Confusion, uncertainty in New York amid fallout from cannabis audit and resignation of key regulator

Even as New York’s nascent legal marijuana market continues to slowly progress, with more dispensaries seeming to open each week, there are still thousands of business licenses hanging in limbo, without any clear idea of when or how things may change for stakeholders.

That uncertainty has only worsened in the past month, industry participants told Green Market Report, after a scathing state audit blasted the Office of Cannabis Management’s handling of the adult-use market rollout. That was paired with Gov. Kathy Hochul announcing she wouldn’t reappoint OCM Executive Director Chris Alexander in the fall.

The audit news teed up Alexander’s resignation a few weeks later, and his last day is Friday, after which no one yet knows who will be in charge at the agency or how things may change going forward, despite Hochul’s calls for reforms to speed up the licensing process and deliver more government transparency.

That has left a lot of stakeholders wondering what to expect next, given that there were a number of specific policy recommendations in the audit from the Office of Government Services, but no communication from the OCM or CCB since May 10 on whether any or all of those will be adopted.

“It’s all question marks. The governor’s office hasn’t made any statements about what they plan on doing,” said Aaron Ghitelman, a former spokesperson for the OCM who left in March to work in cannabis public relations. “It’s kind of been radio silence.”

Leadership vacuum

One of the most immediate questions is who will step into the leadership void created by Alexander’s departure – and even Ghitelman agreed that there’s no clear successor waiting in the wings. Instead, he said, it’s likely that Hochul will appoint an interim executive director to take over for a few months, and then get a full-time replacement installed in the fall. Whoever does replace Alexander will have to be confirmed by the state Senate.

At the same time, there’s uncertainty as to whether Damian Fagon, the OCM’s chief equity officer, will be reinstated after being put on administrative leave following allegations of retaliation against a New York marijuana entrepreneur.

Not knowing who will be in charge creates its own set of questions about how the OCM will proceed and which policies will get top billing, sources agreed.

“I think there’s a lot of questions about who’s making decisions” at the OCM, Ghitelman said. “Are decisions purely being made from the governor’s office, from people who frankly don’t know the difference between sour diesel and oregano? Who are just doing whatever they can to avoid the next negative article?”

A question of ‘continuity’

Damien Cornwell, the president of the Cannabis Association of New York, said he hopes state regulators will act with urgency to implement some of the policy changes suggested by the OGS report. But he emphasized that there are no answers to be had yet.

“That’s the biggest question: It’s one of continuity. What are we doing different or better to move the market forward?” Cornwell said, adding that “lives depend on this summer.”

“One of the things we’re most concerned about is … that they have a plan, an actual plan, that they can accomplish the goals they set out,” Cornwell said.

If there is a plan, it’s yet to be shared with anyone, Cornwell said.

Meanwhile, retail permit applicants continue burning through cash, paying rent on properties that haven’t been authorized to sell regulated marijuana, and many farmers are still awaiting word on whether they’ll be granted license transitions to expand their canopy. Farmers in particular, Cornwell said, are in danger of “losing the summer” planting season if they can’t get a response soon enough.

“We’ve got a lot of people who had inspections weeks and weeks ago, and they haven’t heard anything back from the OCM. The concern is, who’s running it?” Cornwell said.

Changes on deck?

Cannabis consultant Joe Rossi, a principal of Park Strategies, said he expects changes made from the OGS report – such as staffing up the OCM and speeding up the pace of licensing – won’t happen overnight, but that many will eventually be adopted.

“The governor vowed to eliminate the bottleneck of license applications, streamline the application process, communicate rule changes to the public, create internal controls and performance indicators, and properly staff the agency,” Rossi said. “That’s what we’re all waiting for. … This thing got blown up and it needs to get put back together.”

There’s a huge range of policy and procedural changes that could be made, sources agreed. That includes the possibility of the OCM and CCB simply awarding retail permits to the 1,850 would-be dispensary owners who applied by the November deadline last year with a location locked down, as long as they meet certain criteria.

If that happens, however, it’s unclear what it might mean for 4,303 more retail permit applicants who applied by the December deadline without shop locations already under lease, said attorney David Feder, particularly after Alexander and the OCM previously asserted they would only give out a few hundred retail permits from last year’s batch of applications.

“I think all of the people from December who applied for provisional licenses may wind up getting zilch,” Feder said, emphasizing that that’s a guess based on signs from Hochul’s office that many applicants would be getting a refund of their application fee.

It’s also not clear when there may be another chance for members of the general public to apply for New York marijuana business permits, Ghitelman said.

“There’s a chance we don’t see another license application window open until 2026 or 2027, which will continue to hamper the growth of the industry,” Ghitelman said.

There’s also a question of whether the OCM will be beefing up staff, perhaps bringing in new recruits or transfers from other state departments, a suggestion from the OGS report. Regulators may also, if they have enough manpower, assign a case officer to each application, which New York cannabis attorney Benjamin Rattner said would be “huge.”

But it’s also quite possible, Rattner noted, that the OCM and CCB will push back on the OGS report and make minimal changes. That possibility is arguably heightened by what Ghitelman described as a crisis of morale at the OCM. He said Hochul’s office is scrambling to convince workers to remain on the job.

“One of the most interesting things will be to see how OCM’s licensing process changes, if at all,” Rattner said. “With Chris Alexander leaving and reports that Damian Fagon is going to be leaving, it further advantages people who already have licenses and are dealing with getting open.”

Ghitelman said that the bottom line is Hochul’s office fumbled the proposed transition and didn’t have its ducks in a row to actually get the OCM staffed up and poised to truly accelerate the licensing process and the takeover from the thriving illicit market.

“There’s a chance it speeds up. There’s a chance it slows down. I really think it could go either way,” Ghitelman said of the pace of licensing. “I would not put much money on it speeding up dramatically any time soon. Maybe after the summer.”

Feder said that he’s hopeful, however. “The market is going to improve for everybody, because the New York market is going to be a monster. The only question is, when does that take place? How long do we have to wait?”

Green Market Report reached out to the OCM for this story, but it declined to provide any substantive updates.

Some answers may be forthcoming at the CCB’s next public meeting, which is slated for Tuesday, June 11.