Joint Session: Diverse Voices in NYS Cannabis

Welcome to joint session, diverse voices in New York state cannabis, where you'll hear from policymakers, legislators, thought leaders, licensees, advocates, and others interested in the state of the New York cannabis market. This is the second half of a special two part episode of joint session. If you haven't listened to episode one, high hopes, I would suggest you start there. In part two, the blunt truth, I continue my discussion with former OCM colleagues, Aaron Gettleman, Benjamin Sheridan, and Matthew Greenberg. You'll hear about the disconnect between OCM, the governor's office, and the dormitory authority of the state of New York that had been tasked with finding a private equity partner to raise funds to lease and build out 150 cannabis retail spaces across New York state.

You'll hear of the excitement surrounding the opening of the first dispensaries along with frustrations culminating in the findings of the Moy Report, reflections on agency leadership and the group's stubborn optimism about the future of the New York State cannabis market. This episode picks up with Matthew Greenberg responding to my inquiry on whether in the spring of twenty twenty two, the New York State governor's office was aware that OCM did not believe, did not agree with the dormitory authority's projections on the number of leases and dispensaries they'd have ready for retail licensees before the end of the calendar year 2022. Not guessing, but do you have any sense of what the thinking was at the governor's office? I mean, were they even aware that this was happening?

Yes. We told them. I I I mean, that that's the problem here. Right? That's the issue is, like, presentation after presentation for months.

We're making it clear to the governor's office that we needed to open up this program. And and and it was, you know, very clear that they were listening to Dazni and to what Ruben was saying and to the, you know, the the kind of just straight up affected what ended up being mistruths. I don't know if they were lies. I I I don't know if they were exaggerations or lies or whatever you wanna call them, but we had access to the same data that Dazny had access to. It was very obvious that they were not gonna hit the goals that they were presenting as realistic targets to to the governor's office.

And we made it very obvious through multiple in multiple points that it was going to happen that they were gonna come up short of their goals. The governor's office knew it. And there were weekly meetings happening between OCM, you know, brass and DASNY brass and the governor's office, daily, weekly meetings talking about this stuff. And the governor's office knew very well that OCM was concerned about the pace here. Whether or not they took our advice as as truth is a different question.

You know, I think Rubin was telling them a very different story. But there was it was clear from the OCM side that we presented them with evidence that we thought was compelling that said, you guys are gonna have a shortage of leases. You're not gonna hit the numbers that you're telling the market you're gonna hit. And if you don't adapt this program, we're gonna come up short of our goals, and you're gonna have a lot of farmers who are gonna go bankrupt. And I specifically put together a presentation in, I think it was August, that, you know, laid out sort of the economic loss associated with not signing enough leases.

And we gave that presentation to the governor's office, and it didn't get us anywhere. And it was in the, you know, 506 hundred million dollar range of of economic loss across the system as a result of this. And those are just numbers that are way too big for anybody to tell me, you know, that they considered it in the calculus of of how we went about this. I I they didn't they listened to Rubin, and and we didn't get changes until the market was falling apart in December.

In November of twenty twenty two at the cannabis control board meeting, the first round of card licensees were announced. Right? So we announced and I the the number was in the thirties or forties, if I remember correctly.

38 or something like that.

So we announced that. The agency oh, actually, the cannabis control board announces, the licensees. I get COVID at that meeting. And, yeah, that was it was it was a filled room. And I had a mask, but I got COVID.

And then what happens after that? Now in operations, my big goal throughout was one legal sale. I just want one legal sale before the end of the year, and we get that. So one one of the unique things in the card application was that nonprofits were also allowed to apply. They they, fortunately, probably for in in the long run, they did not qualify for the DASNY funding.

I think we set up to 26, nonprofits that served formerly incarcerated individuals would be eligible to apply. A number were successful. And Housing Works had the first store to open in December of twenty twenty two. Because I had COVID, I wasn't able to be there. You guys were there.

What was that like?

Pretty electric. There was a good it's sort of you know, just to to put a bit of a cherry on the bring your own location conversation, and that was sort of just like the proof of concept Mhmm. That it was just gonna be easier for folks to go out and sign a lease. And and that's not to dabbles and oranges, the nonprofits, to a lot of the individuals who applied. These are bigger organizations.

Mhmm. You know, in certain cases decades old and, you know, are able to to to take big swings like this. But, you know, you just kinda see it there. You didn't need to build something, you know, that was too fancy. And, Houseworks just kinda got their doors open, and they had lines, you know, around the block, like, two blocks down, and then looping around the corner.

I I watched it on the news. It was amazing.

Yeah. That was cool, babe. You know, drop in the bucket in terms of the work that ultimately needed to be done. But, you know, they're sort of the governor's office, I think, said 20 stores. It was, like, November, and there was, like, an op ed in the syracuse.com.

