New York Gov. Andrew Cuomo (D) took marijuana reform supporters by pleasant surprise when he endorsed legalization last year after previously calling cannabis a “gateway drug” that should remain prohibited. But for advocates, there was at least one major disappointment in store when he got around to revealing the details of his plan: the proposal, unveiled as part of his budget last month, would ultimately include a ban on home cultivation of recreational marijuana.
Home growing—seen by many as a commonsense policy that ensures access to cannabis for individuals who can’t afford retail prices, live too far from a dispensary or just want to flex their green thumbs—has been a feature of almost all legal adult-use marijuana systems operating in the U.S., with the exception of Washington State’s. So what’s behind the New York governor’s opposition to letting adults cultivate their own crops?
It could be that Cuomo took a page from the commercial cannabis industry. Literally.
Roughly a month before the governor announced the details of his legalization proposal, a New York-based marijuana business association—led by the executives of the state’s major licensed medical cannabis providers—sent a policy statement to Cuomo’s office in the interest of offering “some thoughts on various issues associated with a transition from medical to adult-use.”
One of those thoughts centered on the businesses’ desire to prevent consumers from growing their own marijuana.
Politico first reported the existence of the document, created by New York Medical Cannabis Industry Association (NYMCIA), in December. This month, Marijuana Moment obtained the full 29-page memo through a state freedom of information law request.
There are some broad recommendations that most legalization supporters would take no issue with, such as encouraging individuals from communities disproportionately impacted by prohibition to participate in the legal industry and leveraging partnerships to expand research into medical cannabis.
But a chapter titled “The Fallacy of Home Grow” makes very specific—and, in the eyes of advocates, misleading—arguments against allowing marijuana cultivation for personal use.
The group recognized that people want home cultivation because of “currently high prices of medical marijuana” or because they see it as an “individual civil liberty.” But according to NYMCIA, home cultivation “creates a significant public safety and black market risk.”
The industry organization listed five claims to support that argument:
1. Home grow will make it impossible for the state to eliminate the black market.
2. Home grow will make it impossible for law enforcement to distinguish between legal and illegal products, thus frustrating enforcement efforts.
3. Home grow will undermine the state’s harm reduction goal of ensuring that cannabis sold in New York State is grown without noxious pesticides or other contaminants.
4. Home grow will undermine the state’s public health interest in ensuring that cannabis sold in New York State is tested, packaged, and and labeled correctly.
5. Home grow will cost the state tax revenue, thus hindering the state’s ability to fund priorities such as drug abuse treatment and community investment.
Per that last point, it’s entirely reasonable to assume that New York state would miss out on some sales tax revenue if residents decided to grow their own plants. But the other side of that dilemma is that it’d likely mean missed profits for cannabis businesses, including those affiliated with NYMCIA.
“From our perspective, it’s really hard to see any real reason—other than individual and corporate greed—to be against home cultivation at this point,” Erik Altieri, executive director of NORML, told Marijuana Moment in a phone interview. “There’s not a lot of rational concerns when it comes to allowing a limited amount of plants for an individual to grow at home.”
Melissa Moore, New York deputy state director of the Drug Policy Alliance, also pushed back against NYMCIA’s claim that a home grow option would make eliminating the illicit market “impossible.”
It’s the “fallacy of ‘The Fallacy of Home Grow,'” as she put it. It would make more sense to attribute difficulties reducing illicit market sales to state tax rates on retail cannabis, she said in a phone interview.
“It’s really disingenuous to try to say that it would not be possible to eliminate the illicit market if we allow for home grow. That certainly hasn’t been the experience of other states that allow home grow.”
Moreover, NYMCIA’s position is not consistent with that of other marijuana industry groups such as the National Cannabis Industry Association (NCIA), which argues that allowing home growing can actually benefit businesses.
“NCIA does not oppose limited home cultivation,” Morgan Fox, media relations director at the group, said in an email. “In fact, it can act as an incubator for people to develop skills which can be used in the legal cannabis industry, which benefits businesses as well as individuals looking to enter the market. Much like home brewing has helped spur interest the craft beer market, limited home cannabis cultivation can do the same in legal states.”
Who is involved in NYMCIA and why do they want to ban home cultivation?
