A cannabis industry grown in justice
For decades, New York has had one of the most tightly organized and deeply entrenched underground cannabis distribution systems in the world. Now that recreational cannabis is legal in New York, what will happen to the unregulated delivery services, bodegas and neighborhood dealers who have been supplying the market for decades? We are talking about tens of thousands of mostly Black and Brown folks, immigrants and other marginalized demographics. Should they lose their longtime livelihoods, or should they be welcomed into the new system?
The people of New York, through their elected representatives, have already weighed in on these questions. The Marijuana Regulation and Taxation Act sets social justice as its top priority. It promises to “make substantial investments in communities and people most impacted by cannabis criminalization” and to ensure that licensing in the new industry “reflects the demographics of the state.” The law directs 40% of tax revenue to communities disproportionately affected by past federal and state drug policies and sets a goal of 50% of licenses to be awarded to the most impacted individuals.
It’s difficult to imagine how these goals could be realized without integrating the existing, legacy cannabis businesses into the system — which legislators appear to have recognized. Unlike other states which have excluded legacy operators, New York will allow them to apply for a license even if they have been convicted of previous cannabis offenses. And going one step further, the law will actually give extra priority to license applicants with prior cannabis convictions. As it should be. But there is a problem. Because their businesses were illegal, legacy operators will not be able to satisfy typical licensing criteria, like having accurate tax returns. New York will need to deal with the reality that a legacy operator’s income generally cannot be retraced — and that legacy operators will be very reluctant to surface themselves and join the legal system unless they are confident that they will not be penalized for their past activities.
The answer is an amnesty program that will allow for a fresh start, without fear of prosecution on criminal or tax charges. This isn’t just the right thing to do; it is smart policy. Legacy operators don’t just go away if they are left out of the legal system. Instead, free from the costs of regulation and taxation, they outcompete the newcomers by selling at far lower prices. This is what has happened in California, where legislators favored large corporations over small farmers, where diversity in the legal industry has decreased, and where the underground market remains four or five times as large as the regulated market.
Prioritizing social and economic equity, including allowing legacy operators to get licenses, is therefore not just a moral imperative, it is an economic one. Failure to achieve this goal means the failure of this new market and the ample tax revenue it is poised to generate.
We must design a process that will help legacy license applicants transition to meet the act’s requirements, without having to shut down. They could remain open once their application is approved, subject to safety and code standards, and with the understanding that they will need to receive local land use approval, which can be provisionally issued as the market converts.
Legal inventory would also need to be made available on an accelerated basis, which creates more opportunity to advance the law’s goals. Existing hemp farmers and distressed farmers could potentially be fasttracked to start supplying adult-use cannabis. Many legacy operators already run the very type of micro-businesses that the law permits, so they should be allowed to start growing legal product right now, subject to lab testing standards, satisfying the state’s goals of accelerating social and economic equity opportunity and bringing lab-tested cannabis to the state.
Allowing legacy sellers to convert to legal operations also allows New York to get a head-start on generating tax revenues, which in turn can be reinvested in communities.
We must also recognize a need to account for unreported income. The state can establish a licensing fee that would fairly balance the need to make up lost tax revenue with the need to give legacy operators a fresh start without insurmountable financial obstacles.
If amnesty is granted, the applicant would pay the fee and then operate provisionally, complying with regulatory requirements and deadlines, pending the ultimate decision on the application on the merits.
Amnesty is critical from day one to get this market started. It will accelerate the realization of social and economic justice, it will set the stage for New York to be the first bring the state to create a sustainable legal market model from day one, it will produce much-needed revenues faster, and it will offer a legal, successful future to those on whose shoulders we all stand, and without whom the legalization movement would not have succeeded.