It was like, we're we're gonna have 20 stores by the minute. But Who did you speak to that told you 20 stores by next month? And can we speak to them? Can because if that's true, we we have a little bit of work to do.

Aaron, do you have any idea how that story came out or came about?

Well, I believe It came from Rubin. It was it was a quote that the governor gave. So the governor says we expect, I believe, 15 to 20 stores by the end of the calendar year within their 15 a month until the hundred fifty are there. That is something that clearly nobody from OCM told her. And I think it was who else could she have gotten that number from?

It would have been Reuben. It would have been the dormitory authority. Right now, we've also skipped over the fact that earlier, I believe, in December. So at this point, the first licenses go out. Housing Works is is making moves.

The ownership group that winds up opening Union Square Travel Agency is making moves. Couple of others are making moves, and the dormitory authority to great fanfare at a board meeting of theirs announces we've signed our first lease, and they say the first dispensary in New York State is gonna be on A Hundred 20 Fifth Street in Harlem across from the Apollo Theater. So that was another thing they said without running it by anybody. So essentially, we don't know what's gonna be first. There are a couple couple of horses in that race.

Journalists are asking me.

I know and I remember Reuben McDaniel sort of walking around with mock ups of what that store was gonna look like.

Yeah. And he says it's gonna open before the end of the calendar year. He has this whole plan, and journalists are asking me who's gonna go first. And at that point, I wasn't sure. I I think what I said was if I were a betting man, I would say probably Housing Works.

They seem to have the most experience in retail. But the way Dazni was talking in early winter twenty twenty two was that they were neck and neck, and they announced that Harlem store without letting OCM know that this is coming. And they also did that without letting the local community know that this is coming, which led to to several lawsuits. But back to December 29, the Housing Works opening, I mean, it was it was special. It was, like, one of those days where just everybody everybody and their mother showed up, like, the lines around the block, like, all these characters, like, people ripping bongs in line well before the store opened.

It was it was a vibe. And I think, Matt, do you remember what I said when I walked into the office on December 30, the day after our first store opened. Nope. I said, now I know what the state department must have felt like the day after the mission accomplished happened. Because I think we all knew this is amazing.

This was celebratory. This was huge. But we all knew that we're staring into the

eye of a beast

Mhmm. That that none of us could control and that a lot of people were gonna get screwed. And this didn't happen overnight. We were kind of, like, raising the alarm bells in some cases for months that this was an issue. And I think this goes back to kind of how Hochul always viewed Chris, which is Chris isn't my guy.

I didn't pick him, he was who the legislature wanted. And I think in turn it meant the governor's office just gave less credence and respect to OCM. We were new, we were younger, we operated differently. And at the end of the day, the dormitory authority for decades has been viewed as a slush fund for the governor. So if the dormitory authority is telling the governor something, they're gonna believe it.

So what I was experiencing was Ben and Matt and Herb and others would be having these meetings with the governor's office saying, hey, the dormitory authority is really behind. Things are gonna get fucked if we don't do something differently. And they heard that and came back and kinda were telling the comms and press team, you guys gotta sing Kumbaya with Dazny. You gotta work better. Why are you being so difficult?

They're doing all of this complicated work and you're just being difficult. Try to be supportive of them for once. And it felt like we were in Bizarro World because that just wasn't tethered to reality. But for whatever reason they got this voice in their head that OCM were being the pests when OCM were the only people in this situation who had hit every single deadline we were trying to do. And we wound up being, I think, more effective than others expected.

They did not believe that there was gonna be this much cannabis grown in New York in 2022, that it would actually be an issue if they did what they always do, which is miss deadlines and come in over budget.

Yeah. I would just say, like, you know, the reason things you know, when decisions were ultimately made that things were able to move out pretty quickly with bring your own location is because the infrastructure was built because everyone at OCM saw this. You can only be told not to worry about something by, you know, another agency long enough, and you realize every day that there's an issue brewing here. You sort of have the contingency plan. And, actually, that that kinda 120 Fifth Street verse housing works, not first in any stretch of the imagination, but just the parallel efforts to get them open, really nothing was in place.

The state was learning all the levels of bureaucracy you needed to go through when you wanted to open one of these so that Harlem was really sort of saw it moving along pretty slowly. And there was this like, can we pop up stores? Can we just, like, can we just I don't know. Just get in there with a with an iPad, have a safe in the back, and just sell it. Not that different from, honestly, what Housing Works, you know, kinda did, and a lot of folks did, snacks or, you know, all these guys.

But in that sort of legal research effort, like the kernel that became CGS, I'm pretty sure that that sort of that sort of, like, emanated these grower showcases. You know, can we just can we, like, license locations? Pretty interesting how, like, the collateral impact of all these different issues, you know, what what the solutions were.

I'll add one more thing there. It is, like, let's look at all the things that OCM has been criticized for, you know, shooting from the hip on during that time frame. It's like, you know, the fact that

I I would say being being nimble and creative.