Marijuana companies Columbia Care, Etain, PharmaCann, The Botanist and Acreage NY, Vireo Health and MedMen were all listed as members of NYMCIA in the memo to Cuomo’s office. (MedMen later acquired PharmaCann, and more recently, NYMCIA urged MedMen to leave the association amid a controversy over racist remarks allegedly made by the company’s executives).
(A separate controversy previously enveloped Columbia Care, which owns dispensaries and grow facilities in multiple states, after its Massachusetts-based subsidiary, Patriot Care, was discovered to be advocating against letting certain people with past drug convictions work in the legal cannabis industry).
Acreage Holdings, a cannabis firm that Republican former U.S. House Speaker John Boehner joined as a board member, declined to comment for this story through a public relations firm that represents the company.
A MedMen spokesperson said in a statement to Marijuana Moment that it “respects the right of those who choose to cultivate cannabis for their personal use,” but did not respond to specific questions about the company’s involvement in drafting the policy statement that urged New York officials to continue prohibiting such activity.
Jeremy Unruh, director of public and regulatory affairs at PharmaCann, told Marijuana Moment that the document “was our industry association’s first go at formulating some broad policy positions” prior to meeting with the governor’s office and that the company’s “position on home grow is far more nuanced than a simple approve/oppose.”
“Those policy points you have are sound, but our positions have evolved (and will continue to do so) as we’ve had a chance to socialize these concepts” with other stakeholders, Unruh said. He argued that New York has superior quality control standards in place for medical cannabis and that while the company recognizes “the nature and value of civil liberty” of home cultivation, allowing it would pose public health risks.
But ultimately, “Our position is this: We support the governor’s homegrow proposal,” he wrote in an email.
While recommending that lawmakers ban personal cultivation of recreational marijuana, Cuomo did include a home grow option for medical cannabis patients in his budget plan.
(Full disclosure: Several members of the companies involved in NYMCIA support Marijuana Moment through monthly Patreon pledges, or have in the past.)
Cannabis reform advocates aren’t buying NYMCIA’s claims.
It is quite obvious that NYMCIA’s affiliates have a financial stake in the shape of whatever marijuana law eventually emerges from the New York legislature. And their opposition to a home grow option is a point of concern for advocacy groups.
“[T]o advocate against home cultivation given all we know about how it works in practice from the industry side really just is kind of despicable and illustrates their greed, that they’re willing to sacrifice individual freedoms for the slightest increase in their profits,” NORML’s Altieri said.
The association’s recommendation also runs counter to what Marijuana Moment was previously told by the vice president of corporate communications for Vireo Health, Albe Zakes.
Asked about the memo following the initial Politico report that only vaguely described the document, Zakes wrote in an email that “our CEO and COO assured me that we’ve never lobbied against home grow and in fact support home grow as part of larger legislation, as long as it is regulated and controlled in a responsible manner, the same way medical or recreational markets would be, in order to protect consumers.”
(Vireo CEO Aaron Hoffnung signed an Internal Revenue Service financial disclosure form for NYMCIA last year as one of the association’s directors.)
Marijuana Moment sent a follow-up request for comment after obtaining the policy statement through the public records request, but Zakes said the he was unable to reach the company’s executives and so Vireo would have to decline the opportunity for further comment.
Advocates question whether NYMCIA leveraged its influence for the right reasons.
Is the worry really that a home cultivation policy would sustain an illicit market or complicate law enforcement activities in New York? Are concerns about the public health impact genuine? Or is it that cannabis businesses want the entire market to themselves?
“We need to make sure that we have a check on the potential greed of the industry that we can already see in these early stages based on this advocacy document,” Altieri said. “We need to make sure that the market in New York not only begins to address all the harms caused by the war on cannabis but also is oriented toward the consumer and not large industry interests.”
“Banning home cultivation benefits no one but corporations and large industry groups.”
Despite Cuomo including the home grow ban in his proposal, it seems that advocates may get more time to voice their concerns about the policy. Some leading lawmakers such as Senate President Andrea Stewart-Cousins (D) are increasingly doubtful that marijuana reform will make it into the final state budget, meaning that negotiations on separate legalization legislation could end up resulting in a law that allows consumers to grow their own cannabis.
