By Amaris Elliott-Engel  |  The Daily Record  |  January 27, 2022

Legal experts don’t expect recreational marijuana to replace medical cannabis in NYS

The legalization of recreational marijuana in New York state is not going to supplant the medical marijuana industry because there are many reasons why people will prefer to use medical marijuana instead, local experts say.

“I think that legalization of recreational marijuana has actually benefited the medical marijuana marketplace,” Lori B. Green, partner at Nixon Peabody and co-leader of the firm’s cannabis practice, says. “There are only 10 licensed medical marijuana providers in New York. As part of the legislation that was adopted, as well as actions taken since the Cannabis Control Board first met, the law expanded eligible health conditions for clinicians to prescribe medical marijuana and they also expanded who can prescribe medical marijuana.

“Now dentists and midwives and podiatrists can prescribe medical marijuana. You can now be prescribed a 60-day supply whereas before it was limited to a 30-day supply.”

Tristan Hujer, partner at Phillips Lytle and leader of the firm’s cannabis practice, says that he thinks the adult use market will draw some business away from the medical marijuana space because it may be easier to just go down the street than having to get a medical marijuana card and having to find a provider that will prescribe it.

But Hujer says he does not think that the impact will be marked.

“The medical market has been in existence (since 2014),” Hujer says. “Patients that have patient-physician relationships want the expertise of their physicians and don’t want to go it alone. I can’t see medical marijuana patients en masse just taking a DIY approach now that they can just go down the street to the dispensary.”

Green also says the registration fees for medical marijuana cards are now permanently waived.

The 10 current licensed medical marijuana providers also have been authorized to have permits that allow them to own up to three retail dispensaries where they can sell smokable marijuana, not just edibles, Green says.

Medical marijuana dispensaries are being given a head start because they will have the authority to begin operating recreational marijuana dispensaries sooner than other dispensaries can open, Green says.

“They do have to pay a special one-time licensing fee to enter the recreational market that is going to fund the social equity fund,” Green says.

Gov. Kathy Hochul announced New York will establish a $200 million fund to help social equity applicants seeking adult-use cannabis business licenses in her State of the State address earlier this month.

The fund will assist people who are deemed to be socially disadvantaged to be able to capitalize on the new market for recreational marijuana, including people from communities affected disproportionately by criminalization of drugs, women-owned businesses, veteran-owned businesses and distressed farmers.

There will still be many advantages to using medical marijuana over recreational marijuana, Green also says.

In the context of employment, it could be important to protect one’s job to show that you are using marijuana because of a prescription, Green says.

In the context of rental housing, having a medical marijuana prescription could be a defense against being evicted because it would implicate fair housing laws, Green says.

Having a medical marijuana prescription could also have implications for liability when driving under the influence of marijuana, Green says.

There also is an economic driver for medical marijuana for people who have health insurance when the insurance covers a significant portion of the cost of their prescriptions, Green says.

Some people will also feel morally or psychologically more comfortable that they are being prescribed medical marijuana rather than just buying it from a recreational business, Green says.

“I think there will be a vibrant medical marijuana market even after legalization,” Green says.

Both Green and Hujer say that their clients are anxious for New York state to release the implementing regulations for recreational use by adults of marijuana.

Regulators have said the implementing regulations will be released later in 2022.

“The most important thing is going to be showing us what the application will look like,” Hujer says. “My clients want to start preparing it and submitting it.”

Hujer, who represents many hemp growers, says his clients want to know what type of business documentation will be needed to get licenses, if they will be required to own real estate and if they will need to have leases in place to get licenses.

Licenses will be issued in the categories of cultivation, manufacturing and retail dispensaries, Hujer says.

“Each one of these licenses will be limited to that area of that supply chain whether it’s just growing, process manufacturing or being a dispensary,” Hujer says. “It’s designed to prevent corporations with a lot of capital and a lot of assets and a lot of real estate coming in and owning the entire supply chain.”

There is an exception for microbusiness licenses where small operations, akin to craft breweries, will be “more like a destination and designed to serve that specific community in New York state and be able to do everything from seed to dispensing,” Hujer says.

Green notes that an estimated 50 percent of New York’s localities opted out of allowing dispensaries, and 55 percent opted out of allowing consumer sites.

However, localities are allowed to change their stance and opt in to allow dispensaries and consumer sites, Green says.

Many localities were reluctant to opt in before the state had issued regulations, and they would have an informed understanding of what it would mean to allow dispensaries and consumption sites within their borders, Green says.

Both Green and Hujer say that they are hoping that the federal government will authorize legislation that would hold banks, insurance companies and other financial companies harmless from doing business with cannabis businesses despite federal law banning marijuana as an illegal controlled substance.

“Cannabis businesses are cash businesses,” Green says. “You can’t buy cannabis with a credit card. You can’t open a bank account with federally chartered banks or most state chartered banks. You can’t get a loan from a bank. The ability to conduct business in the ordinary course as any other startup is really constrained.”