The governors from New York, New Jersey, Pennsylvania, Connecticut and (maybe?) Rhode Island had a pow-wow yesterday in Manhattan to discuss legalization efforts across the Northeast. While nothing noteworthy or “impactful” was actually discussed, the governors at least broadly discussed such mission critical aspects such as: taxation, regulatory principles, market regulation and standardization across the region for legalization, and, of course, social equity. Y’all ready for some hot takes on what was discussed? Let’s dive in.

Taxation

Don’t follow California (or any other state’s) lead on taxes, guys. We’ve all done it wrong and we’re all seeing how persistent the illegal market is when high taxes drive up prices to consumers.

Instead, deploy graduated tax levels across a three-five year window that allows the regulated market to crowd out the illegal market via competitive and appealing prices to consumers so as to wean them away from the flourishing illegal market. New York and New Jersey, take special heed of this.

Regulatory principles

Compliance is everyone’s friend. Build the strategy behind regulatory principles to incentivize illegal operators to “walk into the light” and to become compliant and legal. Aggressively punitive regulations will only prove to be more divisive and, ultimately, will drive the illegal operators away from becoming compliant, which in turn will allow the unregulated market to stick around longer, cut into the profits of legal operators and siphon away local and state level tax revenues.

Likewise, consider affordable measures from a fining and licensing standpoint where appropriate. We all understand that the plant-touching industry is an expensive one to break into and to also do business in. Fines and licenses, when possible, should be skewed towards affordable versus cripplingly expensive. Call it another lesson from California.

Beyond all that? Pay close attention to what compliance and regulatory policies will mean for cannabis companies and investors alike.

Market standardizations

Let the consumer dictate what they want to buy. This has Cuomo’s anti-smoking thumbprints all over it. While we applaud Cuomo’s dedication to smoking cessation campaigns, calling for a ban on all cannabis flower will simply provide a revenue stream and opportunity for the illegal market to sell something that the legal market doesn’t have.

That being said, the governors of these states are very wisely choosing to determine across the board what markets should look like and what should be sold. As we have discussed, the geographic size and proximity of eastern states is unlike anything out west has dealt with due to those states being so dang big. Without some standardization of market availability, there will undoubtedly be confusion on what can be bought and where and in what quantity, and all in states that see huge amounts of interstate commerce and traffic on a daily basis.

Social equity

New York, New Jersey and Connecticut all saw stalled legalization efforts in 2019 due to bickering and squabbling over tax revenues being divvied up and due to a lack of attention and detail paid to how social equity should work in these states. Our only guidance? Listen to constituents in regions adversely impacted by the war on drugs and listen to the politicians in those areas calling for reform measures and sound financing programs. Social equity is too crucial to no be granted the deserved attention.

Have questions on cannabis licensing, compliance or advisory services in the Northeast? Contact MMLG today.