Jeffrey Hoffman is a New York City-based attorney who hosts “Ask Me Anything about Cannabis Legalization in New York” each week on LinkedIn. Hoffman and NY Cannabis Insider have partnered to bring those sessions into print in a Q&A format.
Hoffman’s practice focuses on cannabis industry clients, including licensees in the adult-use market, practitioners in the medical cannabis space, and cannabis adjacent product and service providers. He has a particular interest in social and economic equity cannabis license applicants, and he also informs and assists those convicted of cannabis offenses in getting such convictions expunged from their record. He can be reached at info@420jurist.com.
The following AMA from Jan. 25 has been edited for length and clarity. Hoffman’s next AMA is on Feb. 1 at 4:20 p.m.
Have you seen any anecdotal feedback from consumers buying flower that lists a THC potency range instead of a specific number? Has there been any unusually high potency numbers for flower?
There’s all kinds of potency inflation going on in the industry; we all know this. You know, think about alcohol, there used to be a time where all people cared about was, ‘How drunk can I get how quickly?’ and then people started caring about light beers, right? Because they want to get so many calories and then craft became a thing, and people wanted all the craft beers. I’m a big Belgian beer drinker, and in a place that I used to live in North Carolina, they used to have a law on the books that beer couldn’t have more than I believe was 5% alcohol by volume. Those rules got relaxed in the early 2000s.
So, I do think you’re going see these things move a lot. I think as the consumers’ expectations and experience with cannabis in this market grows, you will start to see a differentiation away from just give me the the highest THC number on a label – although maybe that won’t be the case. I mean, clearly, there have been other states that have been doing this for a while and clearly inflated THC numbers still sell.
Mitch Pfeifer from Respect my Region posted a pessimistic view of the NYC legal cannabis industry, do you have any thoughts on his take?
Everybody’s got their own ideas. I know there’s a lot of people that I’m quite friendly with – both here in New York and elsewhere, legacy market, and otherwise – who have some fairly negative thoughts and negative outlooks on it. They certainly cite some very, very valid evidence. Perhaps the most concerning thing, I think, for most of us in the industry is how the regulated market is going to fare against the thousands of illegal dispensaries that were able to open up here across New York City? I mean, I know they’re everywhere upstate as well. I was in Poughkeepsie, not too long ago, and there were three just in the main district there downtown.
When you legalize before the regulated market is ready, which is what we did here in New York, you run a risk of exactly what we’re facing right now: that enterprising New Yorkers realizing that something is not getting enforced, so they go ahead, and do it. And again, I absolutely was in favor that we had to stop arresting, convicting and incarcerating right. We had to stop a system in which black men were 12 to 15 times more likely to be in that situation here in New York City than white men.
There are bills in the legislature right now. I think we want to be very careful about this and there’s plenty of other attorneys – Paula Collins is talking about it a lot, as well as Sheril up at Harlem Business Alliance. But we’ve just got to be careful about how we reduce the number of unregulated shops. We’re not arresting convicting and incarcerating anymore.
There are opportunities for the legislature to put this in place anytime, it’s easy enough for them to do if you just go after the landlords. I mean, the landlords are responsible for the tenants, they put in their spaces, and if a landlord leases to an illegal business, you’ve got to put that on the landlord, and you give them a cure, period. But if they don’t take care of it by the cure, period, then you got to take their building. I mean, let’s really get it on here, legislature.
I am speaking a bit more these days with Assembly member Rosenthal, who I respect deeply, she is one of the big proponents of of psilocybin in the legislature, she’s Chair of the Housing Department now. She has some sway there, and I would just encourage you to talk with your Assembly member Rosenthal, to speak with your fellow assembly members, write a lighter bill – a lighter version of this bill passed the Senate last session that did not include all the landlord provisions that I think we would be interested in. We really don’t want to go after the businesses and especially not after anyone that’s truly legacy. Although I don’t think there’s a lot of these really, in your face stores that are truly legacy, I think it’s, you know, and, you know, kudos to them. It’s really mostly opportunist business folks that had leases or knew that they could get leases cheap, because of a lot of vacant storefronts in certain areas due to COVID. And this is what they’ve done and taken advantage of being able to sell a product.
That until recently was illegal, and that for the moment, at least, they’re not enforcing against folks that need a license to do it. So hopefully, that’ll be what happens, and the legacy market is not going anywhere. As we’ve said here many times, there’s been a cannabis industry in the state of New York – and especially in New York City – it’s probably the oldest deepest cannabis market on planet Earth. You’re here in New York City historically, and so it’s not going anywhere you can’t enforce against what you don’t know about. The OCM simply does not know about the vast majority of the true legacy delivery market, and it’s tough to enforce against that unless you get really stupid and draconian.