Right. Like, you know, line line testing and all of the the TDO stuff and the CGS is it's all to fix this. Right?

Don't just give the the the the acronyms. Like, what what is CGS? What is TDO?

Yeah. You know, the temporary delivery operations for cards who didn't have a location yet to be able to get their operation started. So that was, you know, a response to the fact that we didn't have a bring your own location option and that you needed to get things open and you want these people selling cannabis in the New York market, we thought maybe with the delivery network that existed in New York broadly as a way of, you know, getting weed to people that that was an option. The cannabis grower showcases has been pointed out, you know, ability to basically store for a temporary period of time or location, whatever it is. And the idea, you know, really was let's get them selling weed at concerts.

Let's get them selling weed at the last Grateful Dead show in New York. Those types of things.

You you

know, obviously didn't happen, but that was the idea. And then, you know, the the line testing thing was, okay. We don't have, you know, enough product in the system that's being tested. Can we move things through in a little bit more of a, you know, of a of a faster fashion to make sure that Housing Works has lead available for them day one? Those were the things that really, from an OCM perspective, we were trying to get all of this infrastructure set up that wasn't there to to get weed sold in New York on on day one.

I remember we you know, a weekend, we didn't have any gummies in the system. It was like, oh my god. Where are the gummies gonna come from? You know? And these were these were the things that we were thinking about on on the fly that we never saw these problems end up metastasizing because we figured it out.

We solved the problems, but it was it was a lot of problem solving on the fly there.

Right. Now I wanted to go back just very, briefly to DASNY and the DASNY deal. Right? There's been a lot of reporting on, on on on that lately. And, Matt, a lot of your emails have, have been foiled, or, actually, the agency's emails have been foiled, yours among them.

And so a number of quotes from your emails. Because even, I think, even if, even if DASNY had secured locations, right, I I I don't think you still would have thought that that this was a good deal for the the licensee.

No. And and and we made

that pretty clear to Dazny from day one. I distinctly remember a conversation that we had, you know, an interagency conversation where we said, you know and and it was it was really Ben who was like, look. What what is the goal for these licensees when we're signing a store? What are you underwriting the profitability these licensees to? Because on the OCM side, we wanted to see these people be able to make a career out of this.

And I think, you know, on the DASNY side, it was we're gonna build a location that can be amongst the top performers in the history of the world in cannabis. And when you look at those two things and the underwriting we were doing, we were saying, look, these are operators who have no legal cannabis experience. The odds of them being able to go and open a store that's gonna be in the top point o o 1% of cannabis stores globally is very low regardless of what, you know, resources you give them. They've never done this before. So the odds of them being really, really successful are kinda low.

So we should really be thinking about these as average stores in the state of New York, which would be, you know, doing $500,000 or less in sales a year or a month. And the the way that Dazni was looking at it was they're gonna do 2,000,000 plus a month.

And that's what they were telling that's what they were telling the licensees as well.

That's what they were telling the licensees, and they were doing build outs based on the idea that these licensees would be able to do that, that they didn't need to raise any capital on their own. And it was just unfair to the licensees to tell them this, to to expect you know, to to prepare them for a reality that was never gonna happen. You could never walk into that store those stores with $0 on the balance sheet and expect to be successful. You need Square travel agencies out there spending a hundred thousand dollars a month on marketing and and all the infrastructure that they have, and then you're gonna come in with $0 in the bank and try to compete with those guys and expect to do better than them. It was never gonna happen.

And I think that was the biggest disconnect, but we've we knew that early. And then we knew it once Snack got open and some of these other stores got open, and they weren't hitting the projections anywhere close to the projections that Dazni had for them. And it was like, guys, we we need to reset this, and that wasn't happening. And so you've got these million to $3,000,000 build outs that were happening at 15% interest rates, and there was no licensee who was gonna be able to sustain that burden, even the top top guys. And and that was the biggest issue.

In the end, what did they end up with? Because they do have some stores that are open. I think it's I think they signed 24 leases and something about t in the teens, like, 16 stores.

Yeah. So far, that's what they've got in that about that. You know, I think it's 19 stores open at this point. But every single one of those stores is dealing with a million dollar plus build out that they have to repay to the state at a 15% interest rate. You know?

And the vast majority of them from all of the reporting that's been done and if you talk to them are struggling. You know, they're not making money and they're and they certainly wouldn't be making money if the fund was charging them rent plus interest plus repayment and all this stuff. And there's no reason for the fund too because to spoil the story, you end up with Chicago Atlantic signing a, you know, an agreement that fully guarantees them all the interest in principal repayment that they're owed under these agreements. And so at the end of the day, they are gonna get paid their hundred and 50 to $300,000,000 that they're owed by the licensees, and they'll continue to push for more stores to get open across the state using Chicago Atlantic financing despite the fact that every single time that they do a build out, a licensee is being hurt by that. And it's it's not gonna get any better just because Chicago Atlantic's gonna acquire the underlying real estate, which is where the plan has sort of pivoted to at this point.

