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 seems like a reboot for the olAbbot and Costello knee-slapper is actually the varied state-by-state approach to vertically incorporated cannabis companies.

Vertical integration does occur whenever a business is associated with several phase of manufacturing of a certain industry. In Oregon, for instance, cannabis licenses are tethered to a phase into 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 guidelines. Colorado’s now-ended 70/30 rule needed stores to develop 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 cannabis that are processing. This economically progressive rule promotes competition and prevents monopolization of the cannabis industry that is retail. Hurray for small enterprises! Customers additionally may enjoy an elevated variety of products which derive from decentralized sourcing. Of course, you can find negative consequences too, such as for example the likelihood of greater rates or, according to your Washington State Institute for Public Policy, increased activity on illicit cannabis areas. Washington’s prohibition additionally makes it harder for cannabis stores 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 areas—so what exactly is ny, the following state that is big*)looking to legalize recreational cannabis—going to 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 cannabis bill, 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 cannabis in the United 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 have in on ny, should take note: the CRTA calls for seven types of adult-use cannabis licenses: Cultivator

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

draft for the proposed bill states:o individual keeping a retail dispensary permit might also hold any fascination with an adult-use cultivation, processor, micro-business cultivator, cooperative or distributor permit pursuant to the 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” forcannabis companies “to be certified to develop, process, distribute and/or offer adult-use cannabis.”[come]The two conditions are

seemingly at philosophical chances with the other person: if the reason of curbing straight integration is always to market competition on the market, it really is unclear how granting a couple of businesses the ability to vertically integrate furthers that goal. It might also create an even greater benefit for everyone 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…(*)

Latest posts