What just happened with New York's cannabis marketing regulations?
First a judge invalidated ALL cannabis regulations in New York, but then amended the order to apply only to specific marketing provisions.
Did you feel the earthquake in New York last week?
I’m not just talking about the two four-point-something magnitude ones that hit Friday — but a seismic legal decision that reverberated through the state’s cannabis industry and sent shockwaves far beyond the courtroom.
If you aren’t sure what we’re talking about, here is the headline that had everyone in New York talking last week:
When this headline first dropped, people couldn’t believe their social feeds — but even the most connected reporters on the beat were tweeting about how this ruling seemingly struck down *ALL* of New York state’s regulations.
Within hours there was a swift turnaround when the judge revised the ruling to specifically target and nullify only the marketing and advertising regulations that Leafly had filed a lawsuit over last year — alleviating broader concerns about the state’s cannabis regulatory framework.
So what exactly did Leafly sue the Office of Cannabis Management (OCM) over?
Leafly sued OCM over specific regulations that would prevent dispensaries from marketing themselves or fulfilling orders on third-party platforms like Leafly, WeedMaps, Dutchie, etc. The lawsuit, filed last September, challenged the OCM's rules on the grounds that they were unconstitutional, vague, and infringed upon free speech rights.
Specifically, Leafly argued against rules that:
Prohibited retail dispensaries from paying for marketing or promotion through a third-party platform, marketplace, or aggregator that lists cannabis products for sale.
Prohibited licensees from contracting with a person or entity performing any function or activity directly involving the licensed activities authorized for the license type.
Leafly's contention was that these regulations would essentially bar their business operations in New York by restricting their ability to market cannabis products and engage with dispensaries on their platform.
The regulations challenged by Leafly were not merely bureaucratic hurdles; they struck at the very core of the company’s business model.
Leafly operates as a critical bridge between cannabis dispensaries and consumers, facilitating not just the discovery of cannabis products but also providing a platform for dispensaries to market themselves effectively.
By prohibiting third-party platforms from advertising, marketing, or even listing pricing information for cannabis products, the contested regulations threatened to sever this vital link.
For Leafly, this wasn't just a regulatory inconvenience—it represented a fundamental threat to their operational viability in New York, one of the most promising cannabis markets in the country. The company’s lawsuit, therefore, was a fight for survival, challenging restrictions that they contended not only stifled their business but also infringed upon constitutional rights to free speech.
This battle was about more than just marketing; it was about maintaining a lifeline for dispensaries to reach their customers and for consumers to make informed choices in an increasingly competitive market.
The court’s ruling in favor of Leafly found that the OCM’s rulemaking process was problematic, and the regulations in question were indeed unconstitutionally vague and in violation of free speech rights, leading to the invalidation of those specific marketing and advertising regulations
Here is a list of the specific cannabis marketing regulations that have been overturned in New York:
Third-Party Marketing and Advertising Bans:
Sections 123.10(g)(21) and 124.5(a) (Third Party Marketing Ban) prohibit third-party platforms like Leafly from advertising, promoting, or marketing cannabis products on behalf of dispensaries or other cannabis businesses.
Pricing and Order Restrictions:
Section 124.1(b)(5)(ii) (Pricing Ban) and Section 123.10(g)(23) (Third Party Order Ban) prevent third-party platforms from displaying pricing information or facilitating orders for cannabis products.
Mandates on Listing:
Section 124.1(b)(2) (Third Party All Licensee Listing Mandate) and Sections 124.1(c)(1)-(2) (Third Party Distributor Listing Mandate) require third-party platforms to list all licensees or distributors, potentially limiting their ability to curate or choose their partnerships.
Leafly argued that these regulations are unconstitutional because they restrict their right to free speech by limiting how they can communicate and operate within the cannabis market.
They contended that the OCM's regulations were arbitrary and capricious, lacking a reasonable basis and unfairly targeting platforms that facilitate cannabis marketing and sales indirectly.
The notice of entry filed on April 4th indicates that the OCM has until May 3rd to file an appeal. Should an appeal be filed, the enforcement of Judge Bryant's order might be stayed pending the appeal's outcome, delaying any immediate changes to how cannabis marketing and advertising can occur in New York.
In this highly regulated world of cannabis marketing, operators constantly find themselves navigating a tightrope.
On one side, there's the reliance on platforms like WeedMaps and Leafly, which, despite the resentment of feeling beholden to them, provide essential services that bridge the gap between cannabis businesses and consumers. On the other, there are the restrictive regulations that, up until recently, clamped down on the very use of these platforms, leaving businesses with few options to reach their audience.
While this is a big victory for Leafly’s bottom line in New York, this is also a major victory for the roughly 100+ dispensaries that are now licensed to operate in New York State and struggling to compete against their non-licensed counterparts.
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West Coast cannabis companies target price-sensitive customers - Green Market Report
Three West Coast marijuana companies—Glass House Brands, Lowell Farms, and Leafly Holdings Inc.—highlighted their focus on catering to price-conscious cannabis consumers during separate investor calls. Despite facing losses in 2023, they're strategizing to attract customers seeking value-priced products in the regulated market. Glass House plans to introduce a new line of marijuana flower priced at $9.99 or less for an eighth of an ounce, aiming to draw customers away from the illicit market. Lowell Farms is relaunching its "House Weed" brand as a value proposition, while Leafly introduced a feature in its dispensary finder to help consumers locate the best prices nearby. These efforts reflect a wider trend in the U.S. cannabis industry, with many companies grappling with profitability challenges, leading to predictions of increased market consolidation.
My thoughts:
I’m writing this newsletter from Portland, Oregon — arguably one of the best consumer markets in the country. I have a dispensary down the street from my house (less than a half mile) that has a sign out front advertising $5 eighths all day long. I wouldn’t buy them, but people definitely do. I also regularly see signs for $30 or $40 zips.