So while there are,

you know, 24 leases that are signed or whatever it is, their plan is still to try to do a 50 build outs and and, you know, candidly, that's the part that bothers me the most is that despite the failure, there's still a push by both DASNY and the governor's office to try to make this real. And what did Ben say earlier was the purpose of this? Intergenerational wealth. And this was something that OCM said. And OCM, when describing the card program, described it as here's an opportunity to make generational wealth.

And I think the language of generational wealth, while not explicitly racialized, is language about people who are deprived of opportunities to make general rate generational wealth at other stages in American history. So people who weren't eligible for the GI bill, who were redlined out of purchasing homes that would accrue value, that you can pass stability onto the next generation. So I think not just are people getting pushed into places where they won't make money, they're getting pushed into places where they won't make money after the state promised them an opportunity to make generational wealth. And I think, like, I don't think anybody specifically planned this, but I think it's a a lot of misaligned incentives for decision makers, primarily from Dazni and the governor's office, means dozens and hopefully only dozens of New Yorkers are likely gonna lose their shirts off their back in a gamble that they took where they trusted the government. And at the end of the day, so much of this was a leap of faith.

These are people who had their close family members prior cannabis convictions at the hands of New York state. They've been harmed once, took a leap of faith because they believed in the OCM in New York state in governor Kathy Hochul. And lo and behold, governor Kathy Hochul is letting them out to dry. It's hanging out dry. And people are getting really screwed because people didn't listen to folks like Matt, Ben, and Herb when they were yelling at these meetings in 2022.

Alright. So we'll leave it at that. We we have not talked about lawsuits. I I there's an entire episode just on the the lawsuits. So I wanna talk about the lawsuits per se, but could you talk a little and maybe, Ben, just about the impact of the delays that some of these injunctions had on the agency and, and and its push?

Yeah. Obviously,

you know, not being able to move ahead with your plans, you know, in broad swaths of the state. I I couldn't tell you the exact proportional population of was it Brooklyn, Rochester, Westchester, and, the Finger Lakes. But, you know, like, it plays it was it was, difficult, you know, not only on that level, you know, adjusting sort of the projections of what was gonna be coming through. I think also just from a morale standpoint, the lawsuits was always sort of the boogeyman. We I think anyone who looks at any regulated space, especially in its infancy and early stages of the market, knows that, you know, right or wrong, people are going to sue, if they can to shape, you know, the outcomes.

And, you know, I think that that is, you know, with, you know, at least a handful of the suits here in New York, what we were seeing. So, you know, OCM is in the same position similar to to the DASI program, and, you know, it's sort of positioning alongside other state agencies there as well. You know, somebody has sued New York state. You know? So the conversations about what, you know, the strategy is in response is just, let's add another stakeholder to the group here.

Let's get the AG's office involved now. Like and that stretches out the bureaucracy even further. I don't wanna say it makes the work, you know, impossible, but what I will say is, you know, this vision always stated tact. You can say a lot of things about card and a lot of things about the OCM. Well, kinda did exactly what we said we were gonna do.

They're still doing it. You know, we're gonna put these hemp farmers first, and then we're gonna put people with prior convictions for the stupid laws that we got rid of second. And, you know, the law gives us a lot of information about sort of where to go from there. I think it surprised people in some ways, that there wasn't some sort of little horror of the death star that was laid to sort of, you know, terminate it all and start over again. And we'll see what the conversation looks like, in a year, two years, five years from now about what's been created here, but less than $71,000,000 in sales last month across a number that's growing closer to 200 stores owned by people who five years ago just simply this probably wasn't on their radar or something that was ever gonna be a real opportunity for them.

And I

wanted to just briefly stop there because the time period that we were talking about earlier, we may have had, you know, stores numbering in the teens. Right? We started hitting twenty twenty one. And now, really, a year later, we're about a 50, if not a little bit over. Every week, two, three, four stores open up.

So what what do you see happening?

Yeah. At this point, it takes I think anyone who's in the space on the retail side for even five minutes will tell you, wow. This is complicated and hard. And similarly, you're dealing with a bunch of different stakeholders. So 850 plus folks at the local level have permission to open their doors and, you know, then you have to deal with every single jurisdiction and their, you know, their rules.

So, you know, those two or three stores, hopefully, that number continues to to grow, and the, you know, the scale of the market continues to grow with it. And that's not work that sorta happened overnight. You know, that is very much the payoff of, what was happening at the agency for the last eighteen months, twenty four months.

Right. And something that maybe with a little patience, right, you you people would have seen. Aaron?

