The Challenges of Navigating Social Equity and Predatory Investors in New York’s Cannabis Market

Entering the world of cannabis business ownership, especially in a state like New York, can be both exciting and daunting. The promise of social equity—specifically through the Conditional Adult-Use Recreational Dispensary (CAURD) license program—has offered a glimmer of hope to those who have been historically impacted by cannabis prohibition. However, despite the intentions behind the program, applicants like my partner, Marq Hayes, and I have experienced firsthand the challenges that come with trying to align business ambitions with the reality of navigating an industry still very much in its infancy.

In September 2022, Marq and I applied for a CAURD license to open Brown Budda, our recreational cannabis dispensary in New York. Our application was part of a larger pool of over 900 applicants, many of whom were seeking a chance to tap into New York’s newly legalized cannabis market. The fact that only 32 of us were chosen to receive provisional status in this first cohort is a telling sign of just how difficult it is to break into the industry.

For context, consider the disproportionate number of marijuana-related arrests in the state. The number of people impacted by the criminalization of cannabis far outweighs the number of applicants vying for a chance to enter the legal market. It’s clear that social equity programs are needed, yet as we’ve seen, the road to success is far from straightforward.

The Uncertainty Surrounding Local Municipalities and the Roadblocks to Operations

Fast forward two-and-a-half years, and our dispensary is fully licensed, with delivery operations up and running. However, we’ve encountered unexpected hurdles along the way. Our home base in Southampton, New York, a municipality that initially seemed open to cannabis businesses, now appears to have cold feet about the whole operation. Specifically, the town’s officials have argued that we need a special-use permit to operate our delivery program, despite the fact that both the state and the town had approved our location a year ago.

We’re now stuck in a situation where we’ve had to cease operations until the Town Council grants us the required special-use permit. The irony here is that we’ve already signed a 15-year lease for our location, and it was approved by both the state and local government well in advance. So, we’re left to wait for a decision that could delay our ability to generate revenue and further strain our financial situation.

This situation reflects the larger challenges faced by many cannabis entrepreneurs in New York. Local municipalities have the final say on whether dispensaries can operate in their jurisdictions, and not all are willing to support the burgeoning industry, even though it could bring much-needed economic benefits to their communities.

Predatory Investment Offers and the Threat to Social Equity Goals

While we’ve been dealing with local bureaucracy, another issue has emerged that threatens to undermine the very foundation of New York’s social equity cannabis program: predatory investment offers. As we’ve sought funding to support our operations, we’ve encountered numerous wealthy investors who are eager to get involved—but on their terms.

Many of these offers are, in essence, “indecent proposals” in the spirit of the 1993 film Indecent Proposal. In that movie, a couple agrees to let a billionaire spend the night with the wife in exchange for a substantial sum of money, only to find that their relationship can never be the same. Similarly, the investors approaching us want to take full control of our business in exchange for funding, with some offering to buy us out entirely once our business transitions from conditional to full use status in 2028. This scenario is a far cry from the social equity principles laid out by the state.

The offers we’ve received represent a stark contrast to the values behind the CAURD program, which was designed to help those impacted by the war on drugs gain access to the cannabis industry. Instead of receiving funding that allows us to retain ownership and control of our business, we’ve been forced to entertain offers that would dilute our ownership or, worse yet, give up full control of Brown Budda. It’s a frustrating position to be in, particularly when we’ve already invested so much time, effort, and financial resources into making this business a reality.

The Role of the Office of Cannabis Management’s Trade Practices Bureau

In response to concerns like ours, the Office of Cannabis Management (OCM) has introduced the Trade Practices Bureau (TPB). The TPB is tasked with upholding the integrity of New York’s cannabis market and ensuring that the goals of the state’s medical and adult-use programs are met. One of the key functions of the TPB is to investigate and address predatory practices, such as fraudulent reporting, deceptive business practices, and predatory lending.

This bureau’s work is critical for ensuring that small and medium-sized businesses—like ours—aren’t overtaken by larger, multi-state operators with the capital to dominate the market. New York’s cannabis industry needs to be accessible to all entrepreneurs, particularly those from communities that were disproportionately impacted by cannabis prohibition. The work of the TPB is essential in protecting the intentions of the social equity program, ensuring that the benefits of legalization don’t just accrue to the wealthiest investors, but are spread equitably across the state’s diverse communities.

The Need for Thoughtful, Socially Responsible Investment

At its core, the cannabis industry—like any emerging industry—requires capital to thrive. However, what sets the cannabis market apart is the unique opportunity it presents to create a more equitable society. Social equity is not just a buzzword; it’s a fundamental component of cannabis legalization that aims to address the harm caused by years of criminalization and unequal enforcement of drug laws.

For investors looking to enter the cannabis market, my advice is simple: listen to the needs of licensees and offer reasonable proposals that align with the principles of social equity. We’re not looking for a handout or an easy way out—we’re seeking partners who understand the challenges of starting a business in a newly regulated industry and who are committed to building something sustainable and fair.

If investors want to be part of the solution rather than the problem, they need to approach this market with empathy and a willingness to invest in people, not just profits. Social equity is not just about getting in on the ground floor; it’s about making sure that the benefits of legalization are shared by everyone, especially those who have historically been left behind.

A Call to Action for Ethical Investment in New York’s Cannabis Market

The challenges we’ve faced in trying to launch Brown Budda are emblematic of the struggles many social equity licensees face in New York. From navigating local zoning laws to dealing with predatory investors, the road to success is anything but smooth. However, there is hope that with the right support and ethical partnerships, we can create a cannabis industry that benefits everyone—not just the wealthiest investors.

For those entering the cannabis market, whether as licensees or investors, it’s crucial to remember the original intent behind social equity programs. By working together and focusing on long-term sustainability, we can ensure that the promises of cannabis legalization in New York are fulfilled for all.