The ultimate guide to cannabis legalization in New York: The key dates to know, and which stocks could benefit the most.

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The ultimate guide to cannabis legalization in New York: The key dates to know, and which stocks could benefit the most.
Crystal Cox/Business Insider
  • New York became the 15th state to legalize cannabis on March 31, 2021.
  • The market has the potential to be worth $7 billion once fully established.
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New York became the 15th state to legalize recreational cannabis in the US last year.

In the Empire State, recreational marijuana sales could balloon to $7 billion once the market is fully established. Seemingly every cannabis company in the country wants in.

Your big-picture run-down

Though sales are expected to begin sometime in 2023, New Yorkers can now possess and smoke marijuana if they're over the age of 21. Medical marijuana was already legal in New York.

On August 15, New York's Office of Cannabis Management (OCM) approved 15 applicants for conditional processor licenses. Those licenses allow manufacturers to take New York-grown cannabis to make products like edibles and tinctures and distribute them to retailers.

The OCM also approved 19 conditional adult use cultivator licenses to small farms and other growers to supply raw cannabis to the market.

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Growing marijuana at home, cannabis delivery, and "consumption lounges" — where customers can smoke cannabis in a designation location — will also be allowed in the state, though an exact date is still not known.

The state's limited medical cannabis program has also seen expansion under the new adult-use bill. The list of qualifying medical conditions for medical cannabis was expanded, along with product options. Flower products, which were not allowed under the original program, are now permitted.

New Yorkers with previous marijuana convictions will have their records wiped clean under the law.

Read more:

A timeline of when New Yorkers can smoke marijuana, grow it, and sell it legally

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New Yorkers with previous marijuana convictions will have their records wiped clean under the new legalization law

Regulations and details about the market

Though then-Gov. Andrew Cuomo signed a cannabis bill into law in March 2021, many details still have to be ironed out before recreational sales can begin.

What we do know so far is that existing medical operators will be allowed to transition into the state's recreational market, if they pay a fee, and that they'll have an advantage as vertically integrated entities. The law also has a goal of 50% of its licenses going to social equity applicants, which it defines as those from communities disproportionately impacted by the drug war, minorities, women, small or distressed farmers, and service-disabled veterans.

The ultimate guide to cannabis legalization in New York: The key dates to know, and which stocks could benefit the most.
Crystal Cox/Business Insider

Cannabis products will face a 13% sales tax, with 9% going to the state and 4% going to the local municipality, the bill said. There will also be an excise tax based on milligrams of THC.

Tax revenue will go toward a social equity fund, education, and drug-education programs.

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The newly formed OCM and a Cannabis Control Board will regulate the industry, but there are many influential people who have worked to shape New York's legal market thus far and will continue to have a big hand in regulations as the market moves forward. They range from lawmakers to advocates to company executives.

As the market prepares to come online, cannabis companies are also racing to cash in on New York's legal cannabis market, but illicit weed vans and galleries are posing a surprising threat. Cannabis CEOs told Insider that gray market operators are already eating into their profit margins.

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The key details every cannabis investor needs to know about New York marijuana legalization

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Cannabis companies are racing to cash in on New York's legal marijuana market, but illicit weed vans and galleries are posing a surprising threat

The stocks that are primed to win in New York

The 10 cannabis companies that currently operate in New York's medical market have a first-mover advantage. Seven of these operators — including Curaleaf, Green Thumb Industries, and Cresco — are publicly traded.

New York's recreational market will operate as a two-tier system where operators may either be cultivators (allowed to process and distribute their own products) or retailers (barred from cultivation). The exceptions to this may be existing medical operators wishing to transition to adult-use and microbusinesses.

Incumbents will have two distinct advantages over newcomers: they already have the infrastructure set up to somewhat supply the new marketplace and they'll be allowed to both grow and sell cannabis in the recreational market if they choose to.

Some companies told us they're already preparing to ramp up cultivation to prepare. The biggest companies in New York and elsewhere are also gobbling up talent, and paying top dollar to prospective employees, to prepare as big markets come online and the industry matures.

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The deals to expect as outsiders enter New York

Though (most) newcomers won't be allowed to vertically integrate under New York's regulations, that doesn't mean they don't stand to win big in a state with more than 19 million residents.

Some big companies said they plan to enter New York as cultivators, in large part because they're focused on branding and product quality over retail presence. Analysts say this makes sense as the industry matures and cannabis companies begin to think of themselves as consumer product companies.

But those intent on entering the state as a vertically integrated company may consider acquiring one of the existing license holders.

A handful of current operators are either financially troubled or privately owned. These are operators most likely to be gobbled up, cannabis attorneys who work on M&A deals told Insider.

As the companies prepare to gear up for the new market, cannabis-focused ancillary firms — like law practices, recruiting agencies, and marketers — say they've seen a surge in business.

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Local entrepreneurs will also have opportunities to benefit as new markets, like New York, open up to cannabis businesses.

Read more:

New York just legalized marijuana. Here are the prime acquisition targets and the types of deals you can expect.

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New York is poised to become one of the largest legal cannabis markets. Here are the opportunities for entrepreneurs.

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