At the end

of the day, we all know, and I think we all knew at the time, New York having a large growing booming cannabis market in a lot of ways was inevitable based on the market architecture. And I think one of the things we haven't really talked about much today is antitrust, is what New York did that was different than other states. You've covered it on other podcasts, but essentially, most states have regulations that favor vertically integrated businesses, have this small cartel of operators who cultivate, process, and sell the cannabis. New York divided that, separated supply and retail. And I think just because of that, it was inevitable that we were we are gonna be in a huge, huge place.

And I think the question is, is it a failure that we didn't have one massive week like Missouri did or New Jersey did? Talk to anyone who has a shop in New York and New Jersey. They're gonna pick New York's market every day of the week because they have options. They're not under the thumb of a large of law a large corporate cartel that dictates pricing, that dictates process product availability. The funniest thing to me is people on social media, a lot of anonymous cartoon avatars on Twitter, couldn't stop calling the office of cannabis management communists or socialists or this or that.

But our market leans into the underlying aspects of capitalism. The idea that competition benefits both consumers and businesses. And show me another state East of the Rockies that seems to believe in capitalism and not crony capitalism, and I'll buy you an eighth. And maybe that means I drive up to to Vermont or Maine, but those are tiny states that didn't have to worry about large corporate operators consolidating their market day one. New York did.

So I think kind of we're we're still in the medium space. I think the dream world that we'll have in a decade is all pretty the same way that between pretty much everybody's home and their local subway stop in New York City is a liquor store and a dispensary, and we're not quite there yet. But we will get there. And I think in a lot of ways, it's inevitable. The question is, how many independent cultivators?

How many microlicensees make it? Or do we wind up seeing a new regime, in OCM that just has less economics experience and less of a vision for what they want the market architecture to look like often because the experts they're relying on aren't people they hired, but lobbyists explicitly hired by folks who wanna game the system and rig it to work for themselves.

Alright, Matt. One of the, issues we, you know, we heard a lot about, especially from lobbyists, is, you know, why not license everybody? Right? You applied. You paid you $2,000.

I think it was still $2,000 to apply for the, November, December queues. You know, why not just license everybody, get rid of proximity protection, just let, you know, everybody go go at it?

This is kind of I I I write, you know, dissertations about this on LinkedIn all the time. So if you really wanna get into the the economic kind of thought on this, it's, you know, it it

That's why I'm asking you.

Yeah. Look. In order for small business owners to get the capital that they need to get set up with a retail store in New York, which, you know, will cost you north of 500,000, maybe as as high as a million dollars of capital to just get set up. You need to have a really high return profile because there's so much risk associated with this. And and so in order for an investor or group of investors to feel comfortable backing a business like that, there's gotta be real returns.

And if you bring in vertically integrated operators who have, you know, massive balance sheets that they've brought in from international investors and hundreds of millions of dollars raised in IPOs and pre IPO financing, nobody in their right mind would ever back an inexperienced operator versus those capital aggregators because the capital aggregators are always gonna have higher returns on capital. And so what ends up happening if you do sort of what you've suggested, Herb, you know, there there's sort of two ways to go about this. Right? Is that you you look at the Illinois approach where you start with the big guys and hope to get social equity in later and the social equity guys don't get a chance because the returns aren't high enough at that point. You've already given the highest returns to the vertically integrated operators and as Aaron points out, once those guys control the market, it's almost impossible for you to sort of pry the the market away from them and create a capitalistic competitive environment.

On the other side of it, if you start with Oklahoma as as a model where you're gonna license every single person who applies, the capital returns get destroyed and you end up with a market where prices crash, consumers expect low prices so they'll never pay more, and you end up with no investor returns. The first group of investors get wiped out, and nobody ever comes back and you have a broken market. So there's this middle ground that New York tried to walk of a balanced market where we're thinking as a regulator, the way that a regulator realistically thinks, you know, the Federal Reserve sets your risk free rate on the policy side. Everyone accepts that that's, you know, a way that business gets done. But the minute that a regulatory agency says, hey, you know, as the people who are responsible effectively for setting the return that you're gonna get on your businesses because we know, you know, at a high level what the average store is gonna produce in sales, what the average licensee should produce in in, you know, in in product.

Those are calculations that you can do at a very high level at a at, you know, at a at a at an regulatory agency. We did that at OCM. Most people don't do that. So we could say, look. This is the return that investors are expecting.

Here's what our licensees, if we take this balanced approach, are gonna get out of their licenses. This is the return they're gonna get. With 250 licenses in that November queue on top of all the licenses that you had in card and and everything that was going on, All retailers had that opportunity. But the minute that you start lobbying to allow everybody who applied in November knowing they had about a one in 10 chance of getting a license, that those people are gonna get licensed on top of that, you totally throw that that equation out of whack. And anyone who went into that lottery expecting a certain return isn't gonna get it now because you've expanded to the full queue.

