a store that sells an illegal product, just shut it down. A lot of people use the analogy to a pop up bar or tavern, right that if you had a bar selling alcohol illegally to minors on the street corner, the State Liquor Authority would come in and shut it down within 24 hours. Well, maybe that’s true, but it’s a little bit different than an entity selling cannabis. Because oftentimes, it’s done in secret. Often times the cannabis product that may be off site may not be actually in the store, could be a delivery service, for example. So it’s a little bit trickier than kind of the traditional brick and mortar type of retail experience. Nonetheless, we have to figure this out. And so we have various stakeholders who are working on this issue. For us, legally, will tell you that the enforcement power to shut down and a illegal cannabis store lies squarely within the Office of cannabis management that was laid out in the MRTA originally. So that power still exists there. But the OCM cannot act independent. They work with the Division of Tax and Finance, New York State Tax Department, right. And Division of Tax and Finance can actually seize the legal cannabis material, whether it’s an edible, whole flower, or a different type of product, because their basis of seizure is that this product is not being sold and collecting state taxes. That’s the basis they have to be able to take that material. Now oftentimes in the media, you will hear frustrations from local governments, like the mayor of New York City, who says, I have all these illegal stores, I can’t do anything about it, I want the New York City sheriff or I want NYPD padlock all these illegal stores keep my city safe. Well, as someone who used to work in local government, I was Chief of Staff at the mayor of Rochester. Right, I get that that’s frustrated. But the power and the law exists within the state. So we’re trying to find ways as a state government to help speed that process up. It’s a little bit like Whack a Mole where one store closes, another one pops up and opens. Now you would ask Alex about the fines. And you were absolutely correct, that we made revisions to the MRTA in the 2023 budget. And what we did was we heightened the penalties for having these illegal stores. So the fine if you will, for operating and legal cannabis store in New York State can be anywhere between $10,000 to $20,000 per day, depending on the egregious nature. So for example, it may start at $10,000. And then the police may come in and say you got to shut down, you’re not collecting taxes, you’re breaking the law, you’re not license, they continue to do it, they continue to advertise. Well, now it’s $15,000, then it’s $20,000. The problem is Alex, this is such a lucrative business, estimated at between $7 and $9 billion to the state every year. That they are making so much money they could pay that. So that’s the challenge for us it is we don’t want to go back in time and start another drug war. We don’t want to go arresting people left and right. At the same time, there needs to be a balance struck. We had to protect consumers. We have to protect New Yorkers from these illegal or illicit business practices. So we’re trying to find a way to make enforcement work better. But we also have to find ways to protect New Yorkers so that they know when they go into a legal dispensary what they are purchasing and ingesting into their body is safer than
Alexander Morse 14:21
What a delicate balance it trying to find.
Senator Jeremy Cooney 14:26
It’s tough. especially the context of where we were right and we came from a war on drugs. We were over policed in communities of color, we were going into cities upstate, and downstate, North Country, Southern Tier, right? We did this and it didn’t result in the way we wanted it to be. So we don’t want to just go back in time and start arresting them. We want to make sure that we’re doing this with an eye towards equity and restoration.
Alexander Morse 14:50
So your Chair of the Cannabis Subcommittee in the state legislature. In October, you had, I think it was the first ever hearing on the cannabis marketplace. What did you hear that day? What were some key takeaways that you thought, this is worth researching and looking into?
Senator Jeremy Cooney 15:07
Well, we thought it was very important, first and foremost, to take the conversations out of text chains, off of social media and put it on the record legislatively. Right. So I get phone calls and text messages, WhatsApp messages, Facebook messages, from people telling me what’s going on the cannabis market up and down the supply chain every day. That’s not as productive as actually having someone come in and testify. And it’s not an antagonistic relationship, right? The person testifying is just telling what they’re experiencing, and we’re recording and asking questions. So part of that hearing last year, which you’re correct Alex, was the first hearing on on adult use cannabis and specifically zeroing in on retails. Part of that hearing was to educate members of the Senate, specifically to say, here are, here’s what’s happening on the ground. You can’t just pass a law such as the MRTA and then walk away, you have to provide that legislative oversight to make sure that the agency in this case OCM, or the Division of Tax and Finance, or the Attorney General’s Office has the resources to be successful, and to have this program operate successfully. So a lot of it was member education. The other was solution finding process, we wanted what people were saying whether they were a licensee, whether they were the licensee applicant, whether they were in local government enforcement division, whether they’re a cultivator and a farmer, or processor, we wanted them to help guide what will be the legislative response to this hearing. So now flash forward from October now we are we have just begun the 2024 legislative session. So we’re going to be writing legislation and putting money into the budget for 2024-2025 that now can help address some of those issues that were raised during the legislative hearings. So that was the role. It was a long day. It was like nine hours of testimony back to back. But it was important for people to be heard. And now more important for us to list in and act.
