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NYS Ousts Control Board Member Behind Slow Dispensary Rollout

Reuben McDaniel, a prominent figure in the regulation and execution of New York State’s burgeoning adult-use cannabis sector, has announced his resignation from his influential position on the New York Cannabis Control Board (CCB). This move came amid rising criticism of McDaniel’s dual roles on the CCB and as the president of the Dormitory Authority of the State of New York (DASNY), which some industry stakeholders view as a conflict of interest.

McDaniel’s appointment to DASNY was first recommended by former Governor Andrew Cuomo in 2019, and he was later appointed to the five-member CCB by Governor Kathy Hochul in September 2021.

Why Did Reuben McDaniel Resign?

McDaniel officially announced his departure from the CCB during a regularly scheduled board meeting on June 15, 2023. Although McDaniel did not explicitly state his reasons for the unexpected resignation, the move followed increased scrutiny and backlash from various corners of New York’s cannabis industry.

The criticism has been focused mainly on his concurrent positions. Critics have argued that the differing objectives of the DASNY and the Office of Cannabis Management (OCM) presented potential conflicts and setbacks in the management of the state’s cannabis sector. The OCM was within McDaniel’s purview as a member of the CCB.

As the head of DASNY, a state entity primarily responsible for financing construction projects for institutions serving the public, McDaniel was tasked with raising $150 million in private investment funds. This was slated as startup capital intended to foster social equity within the marijuana industry, providing financial support for licensees who otherwise might struggle to secure the necessary funds. This ambitious initiative formed part of the wider Conditional Adult-Use Retail Dispensary (CAURD) program, which DASNY played a significant role in developing.

However, the program began to encounter significant challenges soon after launch. Licensees faced difficulties securing the real estate necessary for retail operations, and the ambitious $150 million in funding proved elusive. Much of the blame fell on DASNY and McDaniel himself amid these challenges.

The situation led to increased public criticism of McDaniel. The Cannabis Association of New York, widely regarded as the state’s most significant cannabis trade organization, publicly declared McDaniel’s dual roles as CCB member and DASNY president a conflict of interest.

These criticisms were echoed during a charged meeting at the CUNY School of Law. Here, a crowd of licensed retailers, frustrated by perceived opacity in the industry’s rollout and management, demanded increased transparency and accountability from McDaniel’s agency. One CAURD licensee, Carson Grant, notably refused to shake McDaniel’s hand following an impassioned speech, later alleging to NY Cannabis Insider that McDaniel had not been truthful on stage.

What the Future Holds for McDaniel and New York’s Cannabis Sector

Amid the controversy and his resignation from the CCB, McDaniel says he will continue serving as DASNY’s president. His prior experience in the financial services sector, including his founding of the investment advisory firm RM Capital Management, will presumably continue to influence his work with DASNY and the cannabis industry.

Despite the industry’s ongoing struggles and the criticism directed towards him, McDaniel has expressed optimism for the future. He says he believes strongly in Governor Hochul’s vision to make New York a national leader in promoting cannabis social equity and looks forward to its fruition.

However, despite McDaniel’s confidence in the future, the present reality of New York’s cannabis industry remains fraught with challenges. Two years after former Gov. Cuomo signed legalization into law, only a handful of adult-use retailers have been able to open their doors across the state.

As McDaniel departs the CCB, the impact of his departure and his continuing role as DASNY’s president on the rollout of New York’s adult-use cannabis sector remains to be seen.

Hurdles and Setbacks for New York’s Recreational Cannabis Industry

When the state of New York legalized recreational cannabis, it started with an ambitious plan to establish an industry emphasizing social equity. Unfortunately, that effort has not gone as smoothly as supporters had hoped. The initial goal was to give individuals previously convicted of marijuana offenses the first opportunity to sell it legally. While Governor Kathy Hochul had projected more than 100 dispensaries would be operational by summer, only 12 have been able to open since the first licenses were issued in November last year.

Prospective dispensary operators formed a coalition and wrote a letter to regulators and the governor’s office expressing their difficulties in selecting their own storefront locations. Some claimed they felt pushed into accepting inflated rents and construction costs, while others said the state was withholding funds from those wishing to handle matters independently. This indicates a disconnect between the state’s control over the program, designed to benefit these individuals, and the actual outcomes, which are reportedly more frustrating than helpful.

These pushback efforts have also attracted support from cannabis farmers and processors, who point out that the envisioned cannabis market, one that corrects past injustices and promotes small business, is far from becoming a reality. The delays in opening legal recreational marijuana dispensaries are affecting the entire supply chain, burdening many farmers and processors with large quantities of degrading crops and potential business losses.

The new licensing process was designed to allow people convicted of marijuana offenses to be the only ones eligible to sell weed legally for an initial period. DASNY was assigned to provide these individuals with ready-to-open locations and $200 million in low-interest loans. However, DASNY struggled to find landlords willing to rent to dispensaries and has yet to raise money from investors for the loan fund.

The situation recently became even more pressing as the CCB voted to allow major cannabis firms to enter New York’s recreational market two years ahead of schedule. This decision could pit modest dispensaries run by individuals against larger companies, possibly shutting out smaller players, as has happened in other states.

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