And so the worst that this gets, the more expansion that you bring into the market, the more compression that you're gonna get on price and on returns for investors. And it's gonna destroy the entire kind of idea behind a balanced market in New York, and you're gonna destroy capital returns broadly across the sector. If you keep moving at the pace that these lobbyists are are are sort of pushing the governor and pushing OCM to move faster, get more licenses out there.

Right. Because they're they're not looking at the industry. They're looking at their client.

They're looking at their clients because that's how they get paid. Most lobbyists don't get paid based on how this licensee does in ten years. They get paid based on getting that license in the first place. And so there's, you know, there's no incentive alignment between these parties. Whereas, you know, a licensee who's out there applying in the November queue, who got a license, who was part of that lottery, says, look, I took a real chance in applying here.

I got lucky. I got the license. And that payoff needs to be worth it for me for the risk that I took. If you expand that pool to everybody, you're you're totally removing that risk reward paradigm that was created, and you're creating what is effectively just zero returns for everybody. And I don't see how long term and if you overlicense the state and you've heard chair talk about this, you've heard a bunch of people on the cannabis control board say this, We're that we should create a .com bubble sort of scenario because look how that turned out.

Well, the reality is that anyone who bought at the top there lost their shirt and got screwed over, and there were a couple companies that survived. And if we're trying to create that environment, I would say to every single investor, get the hell out of New York. But the reality, I think, is that the infrastructure that we created was sound, and the pace of licensing, partially because the under resourcing of OCM, is gonna be so slow that we may actually still hit that balance even with the governor, you know, sort of forcing decisions on OCM that are incongruent with what would be a really, you know, kind of balanced market. And so my hope is that there's so much inefficiency both in government and in getting stores open in the state of New York that you still have a balanced market here where investors can get returns. But if you get all of these stores open and you license thousands and thousands of cultivators, you're gonna crash the price of wheat in the New York system and you're gonna crash returns for investors.

And it's gonna create a really it's gonna create California and New York, and we do not want that here.

Just to jump in, I think a lot of folks, they say, well, New York's so slow. They're in the stores. The market's to quote, governor Hochul, the market's a disaster. But what state did this in ways that haven't crashed markets, that haven't screwed over the first round of entrance? And have any of them allowed independent operators?

Have any of them done real forms of equity? I think when OCM started, the goal was we're gonna have an independent tier of cultivators and an independent tier of retailers. And many of them will qualify as social equity applicants. And essentially, a lot of folks said, why don't you just let the well capitalized, well funded medical operators go first, make a ton of sales, and then utilize the tax revenue from there to support equity applicants. And one, doing that would lead to an ossified cartel like infrastructure that wouldn't actually allow new entrants to survive, and two, that wouldn't actually have prevented lawsuits.

Look at Illinois. They followed that road map to a t, still got sued over equity programs, and then had, what, three or four years where the only game in town is medical. Every eighth was $60, which is what you're still seeing in parts of Illinois and in New Jersey. And consumers didn't adopt the legal market, which have led to kind of illicit and more traditional ways of of purchasing cannabis to thrive. And I think in a lot of ways, you only really get one, two, or three chances at first to convert a consumer from the way they've been buying their pot for a decade or two or three to the new way.

And when you walk into a store that has 500 options, everything from a $10 dime bag to, $250 ounce with various different edibles, you have a way better shot than if you have 80 products on shelves, and all you're offering are $65 aids that should probably be priced at $25.

Alright. Well, we we can't end this conversation without taking a moment to talk about the OGS report and the resignation of, Chris Alexander. What was your initial reaction when you read when you read the report or saw the reporting on the on the report? It was a sense of being gaslight. Right?

Was it?

Yeah. That's kind of the word I think I I used when we got on the phone a few weeks later, and it was like,

Oh, okay.

Yeah. Kinda felt like a giant gaslight. I don't know if there's much more to say about it than that. You know?

And and you think it was

Yeah. No. And I've talked about that in a previous episode, how those agencies that, you know, were supposed to be in place to assist OCM were involved in, you know, doing this audit. Aaron?

Well, so so one of

the things I'll say is and I think we all experience working for him. I fucking loved working for Chris Alexander. I've worked for a lot of people in my life. There are not that many people. I would say, yes.

I'm gonna I would sign up to work for them again. And either another state or maybe another governor of New York will put Chris in a similar role, and they will reap the benefits in a way Kathy Hochul did not. But then to to bring it back to the report, so I actually was at OCM still when when the assessment was announced. And I'm still handling the phones, flacking with the press, and people say, hey. Are there any chances this slows down licensing?

And I was still getting paid to say the company line, and what I said at the time was, I would be blown away if that happened. This is about people who ostensibly have experience doing things efficiently, figuring out how to help OCM do things more efficiently, which, as we have now seen, was not really the case. This was about a political assassination of Chris Alexander, figuring out ways to make it so the governor could have justification to not reappoint him to his his role. And she did that. And Chris, in my opinion, to his benefit, didn't wanna sit around being a lame duck getting jerked around by somebody who has no clue what she's talking about, and he resigned.

