NY gave these weed entrepreneurs a leg up and now, they could face financial ruin

NY gave these weed entrepreneurs a leg up and now, they could face financial ruin

A multi-story, green-and-white sign reading “Con Bud” is being erected over the facade of 85 Delancey St on the Lower East Side, where Coss Marte plans to open his marijuana dispensary.

Marte put down a $420,000 deposit on a 10-year lease in the building and is on the hook for $38,000 a month in rent starting Oct. 1. He’s in the process of moving his nearby gym, Conbody, above the planned dispensary to create a co-branded space for both businesses.

For Marte, who served four years in prison for selling marijuana and other drugs, the chance to sell weed legally was “an unbelievable dream.” But he is now one of hundreds of entrepreneurs statewide whose plans have been put on hold indefinitely due to an injunction issued last month by a state Supreme Court judge against New York’s Conditional Adult Use Dispensary (CAURD) program.

Gothamist spoke to half a dozen CAURD license holders about what they have at stake. Some have borrowed money from family members, put down hefty deposits on real estate and inked expensive contracts while putting their personal finances and other businesses on the line.

Between contracts for construction, security, marketing, inventory and other services, Marte and his two partners have invested about $1 million so far into getting their cannabis business off the ground, according to court filings. He also has a baby on the way.

Marte and his two partners have invested about $1 million so far ... He also has a baby on the way.

“I’m going to be forced to probably sue the state if I can’t open up before October,” Marte said in an interview last week. “Now, I’m in a nightmare."

New York’s CAURD program was designed as quasi-reparations for the War on Drugs with the first dispensary licenses going to those with past marijuana convictions and their family members. Both state officials and participants in the program repeatedly talked about the opportunity legal cannabis presents for these entrepreneurs to build “generational wealth.”

But many licensed through the program now worry they could face financial ruin, or at least significant losses, as they wait to find out if and when their shops will be able to open. New York regulators have issued 463 CAURD licenses under the program, and only about two dozen have set up brick-and-mortar shops or delivery operations since the retail market opened statewide in December.

The state is now preparing to release general licenses — opening up the industry to a broader range of cannabis businesses in the coming weeks, including large corporate players. It’s unclear whether CAURD licensees who haven’t opened their shops yet will have to reapply then. But they are quickly losing any edge they might have gained by being first to market.

Borrowing from family and friends

Harry Boone and Mireille Souvenir are old friends who became business partners when they started a delivery company together in 2017. Souvenir knew that Boone had been arrested on marijuana charges in the 1990s and sentenced to probation. When she heard about the CAURD program, she pitched him on applying for a license.

Boone, who lives in East New York, was hesitant at first.

“This is not something I'm proud of,” said Boone, 51, who admitted he sold weed on the side while working for a bank in his youth. “It was kind of buried and sealed, so I had to unseal that part of my life in the hopes that my past discretions would maybe benefit me now.”

Boone and Souvenir decided to lock down a lease for a storefront in Queens, just outside Nassau County, even before they were awarded a license earlier this summer because they knew cannabis real estate might only become more scarce and rents would go up.

Cannabis entrepreneurs said they had to pay a premium because the industry is not federally legal and getting a traditional loan can be challenging. Both Marte and Boone said they avoided the state’s loan program because it didn’t seem like a good deal.

Souvenir, who lives near the shop, said she strategically chose the location after reading most towns in Nassau County had opted out of cannabis retail.

The pair have so far invested about $175,000 — borrowing about $75,000 of that from friends and family.

“I've taken out funds from my 401K, and Harry has his personal funds that he's invested into this,” Souvenir said.

The pair said they are aiming to open in mid-October and are plowing ahead with construction in the hopes the court battle over the injunction ends in the CAURD licensees’ favor or that they will be allowed to open quickly during the general licensing period, though there’s no clarity on whether that will be possible.

Marte and others who spoke to Gothamist said they are also trying to stick to their construction timelines, carrying the same hopes.

“We have been told by other people to just stop,” Souvenir said. “I’m like, ‘If we stop now, what are we supposed to do? We've invested so much.’”

Losing their edge

The group of disabled veterans who sued the state this year to block the CAURD program argued that it went against the Marijuana Regulation and Taxation Act, which legalized recreational marijuana in New York in 2021. That law names service-disabled veterans and women- and minority- owned businesses as groups that should also be prioritized for social equity licenses.

In an op-ed published in The New York Daily News Monday, the plaintiffs said they also invested time and money to open up dispensaries – including hiring lawyers and consultants – before finding out they didn’t qualify for a license under the CAURD program.

They will soon get their chance. The state is on the verge of opening up the recreational market to a broader range of cannabis businesses, including small entrepreneurs and larger, corporate players.

The state’s Cannabis Control Board is expected to finalize regulations for the broader recreational market on Tuesday, and state regulators anticipate the general public will be allowed to apply for cannabis businesses by early October.

It’s unclear whether the state will be able to fast-track CAURD applicants among the general pool.

The state Office of Cannabis Management did not respond to a request for comment on whether CAURD licensees will have to re-submit their applications then. Given the ongoing lawsuit challenging the legality of the program, it’s unclear whether the state will be able to fast-track CAURD applicants among the general pool.

Meanwhile, CAURD applicants have started a petition to get state lawmakers to hold a special session to codify the program into law. Neither Gov. Kathy Hochul, nor the Assembly or Senate majority leaders responded to a request for comment on the idea.

State Supreme Court Judge Kevin R. Bryant, who is hearing the veterans’ lawsuit, said in mid-August that he is willing to create an exception to the injunction against CAURD licensees if they already meet the criteria to open. State officials provided Bryant a list of 30 licensees, including Marte, to consider. But Bryant ruled that he still wasn’t sure they met the criteria. Marte was left off the revised list state officials submitted last week, which was whittled down to 12 businesses.

When Marte found out, he said he reacted by frantically trying to speed along construction on his new gym. “I was just like, ‘Let me hold up this sheet rock so we can screw this s--- in and at least I can have one business running,’” he said.

Meanwhile, large, multi-state marijuana companies are more than ready to swoop into the adult-use market.

The regulations the Cannabis Control Board is voting on include a provision allowing the 11 companies with existing medical marijuana licenses in New York to start selling to the general public by the end of the year. Those companies have large indoor grow operations, in-house processing facilities and deep pockets.

They, too, appear tired of waiting. Some of the medical marijuana companies were part of a coalition that sued New York state in March, challenging the legality of the CAURD program. They alleged that the CAURD program violates the state cannabis law’s provision that the adult-use market should open to all applicants at the same time. Those companies have since been allowed to intervene in the case brought by the veterans. As the CAURD program has stalled, those companies have put pressure on Gov. Kathy Hochul to let them start selling as soon as possible.

Dominick Cuffar, a CAURD licensee from Staten Island who’s working to open a legal dispensary in the sea of unlicensed smoke shops on the Upper East Side, said the latest setbacks have been disheartening. Cuffar previously owned a pizza shop in the Financial District that he said was forced to close when offices shut down during COVID.

“It was devastating,” said Cuffar, but cannabis presented a new opportunity.

Since the injunction, he said, he feels like he’s once again waiting on “outside factors and the government” to try to earn a living.

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