How are CAURD recipients doing with regards to capitalization? How are you seeing fundraising going with your clients in the community?
I think this was one of the concerns that a lot of folks had is how folks that have a conviction on their record, and maybe were not able to participate in capital formation in their careers, like folks that didn’t have a conviction on their record, we do have these TPI rules and some of these two-tier roles that are not going to allow investors that are in the supply chain and anywhere really to find the CAURD folks.
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I do think part of the reason they’re doing some of the pop-ups, is to get some cash flow into those businesses to help fund their startup efforts. DASNY is going to be doing the build out, so obviously there are funds there from DASNY. And let’s be real, for folks who weren’t in the CAURD program, the build out would have been the most expensive part. When you look at true startup costs, obviously there’s your first last month’s rent and security deposit. Obviously, you have to have a first turn of inventory, and so that’s going to be a pretty, pretty good capital hit. Arguably that’s working capital – it’s not really capital expenditure – but what are you going to do about your capex? Do you have a lease, or did you have to buy the property and how many hundreds of thousands of dollars have you put into the property to upfit it to have the cabinetry and the security system and the safes and the cameras and everything that you need in this space?
I think it’s not that the CAURD folks don’t need money – they absolutely do. I think that’s part of the reason why they’re starting with these pop-ups is to very quickly and inexpensively inject cash into these businesses. I certainly believe to get some of that crop that has been waiting for a while upstate with all the conditional cultivators get that crop moving through the retail paradigm, but clearly they’re still going to have capital needs.
I do think there will be some challenges there, and I do think some of the current folks probably do have some capital from their existing businesses, I do think a lot of them are going to be much more capital-constrained. So it is going to be a challenge, I think it’s going to be a matter of interested parties here in New York interested parties that are in the retail tiers, in other states all over the US, I think those players still clearly have a role to play here.
Did the Cannabis Control Board make any decisions regarding its bylaws?
My best guess is they are taking time because they’re doing it right. I’m not suing them over it.
How likely are there to be more lawsuits and other regions similar to the ongoing one in Brooklyn, and the other regions?
There was already another lawsuit for folks that are following it. Apparently, and unfortunately, the website that Housing Works is using for their online store does not meet ADA, disability requirements. So hopefully, they’re going to fix that very quickly. Certainly it’d be agood thing to do to fix that. So already, there are already lawsuits. We’ve just got to make sure that we do things smart, that we do our Point of Sale (POS) systems correctly, and that they’re ADA compliant. I’m sure there will be many other problems and we are a very litigious society. A very good litigator I know once told me the best thing about America is that anybody can sue anybody else about anything. I’m not sure I agree entirely with that assessment, but that is where we are.
What advice would you give to people who have been operating since March 2021, but want to become involved in the legal industry?
I don’t know. Do you mean operating non licensed illegal cannabis businesses? I get it, you’ve got payrolls, you’ve got families that depend on the money, and I really feel for those businesses, but my best advice for you is stop.
And I hate to say that, but they sent out a bunch of cease and desist letters, and that was everybody’s warning. Especially if you’ve received a cease and desist letter, if you want a license, and you’ve gotten a C-and-D, you’ve really got to stop. I just hate to say that this is the reality for you. Everybody’s got to pay rent and buy food, right? We get it, and it just sucks. It does suck. However, these are the rules, and I do think OCM is going to stick to their rules on this. If you’ve gotten a C-and-D, and you keep being a bad actor, you’re on their list, and you’re not going to get a license. I hate it, but my advice if you’re if you’re currently operating an unlicensed store, and you do want to get in the regulated market, my advice would be stop, and then hire a really good attorney. It doesn’t have to be me. There’s plenty of really, really good attorneys here in the cannabis space in New York.
Why were nonprofits able to get a CAURD license in central New York when it’s in the injunction?
I’m going to do the best I can guessing on this. My guess is you may have noticed in the previous license rounds, that the nonprofits are a little bit outside of what everything else, the nonprofits are kind of their own in their own little world. They don’t get a DASNY space, they’re not covered by many things under the regulations.
There were listings for Manhattan, the Bronx, Queens and Staten Island. You may have let notice in the same listings, that there were in entities whose location was New York City,
and those were the nonprofits. And so conceptually what you’re looking at there, it’s a very interesting argument is that the nonprofits are not really in a region. I know they put CNY because that is where the nonprofit was up there. But, again, my understanding of how this is being done there is that technically they are not in regions.