Experts talk small businesses, medical marijuana corporations entering recreational market

ALBANY, N.Y. (NEWS10) -- New York’s landmark marijuana legislation tries to make the best of the state’s existing relationships with medical marijuana companies, while also making moves towards equity.

"We really think that the state of New York did an incredible job building an adult-use program that is equal to all groups involved," says Albe Zakes, Vice President of Communications for Vireo Health.

Vireo Health is one of the ten medical marijuana companies already operating in New York State. Zakes says Vireo has been prepared to explore recreational expansion by looking into buying more land next to its existing Fulton County processing facility.

"We will be opening up to three adult use dispensaries as well, so that’s a big expectation that we have. All of that still remains to be seen," he says in a Zoom interview with NEWS10's Mikhaela Singleton.

Anyone looking to enter the recreational industry will have to wait months or possibly years for New York to release regulations. Already, established medical marijuana companies have a leg up with both money and the fact their existing operations won’t be interrupted by the new law.

"It’s full vertical integration — cultivation, processing, and retail sales of those products. That will continue in the new program, but all new business licenses will either be for cultivation or for retail, not both," Zakes explains.

However, the law also reaches out to communities hit hardest by the war on marijuana. At least 50 percent of all licenses will be required to go to minority, women, disabled veteran or distressed farmer owned businesses. However, Kaelan Castetter, CEO of Empire Standard and Director of Policy Analysis for Castetter Cannabis Group says the new Office of Cannabis Management and Cannabis Control Board will have a lot of work to do to make sure small businesses can compete.

"There needs to be a level of haste done to setting up an application process, then making sure that application fee is not prohibitively high, that there are grants and loans available, that there is business assistance available. So the state can do a lot to level the playing field," Castetter says.

"If you do that, then I think these small businesses will be able to compete just fine. If you give the medical marijuana companies too many advantages through bureaucracy and regulations, then yeah they're going to use their money and possibly stifle small business innovation," he goes on to say.

Castetter says he's also very concerned by the new tax structure written into New York's legislation. He says it will be the only one in the country to tax based on the amount of THC in a product and what the end product will be.

"You're creating a new class of criminal and that's non-compliance. Creating a complicated tax structure will make this new system very difficult to understand and easier for people to make a mistake and enter into non-compliance," Castetter explains. "The easiest solution is to go by what other states have done and that's to tax by the percentage of sale."

He says time will tell if New York is committed to keeping small business innovation from being stifled.

"We’ve seen that happen in other states, and we don’t want that. I don’t even think necessarily all the medical companies want that, right? We want a thriving industry to meet the demand of New York which will be one of the largest market places for cannabis in the world," Castetter says.

"We think that everyone should have a place at the table," says Zakes. "We look to California and Colorado, states that have been recreational for some time, and where there are these boutique, mom-and-pop shops of the cannabis industry thriving and hope New York can achieve the same as well."