But I think the assessment was so interesting because at the end of the day, they they put a whole lot of work into figuring out how to describe basic government inefficiency, the same if inefficiency one might see at the state liquor authority or and no offense to the amazing people who worked or worked there, the DMV, any licensing body at the city or state level, especially in New York state, is inefficient. And this report evidence that that the office of kind of spammers remain wasn't perfectly efficient. But I think the way they treated it as if, like, there were levels of corruption or malfeasance. I mean, it's not like OCM committed a billion dollars to build a stadium where the top contractor for the stadium employed one of our spouses. That's the Bills Stadium that Hochul's doing.

We had nothing that approached that level. And I think for Hochul to to kinda go there and I genuinely believe that Hochul assumed OCM was as corrupt as she was and that she was gonna do this assessment and learn that Chris or Damien or somebody else was secretly pocketing money while things are moving inefficiently. Well, they did the assessment. They learned literally none of that. They were were stuck holding what was pretty much an empty bag and had to figure out how to how to paint something of that empty bag so they could remove Chris.

Because at the end of the day, Chris Alexander was never, like, Kathy Hochul's person. Chris was a fierce advocate for years who had his own independent base of power and didn't just have to say yes to her. So I think she got what she wanted. She appointed somebody who who I've only heard good things about Felicia, but at the end of the day, she's, she is somebody who kind of has worked in government, doesn't have an independent base of power, and is somebody who is a lot less latitude to push her own opinions of success than Chris was able to. And at the end of the day, governor Hochul isn't a big person with big dreams.

She just wants to figure out how to keep her job and not get fired. And for her, that's not making waves. And now she'll have an OCM that doesn't do big things.

Alright. Matt.

I don't have a lot to add to to all this. The the one thing I'll say is I really wish them good luck in trying to make this more efficient Because every single person that has been ticked off, fired, left the agency in some capacity since this report and even before that was an a plus player who was doing things that I would imagine in most government agencies, just there's nobody like that. Nobody's gonna work past 05:00 and and care as much as we all cared. And there is just virtually no way in my mind that anything in that report and any of the recommendations are actually gonna make this place more efficient than when, you know, we were there or the people that were there after us were there. I just don't believe that you're gonna end up with real efficiency gains, and I think we've seen that in the months since.

There has been no improvement. If anything, it's gotten worse for a period of time. And until these changes are fully implemented, which could take twelve to eighteen months, I really don't see any chance that licensing is is gonna get better. And I I I feel bad for for the licensees in the system who have been, you know, gaslit by this whole thing, and I feel bad for the folks at OCM who are still there who have to deal with, you know, this this report and and the backlash associated with it.

To jump in quickly, there are people there are people who for months on social media called for the removal of Chris Alexander. And it seems like it was a bit of a monkey paw wish because several months after Chris left, they're now sharing the exact same complaints they had five, six months ago, and it wasn't Chris's fault. That would be ludicrous to assume it was.

Alright. Ben, anything about Chris?

Not to repeat too much of what Aaron said, but you really you know, when you're working for someone like that, you know, you wanna show up for work every day. You wanna give it your role. You wanna throw yourself at hard issues. You feel supported. I said this while I was at OCM.

I I, you know, will say it again after. I really think he's one of those people, you know, in my generation who I would follow. He's a generational leader in that regard. You know, I've been around politics much shorter than, you know, you heard and and, you know, a lot of our folks at at FCM, but, you know, like, a a decade and a half, and he rises above it. And, you know, his goals are, you know, were were really never compromised, and it's about vision.

Like, that vision about what we were creating with the seeding opportunity initiative, you know, required a leader. Or I grew up, my grandfather would say, you know, the fish stinks from the head. I think everything you kinda hear from this entire conversation is, like, you know, this all came from the head. Like, a lot of the inefficiencies were from the head of government, this little agent that was given us for a certain number of resources. The head of that agency was showing up every day and and really putting in the work, and we all felt supported.

And that's why I think, you know, we would all run back for the opportunity to support Chris in whatever he does next, truly.

Alright. So despite some of the things that we've talked about, I I I know there is a lot of optimism that you three have for, for New York State and where the industry is going. So very quickly, starting with Matt, why are you so optimistic?

I'll start by saying part of it's personal experience, which is that, you know, Ben and I left OCM. We're now running a company called Platform Cannabis Advisors, which is helping card licensees primarily and and other retailers get off the ground. And we're just sort of seeing the results of of that and and helping people get open and sort of seeing on the ground what licensees are are seeing in terms of the returns for themselves and and and what they're seeing as success. And the market underlying this is the best that I've ever seen in terms of product selection, in terms of, you know, all the all the things that kinda Aaron pointed to. Price to product selection are are the best in New York from an industry wide perspective.

