Two years after the legalization of recreational marijuana in Colorado, no one national formula has emerged to dominate sales state to state.
But speakers at a recent marijuana conference said that Connecticut has run the most successful program in the New York tri-state area.
“Nobody has figured out this business yet,” said Scott Giannotti, founder of the Cannabis and Hemp Association, which hosted the first annual State of the Cannabis Industry in Manhattan earlier this month. “Entrepreneurs and investors who want to invest in marijuana companies need to be flexible because there’s so many sudden changes in legalization that can happen at any moment.”
Some 551 New Yorkers have been certified to obtain medical marijuana as patients since the state’s legalization program launched in January. That’s compared to 7,900 registered in Connecticut by the end of 2015, according to Viridian Capital data.
“The medical marijuana program in Connecticut is currently more profitable, but if New York increases the number of qualifying conditions permitted under the program, we believe that New York will surpass Connecticut,” said Michael J. Swartz, senior analyst with Viridian Capital Advisors in New York.
A grow facility in Connecticut called Curaleaf is one of the East Coast players that’s earning money by selling to dispensaries an array of product made with THC or CBD, such as oral mucous spray, oral syringes for oral cancer, capsules so people can ingest in pill form and pure undiluted extract for vaporization through the lungs.
“Revenue has been growing at 10 percent a month because of a steady rise in the patient population,” said Curaleaf CEO Ted Dumbauld who was the featured speaker at the event.
After being awarded a license to grow, Curaleaf opened a 40,000-square-foot cultivation center in Hartford County in August 2014 and just completed an extended friends and family capital round of some $5 million to fund the expansion of their product offerings and growing capacity.
“In general, a lot of the capital we see trying to come into the industry is from family offices,” said Curaleaf Chairman Robert Birnbaum. “The implication is that capital that can invest might earn a higher than normal return.”
But unlike New York’s medical marijuana program, Connecticut dispensaries are allowed to sell marijuana flower or leaf as well as edibles.
“Not permitting the sale of flower is an obstacle because there is a segment of the patient population for whom the flower is an appropriate treatment and smoking is a familiar delivery method that brings new patients in,” Birnbaum told Private Wealth.
New York’s Compassionate Care Act restricts legal medical marijuana sales to tinctures, capsules or oil and liquid in cartridges for vaporization.
“The New York State health department regulates the medical marijuana program and doesn’t allow smoking the flower or leaf because it doesn’t want to perpetuate that smoking is a healthy practice,” Giannotti said.
In Colorado, it’s the liquor control authority that overseas legal marijuana under the state’s Marijuana Enforcement Division (MED), while in Connecticut, the Department of Consumer Protection governs the sale of marijuana.
“In Connecticut, it’s about fair business practices,” Giannotti said. “Regulators want to ensure that marijuana dispensary owners don’t divert product and that consumers don’t get ripped off.”
Curaleaf is one of four licensed companies permitted to produce medical marijuana in the state and supplies medicinal weed to six dispensaries statewide.
“There was another competitive process announced on January 11 and there are three new dispensaries coming online,” Dumbauld told his audience. “By summer, we will have nine dispensaries in the state.”
In fact, dispensaries in Connecticut are permitted to obtain supply from all four licensed producers, whereas in New York, they can only purchase product from its affiliated producer.
“In New York, if there’s a shortage, dispensaries cannot buy from other producers,” said Birnbaum. “If there was a regulatory framework in New York, we would certainly deliver, but it’s not something that is feasible right now.”
That’s because marijuana is still illegal on a federal level and only Indian reservations located on sovereign land that are contiguous from state to state can transport cannabis product by ground, water or air transportation without breaking the law.
“The only states that have a realistic possibility of transferring supply is Oregon and Washington because other neighboring states maintain criminalization policies,” said Rob Porter, a tribal law expert and former president of the Seneca Nation in New York.
Current differences in state law around the possession of marijuana still pose a problem.
“Intrastate isn’t a problem, but interstate triggers a federal question,” said Marc J. Ross, a corporate and litigation attorney in Manhattan who is teaching a marijuana business class at Hofstra University School of Law in New York.
Because every batch of three to five marijuana plants and manufactured product is rigorously sampled and tested for pesticides, heavy metals, mold, mildew, bacteria and other contaminants by an independent testing lab, the state of Connecticut is poised to be a state that exports once that barrier is lifted.
“Any state that plans to impose rigorous testing requirements should look to Connecticut as a leader,” Birnbaum said.