Marijuana Moment reached out to NYMCIA itself, Cuomo’s office, Etain and Columbia Care for comment, but representatives did not respond to multiple inquiries by the time of publication.
Read the full NYMCIA policy statement, including the section on home cultivation, below:
New York Medical Cannabis I… by on Scribd
More Than 100 Marijuana Businesses Urge Congress To Include Social Equity In Legalization
A coalition of more than 100 marijuana businesses and industry associations sent a letter to congressional leadership on Thursday, pressing them to ensure that any cannabis reform legislation include provisions promoting social equity in the industry.
The letter describes the evolution in public opinion around marijuana policy, the mass incarceration implications of prohibition and the economic potential of legalizing and regulating cannabis. It makes the case that as Congress considers various proposals to change federal marijuana laws, the work won’t be complete with the mere end of prohibition.
Specifically, the signees say they are concerned that individuals from communities disproportionately impacted by the war on drugs are being “left behind because a previous [cannabis] conviction often is a disqualifying factor to become an owner or employee in the new legal ‘green-rush'” and also because “they are unable to come up with the capital necessary to break into the industry.”
“In 2018, combined sales of regulated medical and adult-use cannabis topped $10.4 billion, and the 7 states with active adult-use markets generated nearly $1.2 billion in tax revenue. The industry is now employing well over 200,000 people,” the letter reads. “And yet, with this rapidly growing new industry and broad popular support for legalization, many of the communities who were devastated by the decades-long War on Drugs are now being left behind.”
The coalition made a series of policy recommendations that aim to level the playing field and repair the social and racial harms of the drug war.
For example, the businesses said that, beyond federally descheduling marijuana, lawmakers should allow banks to service state-legal cannabis businesses, fund social equity programs to encourage those targeted in the drug war to participate in the legal market, clear the records of individuals with prior marijuana convictions and invest in efforts that lift up impacted communities.
Signees include the Minority Cannabis Business Association, National Cannabis Industry Association (NCIA), Marijuana Policy Project, Americans for Safe Access, Michigan Cannabis Industry Association, Harborside, Berkeley Patients Group, Arcview Group, MJ Freeway, Greenbridge Corporate Counsel, SPARC and 4Front Ventures, which led the letter.
“I feel the cannabis industry has a moral obligation to ensure that communities and individuals who were harmed the most by prohibition do not lose out yet again as we forge these new economic opportunities,” said Mike Liszewski, 4Front’s senior regulatory affairs counsel and the chief organizer behind the letter, said in a press release.
“There are many who would argue that Congress should not get into the business of picking winners and losers,” the businesses wrote.
“We would argue that if Congress chooses to end federal cannabis prohibition but chooses not to address these glaring racial and economic disparities in the process, it will in fact pick those who are already the most well-financed, the least likely to have suffered an arrest and conviction, and almost certainly do not come from the communities that were severely harmed by decades of prohibition to be the winners of the new economy.”
The letter comes one week after the House Judiciary Crime, Terrorism and Homeland Security Subcommittee convened for a historic meeting on ending federal marijuana prohibition, where witnesses and members discussed how to chart the best path forward toward legalization.
“As representatives of the legal cannabis industry, we have a responsibility to help undo the harms caused by prohibition and ensure that people most impacted by failed federal policies have access to the opportunities being created every day in this market,” Aaron Smith, executive director of NCIA, said in a statement. “We are pleased to join this distinguished group of business leaders and advocates in calling on Congress to incorporate these ideas into legislation.”
“Past Congresses have played a major role in marginalizing people of color through the war on cannabis, and it is the duty of current and future lawmakers to make up for this,” Smith said.
On a related note, a separate coalition of civil rights and drug reform groups, including the ACLU, was formed last week and released a letter making similar social justice recommendations for federal cannabis legislation.
“Some in Congress may feel it is too soon to end federal cannabis prohibition or that Congress does not have a responsibility to address the harms created by how this policy has targeted certain communities,” the new letter from the businesses and industry groups states. “But if Congress declines to harmonize state and federal cannabis laws or fails to take responsibility for the consequences of disproportionate enforcement, the problems caused by prohibition will continue to persist.”
“The time to wait and see is over,” they wrote. “Now is the time for Congress to take the bold but ultimately pragmatic step to deschedule cannabis along with approving the necessary funding and programming to support the communities that incurred the most harm because of federal prohibition.”
