Catch-22 for Weed License Hopefuls Who Need Past Conviction — and Business Chops
The state wants applicants for the first 100 cannabis dispensary licenses to have owned profitable businesses and have pot charges in their pasts. Experts say that’s a tall order.
When state officials first described the rollout of New York’s recreational marijuana industry last year, Shake, a weed dealer in Brooklyn of nearly 20 years, wanted to get in on it.
With lawmakers promising to give a boost through social equity programs to New Yorkers with past marijuana convictions and people disproportionately affected by the drug war, she thought she could be first in the door of the fledgling legal industry.
“I was all happy in the beginning. Yes! You know, ‘Maybe things can fix themselves. Maybe I could right my wrongs. Maybe I could be a taxpaying citizen,’” recalled the 36-year-old from East New York who did not want her real name published. “And then the regulations came out.”
The state’s new Office of Cannabis Management announced earlier this month that the first 100 legal cannabis dispensary licenses will go to New Yorkers with past marijuana convictions.
But those same licensees will also have to prove current or former ownership of a profitable, and legal, business with at least two years of financial statements, among several other preconditions.
“I knew it was too good to be true,” Shake told THE CITY.
While Shake meets the previous-conviction prerequisite, she likely won’t meet the others, which are particularly prohibitive for anyone with past convictions, cannabis industry experts say.
If you have a criminal record, finding jobs or gathering funding is not easy. So it’s rare to see people with “entrepreneurial business experience of launching and managing a commercial enterprise,” who also have a criminal record, said Sloane Barbour, a partner at FlowerHire, a weed-business recruiting agency.
“In the Venn diagram, there is probably a very small percentage of people,” he said.
The 35 pages of regulations introduced and approved by the New York State Cannabis Control Board on March 10 say that the first 100 applicants must:
- Prove they have at least a 10% ownership interest in a business that has had a net profit for at least two years, with audited financial statements and a certificate of good standing from the state, among several other documentation requirements.
- Show that they were convicted of a New York State marijuana-related offense — federal charges not included — and that they were living in the state at the time the arrest took place.
- Prove a close association with someone with a conviction, if the applicant themselves has none on their record. Convictions count if they come from an applicant’s child or dependent, spouse, parent or legal guardian. Siblings with convictions are not included in the proposed rules, nor are cousins, aunts and uncles.
- Enter into a peace agreement with a labor organization.
- Pay a non-refundable application fee of $2,000.
There is an option for nonprofit organizations to apply for a license, but they must “serve justice involved individuals and communities” and “have a history of creating vocational opportunities for justice involved individuals,” among other requirements, the regulations says.
Work in Progress
The new rules, however, are not yet set in stone: the OCM says it will take public comments about the guidelines for 60 days beginning on March 30, then will finalize the rules after that.
Applications are slated to open in late summer or early fall, the agency said.
The OCM has repeatedly emphasized that many details still need to be worked out about how New York’s cannabis industry will function. Dispensaries are only one of 11 types of licenses the state plans to roll out.
“We’re thrilled to hear the ideas and response from New Yorkers about the regulations we proposed earlier this month and look forward to an ongoing dialogue when they post on the state registry for a 60-day public comment period,” said OCM spokesperson Freeman Klopott.
“We’d remind everyone that this is just a start as we’re working on regulations for the entire market and building support across all license types to ensure equity applicants have every opportunity to not only obtain a license, but also build businesses that succeed over the long-term.”
But nabbing one of the first 100 licenses would give a huge head start to potential cannabis sellers, experts say.
One big boost, especially for operators in the five boroughs: In its proposed regulations, OCM indicates it will find retail spaces and hold leases for future sellers.
Compared to other states where cannabis has been legalized, New York’s plans are particularly generous to future cannabis businesses, said Lauren Rudick, co-founder of the cannabis practice at the Hiller law firm in Manhattan.
“We’ve never seen government strike deals on real estate for these prospective facilities. We’ve never seen the government give out money in the way that New York is planning to give money to these particular facilities. All of that is very unique,” she said.
But getting those benefits for most people with past convictions will be “very challenging,” Rudick said, given the “collateral consequences associated with the failed drug policy that got them into trouble in the first instance,” she said.
“They’ve lost access to student loans or housing or job experiences,” she said. “So when you imagine people who are justice involved, it’d be very difficult for them to overcome those challenges, and then open a business and have that business be profitable.”
Coss Marte is among those who overcame those odds, and aims to be among the first 100 cannabis licensees, he said.
The 36-year-old owner of the personal training company CONBODY fits the state’s bill. Marte said he started selling pot as a 13-year-old on the Lower East Side — where his younger brother, Chris, now serves as the area’s Council member — then landed in juvenile detention for a year in 2001. He served two more stints in prison as an adult, in 2005 and 2009.
While behind bars, he got into fitness, then trained his fellow inmates. When he was most recently released, in 2013, he tried to turn that experience into a business, but it was an uphill climb.
“If you’re trying to open up a retail shop, those questions arise, ‘Have you ever been convicted?’ That was stuff that really deterred me from even starting,” he said. “Everything was just so stacked against me.”
Today, his company employs 15 people, and he also runs a nonprofit, Second Chance Studios, with nine staffers who train formerly incarcerated people to work in digital media.
He wants to parlay his experience and open a dispensary, to be named CONBUD, with jobs for even more ex-cons. He knows the state’s requirements are strict, but said he understands why.
“I think it’s fair,” he said. “You don’t want to give it to anybody that has no business experience. I absolutely think it’s a smart move.”
Not only do would-be cannabis sellers need past business experience, but the cannabis industry is a particularly challenging one to join, said Barbour, with FlowerHire.
Taxes on pot sale are high, and complicated. Compliance is expensive. Operators will have to learn how to track their products “from seed to sale” or risk losing their license, he said.
“There should be no illusions. It’s not like you hang a shingle up and all of a sudden, you’ve got loads of people at your door and you’re selling cannabis for 300% profit margin,” he said.
Rudick says the strict regulations make sense, because the applicants will be “steward of the state’s money.” On the other hand, she wonders if “we’re excluding the very people that this type of priority and licensing was intended to provide.”
In Washington Square Park on a recent weekday afternoon, two women selling cannabis products on foldable tables told THE CITY they’d love to get into the official game. But they’re not optimistic about getting in on the first round of licenses.
Both shared only their initials because of the work they do. While marijuana is decriminalized in New York, selling without a license is not allowed by OCM, who threatened some sellers with fines in warning letters sent out earlier this year.
L.R., who sells $10 joints displayed in glass jars, said opening a brick-and-mortar cannabis cafe is her dream, but finding the money for it — including to get a license — will be tough.
“Affluent people are also trying to apply and get into the business, but when they have a higher income than someone like me, a person of color, they kind of bump you out of the way,” she said. “I have to wait to make my money while they already have it.”
Nearby, A.I., wearing a black baseball cap and a top featuring yellow, pink and green pot leaves, said she’s hoping to go “really big” with her business, despite the state’s restrictions and requirements.
On the one hand, A.I. is who the state board wants — she has been incarcerated for smoking and selling, she said, and was homeless in the city for about seven years — but her job experience doesn’t translate to a traditional resume.
“Being an entrepreneur, hustling and selling for 10 years is enough proof that I’m a good business woman,” she said.
In East New York, Shake has 17 years of business experience selling pot. But she knows that won’t cut it to go legal right now.
“If they basically looked the other way and act like the elephant is not in the room, I could do it tomorrow,” she said. “But if they keep setting up these little regulations and using wording to basically exclude people from the chance of doing that? It’s never gonna happen.”