Marijuana companies spend big on lobbying amid a slumping pot market
Marijuana companies spend big on lobbying amid a slumping pot market
Think BIG might have been co-founded by CJ Wallace – son of the legendary rapper Christopher Wallace, known as The Notorious B.I.G. – but the company looks like a typical player in the ongoing efforts to legalize recreational marijuana in New York. It has spent thousands of dollars on lobbying representation in Albany in recent months. And like other advocates, CJ Wallace couches his Los Angeles-based marijuana company in social justice terms.
“Just every other brand that’s out there, if they don’t have a criminal justice angle, they’re doing a huge disservice to everybody,” Wallace told Esquire last year. “Everybody has, or should have, a responsibility to speak on that and do as much as they can to correct those wrongs.”
The company’s message of social justice has been embraced in proposals by Gov. Andrew Cuomo and state lawmakers as all sides work on a legislative framework for legalization. “Think BIG believes that cannabis can be used as a tool to unlock creativity, curiosity and help build communities across New York,” said Fred Polsinelli, a lobbyist for the company. “It’s our hope that this message resonates with elected officials who are responsible for the development of a sustainable program.” But the recreational marijuana market may not seem as lucrative today as it did a year ago, when state leaders failed to reach a consensus on legalization. The share prices of marijuana companies were hammered during the second half of last year, many states with legal markets like California have seen tax revenues fall short of projections and the capital markets for funding marijuana production have dried up.
However, companies like Think BIG are still spending big money to sway Cuomo and state lawmakers while they aim to strike a deal before the April 1 state budget deadline. While there are some differences in the proposals from legislators and the governor over how future tax revenues would be used, both have included provisions that would give disadvantaged groups preferential treatment in entering the marijuana business – an approach supported by some of the companies spending the most money on lobbying.
“Both my bill and the governor’s proposal recognize that any new regulatory model needs to prioritize market access to businesses from communities disproportionately impacted by the drug war, and smaller distressed family farmers, rather than some of the larger players in the cannabis business,” said Sen. Liz Krueger, who is leading the Legislature’s legalization efforts with Assembly Majority Leader Crystal Peoples-Stokes. Lawmakers also want some future tax revenues devoted to helping people from the communities hit hardest by the war on drugs access capital to start marijuana businesses.
The share prices of marijuana companies were hammered during the second half of last year, states have seen tax revenues fall short of projections and the capital markets for funding marijuana production have dried up.
Such provisions would hurt bigger companies that do not qualify for preferential consideration – and these companies are making their voices heard, according to Krueger. “It is true that larger players are trying to shape the final legislation,” she said. This includes trying to persuade lawmakers to allow a company to control the entire production cycle of recreational marijuana from seed to sale – otherwise known as vertical integration – that Krueger said she opposes. “Mechanisms such as technical and financial support for equity applicants and limits on vertical integration can create economic opportunity for disadvantaged communities and small businesses,” she added.
Companies are spending substantial amounts of money to get the ear of the governor and lawmakers, according to lobbying records. It remains unclear whether the companies paying lobbyists are focusing on legalization as a whole, or backing specific legislative provisions. Think BIG, for example, began paying $3,500 per month for lobbying in November, according to disclosures filed with the Joint Commission on Public Ethics. Colorado-based Viola Extracts is spending $7,500 a month, though it remains unclear whether the company is looking to get into the recreational or medical marijuana market in New York. Both companies are led by people of color – Think BIG by Wallace and Viola by former NBA player Al Harrington, who have both supported the social equity component of legalization in media reports. A representative for Viola did not respond to a request for comment.
The views of other company leaders are less clear. Brian Bairos – a white, Massachusetts-based CEO of dispensary company Giving Tree Health Center – spent $5,000 per month on lobbying in the second half of 2019. He did not respond to a request for comment.
Two Canadian companies have also spent thousands of dollars on lobbyists in recent months. Canopy Growth Corp. inked a lobbying deal with Cozen O’Connor Public Strategies in March 2019 for $7,500 per month through the end of 2020. Acreage Holdings – which Canopy secured the right to buy for $3.4 billion at the end of last year – paid $15,000 per month to Brooklyn-based 99 Solutions and $10,000 per month to Greenberg Traurig to represent the company on “marijuana issues.”
Acreage is a member of the New York Medical Cannabis Industry Association, a trade group of medical marijuana companies. “We look forward to working with the governor, the Legislature, and all stakeholders to pass a law that creates an inclusive, diverse, and competitive industry that will reinvest in communities impacted by marijuana prohibition, protect medical marijuana patients, and provide responsible access to safe adult-use products,” according to a statement by the association.
It remains to be seen whether these lobbying efforts will pay off in the long run. Though lawmakers and the governor have expressed optimism on reaching a deal this year, they might not be able to find a consensus on tax revenues. Considering that 16% of New York City residents reported using marijuana in 2015-16, there is undoubtedly a lot of money in legalizing weed. But it might not be as much as some entrepreneurs are hoping for and as much as the state is projecting.
The governor’s office estimated the state could receive $300 million in tax revenue annually once a legalized market gets up and running. A 2018 report by state Comptroller Thomas DiNapoli projected that the state would take in nearly $436 million in tax revenue every year.
Tax revenues and sales in other states that have legalized marijuana, like California, have underperformed expectations. Canopy Growth’s stock has dropped from about $50 per share to under $25 in the past year, reflecting the wider dip in the market. “The industry is not doing so great,” said Josh Weinstein, the founder of CannaGather, which promotes networking among people interested in starting a legal marijuana business.
This dip in business prospects though has a silver lining for advocates because it allows them to refocus on some of the core goals of legalization. Ensuring social equity is woven into a legalization bill backed by activists and some parts of the business community. Advocates are also battling what Weinstein called a popular misconception that has undermined legalization efforts to some degree. “One of the biggest challenges for cannabis legalization is not: Can these companies sort of expand the number of people that consume,” he said. “It’s really much more so like: Can we shift the illicit market to the legal market?”
Correction: Think BIG has paid a lobbying firm, but has not yet directly lobbied lawmakers.