A panel discussion at the recent Business of Cannabis event in NYC analyzed the serious issues still facing the industry rollout in New York. What has been touted as a social equity-first initiative has been riddled with significant challenges and lawsuits.

To date, the Office of Cannabis Management has awarded 56% of licenses to those who paid for the war on drugs. While this is the most any state has done to be fair, the road to success is still a long way off.

Panelist Ethan Nadelmann, Founder of the Drug Policy Alliance, called New York the epicenter of racial inequity, where young men of color were overwhelmingly arrested on marijuana charges. Even though it has been a rocky rollout, and New York was a laughing stock for a couple of years, he praised the accomplishment so far and reminded everyone that it wasn’t too long ago that the notion that people who have a marijuana conviction should even be allowed to get licensed was inconceivable. “So the kind of 180 on that, where people who actually have a conviction are in the head of the line, is a remarkable breakthrough development,” he said.

Nadelmann posed the questions: What will all of this look like 5 or 10 years from now? What percent will still be equity licenses? To what extent are just a small number of people benefiting from this equity thing? Will we see the continuing equity? Will it be meaningful? Were there better ways that equity might have been done? Should the OCM be given a time limit to accomplish its goals, similar to other industries?

The True Party of Interest Debate

The conversation then turned to one of the biggest sticking points in the state’s rollout — the True Party of Interest (TPI) rules, which determine who can invest and own across different parts of the supply chain.

Attorney David Feldman explained that while the rules were originally designed to prevent “Big Cannabis” from dominating the market, they’re now creating unintended barriers for small operators. “They’re actually hurting small businesses,” he said, noting that restrictions prevent multi-state operators and out-of-state investors from putting capital into New York dispensaries if they own cultivation or processing assets elsewhere. “Small businesses need access to experienced investors and operators to survive, and right now, they can’t raise that capital.”

Simone Washington, Head of Equity at the Office of Cannabis Management, defended the policy’s intent, emphasizing that the agency’s Trade Practices Bureau was established to monitor ownership and ensure the market remains rooted in equity. “We hear the concerns,” she said, “but we must protect the spirit of the MRTA and make sure this market primarily benefits people harmed by past drug laws.”

Nadelmann added that other states have found a more balanced approach. In Connecticut, for example, larger operators can hold minority stakes in equity businesses — a model he called a “net positive” that brings both capital and expertise. He also cautioned that the industry must prepare for broader shifts ahead. “If federal legalization comes — and it might — many of these restrictions could vanish overnight. We need to be ready for what a national market could mean.”

A Call for Unity

If the TPI debate highlighted how regulatory complexity is stifling opportunity, the next topic revealed an equally daunting challenge: the lack of unity across the industry itself. Despite sharing common goals, operators, activists, and policymakers often find themselves working at odds with one another — sometimes in court.

Moderator Sam Reisman noted that despite common ground under the pro-legalization umbrella, competing interests have fragmented the movement. Advocacy groups, equity operators, and businesses have pursued separate agendas, occasionally securing injunctions that slowed the entire rollout.

Ethan Nadelmann acknowledged feeling “deeply conflicted” as both a reform advocate and a board member of a multi-state operator, but emphasized that industry and activism have more in common than they think. “We all want intelligent regulation,” he said. “Bad regulation helps no one.” He praised collaborations like the Last Prisoner Project, which unites both sides to address lingering injustices from the War on Drugs.

Simone Washington called for more open communication, noting that “people are very siloed” and rarely come together to identify shared objectives.

Attorney David Feldman agreed, pointing out that the industry’s fragmented advocacy sends mixed signals to lawmakers. “What we need is a single, strong trade organization that represents all sides under one coherent vision,” he said.

The Double-Edged Sword of Federal Rescheduling

As talk of federal rescheduling continues to swirl, panelists debated what moving cannabis from Schedule I to Schedule III could mean for New York’s developing market. Moderator Sam Reisman noted that while the proposal has stalled, its potential ripple effects could be profound.

Attorney David Feldman outlined three major outcomes. First, eliminating IRS code 280E would allow cannabis operators to deduct ordinary business expenses for the first time — a “game changer” that could lower effective tax rates from as high as 80% to something sustainable. Second, rescheduling would open the door to expanded research, long hindered under Schedule I restrictions. And third, Feldman said, it could enable the FDA to establish a federally recognized medical cannabis framework without new legislation. That, in turn, could pave the way for interstate commerce, trademarks, and institutional investment.

But not everyone was optimistic. Simone Washington expressed concern that rescheduling could jeopardize New York’s equity commitments. “This administration has shown it’s anti-equity,” she said. “If the federal government takes control, the businesses will swallow the market, and the equity operators will be pushed out.”

Ethan Nadelmann echoed her caution, adding that full federal legalization — depending on how it unfolds — could also accelerate consolidation. “When you open the door to interstate commerce, it’s not just the MSOs,” he warned. “It’s Big Alcohol, Big Tobacco, and Big Consumer Goods that come rushing in. That could wipe out the small operators entirely.”

Fixing the Fallout from Proximity Rules

Among the most contentious issues now facing New York’s cannabis rollout is the recent reinterpretation of the state’s proximity rules, which prohibit dispensaries from operating too close to schools and places of worship. The abrupt regulatory change has left several operators — who had already secured leases and invested heavily in buildouts — suddenly out of compliance, sparking calls for legislative amendments to the MRTA.

Simone Washington acknowledged the strain the new guidance has created. “We require people to have locations before they can even apply for a license, and that’s causing a lot of friction,” she said. With downstate real estate scarce and landlords taking advantage of operators desperate for compliant spaces, Washington said the Office of Cannabis Management is exploring ways to introduce lease protections and other structural reforms to prevent further exploitation. “It’s not necessarily about changing the MRTA itself,” she added, “but it does mean looking at solutions from a legislative standpoint.”

Attorney David Feldman called for more sweeping reforms. “The proximity rules need to be relaxed so more people can actually participate,” he said, also urging limits on local zoning powers that have allowed some municipalities, particularly on Long Island, to obstruct the state’s authority. Feldman argued that New York should rethink restrictions on ownership caps as well. “If someone builds one successful dispensary, why can’t they have four or five? No one tells Starbucks they can only open three locations in New York City.”

Ethan Nadelmann took a broader view, arguing that New York needs to learn from other states rather than repeating their mistakes. “I’d love to see New York take the lead in bringing together the most thoughtful stakeholders from both the industry and regulatory sides to really assess what’s worked and what hasn’t around the country,” he said. He also warned that regulators must be proactive in addressing the growing overlap between the hemp and cannabis sectors. “This hemp thing is a massive knuckleball coming into the industry,” he said. “One way or another, the two are going to merge — whether through drinks, flower, or something else. New York should be ahead of the curve instead of just reacting.”