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May 13, 2022

Jason Klimek Quoted in New York Times Article on Legal Cannabis Sales

Jason Klimek, special counsel, was quoted in the New York Times article “They Have Sold Pot for Years. Now They Want to Go Legal. Can They?” about whether people who’ve previously sold cannabis illegally (called “legacy businesses”) are able to pivot to selling adult-use cannabis legally in New York State. 

According to the article, thousands of legacy business owners and cannabis entrepreneurs hoping to legalize face “start-up costs, high taxes, administrative demands, and fierce competition from well-capitalized companies.”

The success of the adult-use cannabis market in New York State relies on the integration of the legacy market into the legal market. And, while the benefits are plenty, attaining a state license is complicated. Legacy cannabis business owners previously had to—and still technically have to—do their business off the books, which is a red flag for the Internal Revenue Service. “There’s no statute of limitations on taxes,” said Jason. 

The article also states, “Businesspeople new to the cannabis industry most likely come in with a slew of advantages, including clean cash and clean records—not to mention experience with regulatory frameworks. They are, essentially, starting new companies, just as they would do in any other legal industry.”

While New York State’s cannabis legalization legislation includes provisions for social equity applicants, some independent business owners are concerned that large corporations will get licenses first. Jason said that opening a dispensary could cost anywhere from $500,000 to $1 million, and the longer applicants wait for their license to come through, the more bills they’ll rack up. And continuing to operate unlicensed cannabis businesses to offset the costs isn’t without its risks. 

However, despite their concerns, business owners are still willing to forge on in the hopes of getting licenses to run successful legal adult-use cannabis businesses.

New York Times subscribers can read the full article here.

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