Read the full letter from cannabis industry groups below:
This piece was updated to include comment from Liszewski.
Photo courtesy of Mike Latimer.
Senate Schedules Hearing On Marijuana Business Banking Access
In one of the clearest signs of marijuana reform’s growing momentum on Capitol Hill, a Republican-controlled Senate committee has scheduled a hearing for next week that will examine cannabis businesses’ lack of access to banking services.
The formal discussion in the Senate Committee on Banking, Housing and Urban Affairs on Tuesday comes as legislation aimed at resolving the marijuana industry’s financial services problems is gaining momentum. A House cannabis banking bill that cleared that chamber’s Financial Services Committee with a bipartisan vote in March now has 206 cosponsors—nearly half the body—while companion Senate legislation has 32 out of 100 senators signed on.
The move for a hearing is somewhat of a surprise, as Chairman Mike Crapo (R-ID) had refused to commit to schedule time for the issue when asked in April, saying that “as long as cannabis is illegal under federal law, it seems to me to be difficult for us to resolve” the financial services piece.
But pressure has increased, with 50 state banking associations, the National Association of State Treasurers, the top financial regulators of 25 states, a majority of state attorneys general and bipartisan governors of 20 states all endorsing the legislation—the Secure And Fair Enforcement (SAFE) Banking Act—and calling on Congress to act on it.
Advocates point out that preventing banks from servicing state-licensed marijuana growers and retailers forces those businesses to operate on a cash-only basis, which creates public safety risks by making them targets for robberies.
While a House floor vote had been expected on the issue prior to the upcoming August recess, time is running short and no further action has yet been scheduled. That said, Minority Leader Kevin McCarthy (R-CA) last week noted bipartisan support for the legislation.
“There’s an issue when it comes to banking, making sure you’re able to having accountability within that,” he said. “I’ve heard a lot of bipartisanship in there.”
A separate House-passed spending bill also contains a provision seeking to prevent federal financial regulators from punishing banks for working with state-legal marijuana businesses, but its language is seen as less robust than the standalone legislation, which is sponsored by Rep. Ed Perlmutter (D-CO) in the House and Sen. Jeff Merkley (D-OR) in the Senate.
“House Democrats have a robust agenda which has made it tough to get time on the legislative calendar,” a spokesperson for Perlmutter said in an email. “But as we continue to talk with people, we keep gaining more and more support and look forward to a strong vote on the floor of the House soon.”
Witnesses at the newly scheduled Senate hearing—titled “Challenges for Cannabis and Banking: Outside Perspectives”—will include representatives of the Credit Union National Association (CUNA), Citywide Banks and prohibitionist group Smart Approaches to Marijuana.
“At its heart, cannabis banking is a public safety issue. It’s an $8.3 billion industry that’s currently being forced to operate almost entirely in cash,” CUNA President and CEO Jim Nussle said. “While 33 states, territories and DC have legalized cannabis, it’s been overwhelmingly difficult to provide these businesses financial services because handling transactions are currently considered money laundering. Credit unions have been leading the way in helping to get this money off the streets. We are dedicated to finding a solution to this ongoing challenge that impacts every community around the country, and look forward to working with Senate leaders during this hearing and with Congress at large.”
Also testifying will be John Lord, CEO of marijuana retail chain LivWell Enlightened Health and chairman of the industry advocacy group the Cannabis Trade Federation (CTF).
Neal Levine, CEO of CTF, said in a statement that he hoped the organization’s testimony will “contribute to the growing momentum behind meaningful and historic cannabis policy reform.”
“This hearing is yet another sign that Congress is taking the cannabis banking problem seriously and intends to take action to correct it,” he said. “Cannabis businesses operating legally under state and local laws should have the same access to banking and financial services as any other type of business.”
Merkley and Sen. Cory Gardner (R-CO), the bill’s chief GOP cosponsor, will appear at the hearing as well.
Michael Correia, government relations director for the National Cannabis Industry Association, called the hearing “yet another signal of the bill’s popularity.”
“Chairman Crapo has been clear that he does not support marijuana,” he said. “However, this clearly shows that he understands this issue is a banking problem that has serious public safety implications.”
