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New York state marijuana regulators are considering whether they should temporarily cap the number of marijuana retail licenses to 1,600. According to a statement from Cannabis Advisory Board (CAB) chair Joseph Belluck, the Cannabis Advisory Board sent the suggestion to cap state retail licenses to the Cannabis Control Board (CCB). The CCB’s suggestion is nonbinding and it will be up to the Cannabis Control Board to take steps and facilitate the temporary cap on licenses.
New York’s regulated cannabis industry is still in its infancy after the state legalized marijuana in March 2021 and began adult-use sales before the end of the year. The rollout of New York’s recreational cannabis market was plagued by delays and lawsuits and significantly undermined by the state’s illicit cannabis market.
Despite the market’s tender age and the various challenges it has faced, New York’s recreational cannabis industry is close to hitting $1 billion in annual revenue just a few years after launch. The CCB’s suggestion to cap licenses could meet a lot of pushback from a young market filled with players who have been trying to get into the game since New York legalized adult-use marijuana.
Belluck, on the other hand, stressed that the limit would be temporary and subject to regular reevaluation. Furthermore, he noted that the limit wasn’t similar to the license caps other states have implemented as it was only a temporary measure meant to help social equity cannabis retailers and the general New York cannabis market from experiencing the issues players in other states have gone through.
Rather than a license ‘cap’, Belluck said, the limit is a recommendation for the number of licenses New York should approve at the moment. He noted that the state has issued permits to some cannabis operators yet they still haven’t opened their doors and may not even launch at all. The limit would help cannabis regulators in New York protect new cannabis retailers and encourage the cannabis market to grow.
It will also allow state regulators to stabilize cannabis prices. Retail prices could drop if too many retailers open shop, flood the market with cannabis products, and lower prices, making the market an unattractive prospect for subsequent entrepreneurs. Oversaturation has been a major issue across most of America’s state-level cannabis markets for the past few years, with many growers and retailers recording significant losses as oversupply caused prices to fall.
The CAB’s suggestion comes shortly after Felicia Reid, acting Executive Director at the New York Office of Cannabis Management, said that the OCM is working hard to avoid oversaturating the state’s cannabis market after its slow rollout. The CCB will consider whether to follow or ignore the Cannabis Advisory Board’s advice when it meets in 2025.
The intentions behind preventing oversaturation of the adult-use market are commendable and would support the growth of not just cannabis companies but also allied verticals like the one in which Innovative Industrial Properties Inc. (NYSE: IIPR) operates within its chosen markets. What remains to be seen is how the recommendation of CAB is implemented and what effects it has on the trajectory of the industry in the state.
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