New York Gov. Hochul Announces Cannabis Regulatory “Overhaul,” Says Top Cannabis Regulator Will Depart

New York Gov. Kathy Hochul released the blistering findings of a review of the Office of Cannabis Management on Friday, and she said the state’s top cannabis regulator would step down. 

In March, Hochul asked the Office of General Services to conduct a review of the Office of Cannabis Management, in part to assess why the adult use licensing rollout has been so slow and turbulent. The review found that the “combination of a complex review process, a lack of transparency regarding licensing progress, and an absence of enforcement action have led to deep public distrust, applicant frustration, chaotic implementation of key equity programs, and an inability to rule out potential abuse.”

At a news conference on Friday afternoon, Hochul announced an “overhaul.”

“We’re going to transform OCM itself. It’s past time for OCM to move from a startup mode into a fully operational regulatory agency. One with stronger internal controls and a reconceived organizational structure,” Hochul said. 

After the report was shared with Chris Alexander, the executive director of OCM since its inception, Hochul said “he agrees there is a time for a new direction at OCM, and has graciously agreed to work with us for the remainder of his term to help implement those operational changes. And he told us he intends to pursue other opportunities at the conclusion of that term, which is in September.” 

The launch of New York’s adult use cannabis market came up against myriad headwinds: OCM, and the Cannabis Control Board, which sits within the Office, has faced considerable litigation compared to other state cannabis programs, and there’s been a proliferation of unlicensed cannabis sellers competing with legal retailers. Discord between cannabis regulators has also been obvious at public meetings. 

OGS Commissioner Jeanette Moy embedded within OCM to inform the assessment. Broadly, Moy focused on the organizational structure of the new regulatory body, which was formed after lawmakers passed the Marihuana Regulation and Taxation Act (MRTA). Moy’s goal was to identify areas where changes to policy, procedures, and regulations could streamline licensing. 

The OGS review found that “OCM has significant structural gaps, limiting its ability to fulfill its licensing role” and that the “management team is relatively inexperienced in leading regulatory entities and has significant leadership turnover.”

Moy laid out some of the five-year “turnaround plan” for cannabis regulation during the Friday news conference. 

This includes a “push toward centralizing and uplifting the operations, work to unclog that licensing bottlenecks, improving communications and enhancing transparency so that there’s an individual that you can talk to, which is a very basic request from government, knowing that you can ask a question and that you’re going to get a response,” Moy said. 

One near-constant ask from applicants at public regulatory meetings has been for better and clearer communication with cannabis regulators. 

Roughly 1,200 applicants have secured a location and are paying rent on those sites, but they’re waiting for OCM, the OGS review found. Moy said that regulators are currently recruiting for vacant licensing positions that will increase the size of the licensing team by 40%. Hochul on Friday added that applicants will get a “point person” to “shepard” them through the licensing process. 

“Everyone wants OCM to be successful,” Moy said. “We want it for their staff. We want it for the leadership, and we want it for New Yorkers who want to see this industry thrive.” 

New York’s adult use cannabis industry started with Conditional Adult Use Retail Dispensary (CAURD) licensees, or “justice-involved” people who had a cannabis conviction or a close family member with one. The OGS findings concluded that the CAURD program “implementation was chaotic. While CAURD is a top executive and legislative priority, the program has gone through multiple disruptive policy shifts, on top of litigation, creating instability and stress for licensees.”

While New York lawmakers and regulators have trumpeted the state’s cannabis equity efforts — which aimed to be more comprehensive than any other state to date — the OGS findings suggest that the equity plan missed the mark because it was overly complicated.  

“Equity is a core mandate of MRTA, prioritizing licensure of New Yorkers adversely impacted by cannabis criminalization,” the findings noted. “However, the application process suffered from excessive complexity and minimal transparency, with rules that changed with each application period and were difficult to operationalize. OCM regularly failed to meet established targets or deadlines and instituted some policies with adverse consequences for applicants, many of whom met MRTA’s equity criteria.”

Hochul’s office announced a $5 million grant program for CAURD applicants that found their own locations. “In recognition of the delays CAURD applicants faced on the road to opening their businesses, including those due to private litigation that substantially paused the CAURD program until December 2023,” Hochul’s office wrote in an announcement, Empire State Development will work with OCM to disburse the “one-time commitment of funding.”

On Friday, Moy expressed hope for the future of equity in New York’s cannabis industry. 

“By building and maintaining upon New York’s commitment to equity, restructuring and streamlining this process, we can ensure that the social equity clause that is a part of New York’s cannabis market will continue to be successful,” Moy said. 

Editor’s note: this story has been updated.