Anyone who doesn’t think their market will look similar eventually is sadly mistaken. Lots of business plans being built on projection models that don’t reflect the reality of the marketplace.
Until we see the end of federal prohibition, we will continue to see each siloed market run through their own boom and bust cycle.
The only way to guard against the eventual race to the bottom is to build a brand that provides more than just the transactional value of a product purchase. You need to focus on building a community — one that will support you at any price point and tell their friends and family that they should too.
Some of these larger scale companies may have a logo and some branded merch but if no one is out in the streets talking about their flower and sharing it with their friends, is it even a brand?
If you’re a craft grower or in charge of a smaller brand — don’t focus on width (scale), focus on depth (community). It doesn’t matter how much weed you grow — it matters how much you can sell and how quickly.
New Markets Poised to Lift U.S. Cannabis in 2025 - The Wall Street Journal
The U.S. cannabis sector anticipates significant growth in 2025, banking on potential legalization in Florida and Pennsylvania for recreational marijuana. Analysts and industry leaders foresee these emerging markets as key drivers for sales expansion, alongside the full swing of adult-use cannabis sales in Ohio and New York. Companies like Curaleaf and TerrAscend are eyeing exponential growth opportunities, with 2025 expected to realize the full benefits of these emerging markets, setting the stage for substantial contributions to the industry's bottom line.
My thoughts:
While most of the attention of the last year has been on the potential rescheduling at the federal level, the movement at the state level still continues to force change and buttress MSO business strategies.
With 2024 being a Presidential election year, having cannabis legalization on the ballot in Florida is sure to drive turnout as it has done in many states before it.
Governor Josh Shapiro seems determined to get legalization done in Pennsylvania and could potentially pull it off before the end of the year. This would make for some major electoral college states all becoming large, operational, adult-use markets (New York, Florida, Ohio and Pennsylvania — representing 113 electoral votes) before the next presidential election in 2028.
With Trulieve having invested $40M to get legalization on the ballot and TerrAscend’s CEO saying that adding PA and FL would 10x their business, it’s clear that all eyes will be on these major presidential election states in 2024.
Social Media Platforms ‘Fueling’ New York’s Unlicensed Cannabis Market, Stakeholders Say - Cannabis Business Times
Amid the rise of unlicensed cannabis shops in New York, industry groups have raised concerns about their active presence on social media platforms and use of paid advertising to promote untested products. In a letter to Gov. Kathy Hochul, five organizations called for legal action to hold these companies accountable and protect consumers. Despite state efforts to increase enforcement, fines remain largely uncollected. The groups urge immediate action, proposing collaboration with the state Attorney General to initiate legal proceedings against social media platforms and implement verification tools to ensure compliance with regulations.
My thoughts:
This story from the end of February highlights how New York continues to be the case study in the complexities of getting an equitably licensed cannabis market off the ground and the challenges that cannabis marketers face in new markets.
It’s hard to deny the impact of having 8,000 unlicensed dispensaries — in NYC alone. One operator Alfredo Anguiera, co-founder of ConBud LLC said that he has 71 unlicensed shops within 1,200 ft of his licensed storefront on the lower eastside.
Governor Kathy Hochul held a press conference (just two days after stakeholders sent her a letter) highlighting how her office was prioritizing the problems licensed shops are facing from the illicit market.
Although the press conference and a letter from stakeholders were generally calling out “social media” companies, the group and Governor Hochul seemed to be focused on Google, who seemingly is making a lot of money by listing unlicensed shops.
Stakeholders pointed out that social media companies could partner with NY to use the state’s dispensary location verification tool in order to verify who should be allowed to advertise on their platform. This would help Google drive legitimate revenue, help the state maintain compliance and give licensed operators an upper hand on their illicit competitors.
When I was Head of Growth/Director of Marketing at National Cannabis Industry Association, I had some conversations with folks at Facebook (now Meta) about what it would look like to start allowing licensed operators to use their ad platform and was even allowed to run some paid ads for NCIA without getting shut down.
At one point before the pandemic, they had a taskforce/committee that included industry stakeholders to take the first step in the process of onboarding CBD companies. I’m not sure where things went, but I do see hemp/CBD ads in my FB/IG feed occasionally.
One idea that I had floated to them at the time was to partner with an industry association like NCIA or MCBA and to use a license database platform like CannaBizMedia to verify licenses so that they had justification for their legal departments who want to stay far away from cannabis until federal prohibition falls.
In my opinion all of these social media platforms are “too big to fail” and wouldn’t face a crackdown from the federal government if they were to bring licensed cannabis companies on their platform. At this point, they’d have dozens of governors and attorneys generals ready to file amicus briefs on their behalf if such a scenario presented itself.
Cannabis Industry Blogs + More Headlines:
Inside The Cannabis Industry’s $75 Million Pre-Roll Empire - Forbes
Colorado Bill Banning Social Media MJ, Drug Posts Raises Constitutional Concerns - High Times
Virginia’s Republican Gov. Youngkin and GOP policy panel both say ‘no’ to cannabis - MarketWatch
Will Hawaii legalize weed? The fight for recreational marijuana is complicated - USA Today
The Big Problem for Marijuana Companies? What to Do With All That Cash - The Wall Street Journal
Jay O’Malley: Cannabis Will Reach Alcohol Level Of Marketing - The Dales Report
Mainstream Marketing Chatter:
35 Content Marketing Statistics You Should Know - Search Engine Journal
Inside a high-stakes fight to limit social media’s hold on children - The Seattle Times
Why CMOs Are An Endangered Species — And How They Can Survive - AdAge
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