Alexander Morse 17:13
Is there anything specific pertaining to that legislative response that you could share with us today?
Senator Jeremy Cooney 17:18
That’s a good question Alex. There’s a couple of themes. One of the things that we heard a lot from the licensee. So these could be cultivators or distributors, or one of the 37, at this point, adult use licensees for retail dispensaries. One of things we heard is THC tax. Now this is not as as exciting as a lot of people would find. But this is one of the ways that New York MRTA differed and other legalization efforts in different states is that we impose a tax based on the THC potency of said product. So quite simply, the higher the THC content, the more money it costs to the consumer, right, because the tax on that product is higher. So think of it like alcohol proof, right? If you buy a higher proof alcohol, it generally cost a little bit more than a lower proof alcohol. And it’s depends the brand and all of that good stuff. But the same concept applies in the cannabis world. What we’re finding from retail trends is that consumers actually are looking to purchase higher potency products. A problem is, is that we can’t compete with the illicit market in terms of the pricing of high potency products. So if consumers are looking to buy high potency products, and our product in a New York State licensed retail dispensary that we know is safe, and we know his license and is collecting taxes and operating under New York State law. If our product costs more money than a pop up store two doors down the street. And they’re selling the same product, same potency at half the price. We can’t compete with that. And so the consumer is going to be price sensitive, generally speaking, and go and buy that product from the illicit store that is not tested that we do not know what’s in there. And it’s not benefiting the community because the money is not being collected for taxes to be reinvested into our society. So that’s the problems we need to look at an alternative tax scheme. And there’s models in Colorado and Massachusetts and Michigan that we’re taking a look at to see if we could do something legislatively to amend the MRTA to remove the THC potency tax and for how to your listeners who want to look more into this bill. I carry the legislation in the Senate. It’s S.4831 Is the THC potency tax. I think you’ll hear a lot more about it in the next few months.
Alexander Morse 19:53
Well, Senator Cooney, thank you so much for stopping by today. I certainly learned a lot but this was a great conversation about just the state of the marijuana marketplace in New York and some of the challenges that the state and also the communities are facing, whether that’s the legal challenges for who’s eligible for licenses, or how to curb illicit sales and really make sure that the legal marketplace is robust. Really just want to thank you again.
Senator Jeremy Cooney 20:15
Let me just end with a positive note. As much as challenges as we faced we’re learning quickly, we’re responding better. And we’re bringing the right people to the table to get this done right. New York will be the largest and most equitable cannabis market in the entire nation. So whether we get to a federal conversation around federal legalization, that’s years down the way but New York is going to lead the way so that stumbling blocks that we are heading now are only going to make us stronger, because we will be a bigger market than California. And so we have a real opportunity to do right by the state and by right by our consumers from a public safety perspective, and from a recreational perspective to lead in this marketplace. And I think we will do that.
Alexander Morse 21:02
Thanks again to Senator Jeremy Cooney for helping us unravel the intricacies of the marijuana regulation and taxation act and confronting the challenges and opportunities that accompany the implementation of illegal cannabis market. If you want to learn more about marijuana policy in New York State and the nation, check out the Rockefeller Institute’s “In the Weeds” on our website. The page is loaded with content from blogs, reports, data visualizations and other podcasts that examined how states are legalizing marijuana in the shadow of a federal prohibition. A link to the page is in the episode description. Did you like this latest episode, share it with a friend. It will help others find the podcast and help us deliver the latest in public policy research. All of our episodes are available for free wherever you stream your podcasts and transcripts are available on our website. Special thanks to the Rockefeller Institute staff Heather Trela for their contribution to this episode. Thanks for listening. Signing off, I’m Alex Morse.
Alexander Morse 22:20
Policy Outsider is presented by the Rockefeller Institute of Government, the public policy research arm of the State University of New York. The Institute conducts cutting edge, nonpartisan public policy research and analysis to inform lasting solutions to the challenges facing New York State and the nation. Learn more at Rock institute.org or by following at Rockefeller Institute. That’s Rockefeller i n s t on social media. Have a question comment or idea. Email us at communications@rock.suny.edu
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