Beyond financial services access, support on broader marijuana issues is growing in Congress.
Last week, a House Judiciary subcommittee held a first-ever hearing on ending federal cannabis prohibition at which lawmakers and witnesses expressed a near consensus that far-reaching reforms are needed but voiced some disagreement over specific provisions of pending bills.
Last month, the House approved amendments to protect state, territory and tribal marijuana laws from Justice Department interference and last week passed a measure to let military veterans who work in the cannabis industry apply for government-backed home loans.
American Bankers Association Demands Answers About Hemp And CBD
The American Bankers Association (ABA) recently sent a letter imploring top federal financial regulators to provide explicit guidance on how the banking sector can lawfully service hemp businesses.
The letter—sent to the heads of the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), the Treasury’s Comptroller of the Currency and Financial Crimes Enforcement Network (FinCEN) last week—describes ongoing uncertainty among financial institutions since hemp and its derivatives were federally legalized under the 2018 Farm Bill.
ABA Executive Vice President Virginia O’Neill wrote that “banks remain uncertain about the degree to which they can serve hemp-related companies, and the compliance and reporting requirements that such relationships require.”
“Although other federal regulators have issued helpful clarifications regarding hemp production, banks are subject to a complex set of legal requirements and regulatory expectations and require specific guidance to ensure they are acting appropriately,” she wrote. “Furthermore, the unique nature of hemp as a low-THC strain of marijuana, which remains a Schedule I substance under the [Controlled Substances Act], means banks must have a reliable mechanism to distinguish legal hemp from federally illegal marijuana with extreme confidence.”
There have been other attempts to elicit clarification from federal regulators in the months since hemp was legalized.
Rep. Andy Barr (R-KY) asked FDIC Chair Jelena McWilliams about the issue in May, telling her that he has constituents who’ve told him their access to financial services has “actually deteriorated since we descheduled industrial hemp” and requesting further guidance.
In a similar letter to federal regulators this month, Sen. Michael Bennet (D-CO) also complained about the continued lack of access to banking services for hemp producers. The 2020 Democratic presidential candidate said he hopes the agencies “can work expeditiously and in a coordinated manner to issue guidance describing how financial institutions can offer financial products and services to hemp formers and processors.”
But so far, the closest the regulators have come to assuaging the concerns of banks is a statement from a top Federal Reserve official who said during a Senate hearing earlier this month that “hemp is not an illegal crop.”
ABA said it appreciated the comment but that “a formalized statement from the agencies is necessary to enable banking services for the hemp industry on a meaningful scale.” O’Neill requested confirmation of five specific areas of interest.
“Specifically, we ask that the agencies confirm that:
“—hemp is no longer a controlled substance, effective as of the enactment of the 2018 Farm Bill, and therefore proceeds derived from hemp businesses are not unlawful, and handling those proceeds does not constitute money laundering;
“—banks do not need to file suspicious activity reports solely because a transaction relates to hemp or hemp-derived products;
“—banks can rely on a license issued by a state department of agriculture or the U.S. Department of Agriculture to confirm that a hemp producer is operating in compliance with state and federal law, and that their product qualifies as ‘hemp’ as defined in the 2018 Farm Bill;
“—in accordance with United States Department of Agriculture (USDA) guidance, banks can serve hemp cultivators and processors operating subject to state pilot programs under the 2014 Farm Bill, effective immediately; and
“—as soon as USDA finalizes its regulations related to industrial hemp, banks will be able to serve hemp cultivators and processors operating under state approved plans or direct federal licenses.”
Further, ABA asked for specific guidance as it relates to hemp-derived CBD and information about “the appropriate procedures for sourcing those products back to legal cultivators and processors.”
While the association recognized that “this is an evolving area of law and regulation” and that questions remained among federal regulators about the implementation of hemp legalization, it said that “there are steps that can be taken now to help clarify legal and regulatory expectations for banks in the current environment.”
The letter focused exclusively on hemp and its derivatives, but there’s a simultaneous conversation going on nationally about how financial institutions can work with state-legal marijuana businesses. Bipartisan legislation that would protect banks that service such businesses has the support of all 50 individual state bankers associations.
Read the full ABA letter on hemp banking below:
Regulators Hemp 062119 by on Scribd
Photo courtesy of Brendan Cleak.