VERTICAL INTEGRATION IN MARIJUANA LEGISLATION – LOOKING FORWARD TO NYC


BY RAMSEY CHAMIE, GREEN LIGHT LAW GROUP—

Washington limits it, Florida requires it (type of), and Oregon doesn’t give a darn. What appears like a reboot associated with the olAbbot and Costello knee-slapper is actually the varied state-by-state approach to vertically integrated cannabis businesses.

Vertical integration does occur whenever an organization is taking part in several phase of manufacturing of a certain industry. In Oregon, for instance, cannabis licenses are tethered to a phase within the manufacturing string: producer, processor, wholesaler, laboratory, retailer, or researcher. A fully vertically incorporated cannabis business in Oregon would control the entire process internally, from seed to sale. Oregon will not restrict integration that is vertical. In other words, one business can hold licenses a points that are different the manufacturing string.

Vertically integrated organizations improve efficiencies, increase profitability, control the product pipeline, and, fundamentally, reduce costs for customers. (For these reasons, numerous popular non-cannabis companies—think Netflix, Tesla, and Peloton—have aggressively pursued integration that is vertical.)

From a health and safety perspective, mandating vertically integrated cannabis markets helps ensure the quality of products. That’s why we have seen integration that is vertical in state medical cannabis legislation. Colorado’s now-ended 70/30 rule needed merchants to cultivate 70% of whatever they offered. Florida and Hawaii still require some known level of vertical integration of medical marijuana operations. (Florida’s law is subject to an ongoing legal challenge and may be overturned this year.)

Washington, on the other hand, takes a different approach with recreational marijuana: it prohibits full integration that is vertical. Leisure merchants in Washington cannot get involved with creating or processing cannabis. This economically modern guideline promotes competition and avoids monopolization for the cannabis retail industry. Hurray for smaller businesses! Customers additionally may enjoy an elevated variety of items that derive from decentralized sourcing. Of course, you can find negative consequences too, such as for example the chance of greater rates or, according towards the Washington State Institute for Public Policy, increased activity on illicit cannabis areas. Washington’s prohibition additionally makes it harder for cannabis merchants to find permissible deductions for “cost of items sold (COGS) under Internal Revenue Code Section 280e.

In sum, there are genuine claims for and against vertically incorporated cannabis markets—so what’s ny, the following state that is big*)looking to legalize recreational —going cannabisto do? NEW YORK’S PROPOSED PARTIAL RESTRICTION ON VERTICAL INTEGRATION, SORT OF…

Earlier

this month ,New York Governor Andrew Cuomo announced 30 amendments to his proposed adult-use recreational bill, cannabis the Cannabis Regulation Tax Act (CRTA). The amendments are part of the Governor’s effort to get his muchmaligned legislationacross the finish line .( third time is a charm?). His PR strategy is simple: less emphasis on revenue (the CRTA would create the highest effective tax rate for recreational in the cannabisUnited States) andmore on civil rights.T he amendments call for an additional$100 million to a social equity fund to help revitalize communities harmed by the war on drugs , allow home delivery, and reduce criminal penalties for illegal sales. By sweetening the pot, so to speak, Governor Cuomo hopes to win over progressives who prefer the Marihuana Regulation Tax Act (MTRA) sponsored by NY state senators.So

What* that is( does the CRTA state about straight integration? Marijuan-treprenuerseager to obtain in on ny, should take note: the CRTA calls for seven types of adult-use licensescannabis: Cultivator

  1. Processor
  2. Distributor
  3. Cooperative
  4. Microbusiness
  5. Retail
  6. dispenserOn-site usage
  7. A

draft associated with the proposed bill states:o individual keeping a retail dispensary permit could also hold any desire for an adult-use cultivation, processor, micro-business cultivator, cooperative or distributor permit pursuant for this article.” [n]So the* that is CRTA( bans vertical integration by recreational marijuana retailers. Or does it?

The CRTA also allowsNew York’s Office of Cannabis Management (OCM) “to hold a bidding that is competitive, including an auction” for organizations cannabis“to be certified to develop, process, distribute and/or sell adult-use [come].”cannabisThe two conditions are

seemingly at philosophical chances with the other person: if the point of curbing straight integration is always to market competition on the market, it really is unclear how giving several businesses the ability to vertically integrate furthers that goal. It may also create an even greater benefit for the people few businesses that are vertically integrated*). So, for now, New York is taking a

n inconclusive approach: ban full vertical integration, but leave the door open from the OCM to allow somevertical integration ({*)as it sees fit.When the dust settlesand the

final version of the CRTA is passed into law later this spring (most likely), we will revisit NY’s vertical integration rules andexplore what the OCM is likely to do with it the first 12 to 24 months of its existence.You|with it the first 12 to 24 months of its existence.

You*)as it sees fit.

When

of the CRTA (*)is passed into law(*) later (*)this spring(*) (most likely), (*)we will (*)revisit (*)NY’s (*)vertical integration (*)rules (*)an(*)d(*)explore (*)what the OC(*)M(*) is (*)likely (*)to do} can contact Ramsey Chamie at [email protected] or (*)Share that is 503-488-5424.(*)Source this:(*)Like this:(*)Like(*)Loading…(*)

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