We have a balanced market, which I don't think anyone else has really achieved. The rails are there to continue, you know, to be successful in that way. And I think to the extent that, you know, licensees will fail and some others will, you know, pick up the the pieces of what was left over there. But at the end of the day, the the architecture is there for a really successful system. It's a well thought out law with a very well thought out regulatory regime.

And as long as the legal landscape doesn't get too complicated with lawsuits and littered with injunctions and other things, There are enough licenses out there right now to continue to balance this market for years to come and have licensees continuing to kind of provide their own families with generational wealth. And I think that was the goal. So I think we're doing everything that the MRTA wanted the state to do. I think the architecture is there to be really successful without an oligopolistic structure, without an oversupplied structure. And so I'm really excited to kind of keep betting on a market that doesn't have enough capital in it yet, and and at some point, people will realize the opportunity is here.

Alright. Thank you.

Ben? I think we've said some of the numbers over the course of the last hour or so. You know, just how how many folks have been given a chance here, a real chance to to press ahead. Just the foundation that's been built gives me a lot of optimism that, the stories that are coming out of New York cannabis. And I I think when you look at just like I hate to use their their batting averages because they're talking about people and lives and but when you look at the, you know, the relative opportunities for success across state markets, people will say, wow.

New York really gains a whole bunch of people relative to every other market, a whole bunch of people a chance to get their doors open to to to become businesses, and and I think the best is really ahead of us still, for that cohort.

Alright. Thank you. Aaron?

What gives me faith and, obviously, I'm excited about what we're seeing already, but I think New York is really ready to make use of the on-site social consumption licenses whenever they come. And I think that's really what's gonna elevate New York City and New York State ahead. I think if you talk to somebody in 1964 and ask them, hey. Where is the cannabis capital of The United States? They would probably say the village.

But by the late nineties, early '2 thousands, Cali leapfrogged us. They got in ahead of us when it came to medical, when it came to adult use. I think kind of if you've been to Amsterdam, there, they have one version of social consumption that to me very much lives in the past. And I think California, when it comes to kind of trends and a lot of things leapfrog, but they haven't conquered on-site consumption. They haven't conquered experiential cannabis, and they probably won't in the way New York does.

And I think New York City, back to I'm excited to hear your the conversation for the pod that will be out by the time our pod is out about highway safety. It's New York City is realistically the only place in the country outside of Las Vegas where you can have a social consumption location for cannabis where people don't actually have to drive home. And I think that'll mean we can get a little more suited than you can in New Jersey or California or Seattle or even Vegas. And I think, like, what we're gonna see for Michelin star chefs, what we're gonna see in the Hudson Valley and in the Finger Lakes, and what we're gonna see that, like, we can't even comprehend. My vision is small.

I just wanna go to a movie theater where I can see The Godfather two and, like, smoke a joint in the middle of it. But, like, that's gonna be really small picture compared to what we wind up getting, the ideas that we haven't even dreamed up yet. The ways that cannabis can do the headiest of ideals, what led to people fighting for legalization, not just the end of criminalization, but the use of cannabis to kind of bring people together. I think society right now, we're more alone than we've ever been because of technology, because of housing costs, because of this or that. And I think a lot of people view cannabis as something you do alone at home that kinda contributes to that sense of isolation.

But I also think cannabis can be one of those tools that gets people out of the house and to do things together and to really live those lives that we all wanna live, the healthier, more connected, more community minded, and community focused lives.

I wanna thank you for your time today and for doing this, this discussion. And I also wanna thank you for the the work that you guys did at OCM. You guys were tremendous. I don't think people recognize or or see, you know, the passion and the care that, not just you three, but the entire agency, you know, really worked hard to get this right. Right.

You know, we talked about generational wealth. I remember hearing someone talk about we have to be careful not to create generational debt. You know, and the agency, for all its, you know, good and bad, really was focused on, you know, helping people. So, thank you very much for your time today and, again, for the service at OCM.

Thank you for having us.

Thanks, Herb.

Recognizing the pace of this wide ranging discussion, if you would like to learn more, please see our show notes where we have added many links to articles and press releases representative of the topics covered. Thanks for listening. We'll be back in two weeks with New York City Council Member, Julie Menon, who chairs a committee with oversight of both cannabis NYC and the office of nightlife. We will also highlight Sohan Bashar, the owner of a dispensary, Silk Road NYC, a young man who in many ways could be a poster child for OCMs conditional adult use retail dispensary license. If you're enjoying the show, please leave us a rating and review on your favorite podcast platform.

It helps new listeners find the show. Joint Session is produced by me, Herb Barbot with additional production and engineering by Matt Patterson with Rebecca Malpica on digital marketing and social media. You can find us on Instagram at jointsession.pod. That's one word, joinsession.pod and on LinkedIn at join session podcast. You can also email me with your comments or questions at herb.joinsession@gmail.com.

Until next time, this is Herb Barbot. Thank you.