Our First Expert Round Table Discussion
Our featured guests were Jason Klimek, Esq. of Boylan Code LLP and Kaelan Castetter of CSG Hemp. Below you'll find tidbits from our discussion that we thought were particularly insightful and helpful.
Jason Klimek, Esq. (J.K.) on taxation of legalized cannabis in NY state:
"I think they will try to legalize cannabis because it will help with the NY state budget. However, this may be used as a justification to have a higher tax rate; this might give NY state a revenue bump short term, but long term it won't work. Ultimately, small businesses will go out of business, the big multi-state operators will buy up their assets, and then will lobby for a lower tax rate."
J.K. on giving rural counties a voice in legislation:
"A lot of counties that can provide farming expertise need to have a say in how legislation is drafted. Big counties are for cannabis legalization, but leaders of some smaller rural counties are resisting. This is unfortunate because dairy, corn, wheat, and soy farmers are all hurting. If the counties of these farmers opt out of legalization, they won't get any of the tax revenue."
J.K. on supply and demand:
"NY gave out hemp cultivation licenses too freely; this is all about supply and demand. If you oversupply a commodity like cannabis beyond demand, it will sell for pennies on the dollar. Conversely, if you don’t produce enough, you drive the price up and people will go to the illicit market for a cheaper price. The number of licenses needs to be limited at the very beginning to ensure stable growth of the market."
J.K. on raising capital for small businesses:
"The average farmer hasn’t done a securities offering before — you have to learn how to shop around your pitch. NY HempLab can help teach these skills. Unfortunately, people that don’t know what they’re doing get a lot of money and then fail. Instead, we want capital investments to go to people who are knowledgeable and have a high chance of success. The problem is that people that are not skilled for the cannabis industry are nearly always the most familiar with the fund raising process."
J.K. on NY state's medical cannabis program:
"New York's medical program is a failure because of the multi-state operators — they have nine out of the ten available licenses. They control the market, prices are too high, and product choices are too limited; this is all driving qualified medical patients to the illicit market, which needs to be rectified immediately."
Kaelan Castetter (K.C.) on entering the cannabis industry: "Look at what your talents are and try to fill a void using those. It’s a fallacy that you need to do everything and be vertically integrated — that leads to overspending, loss, and too much growth too fast. The more diverse the industry is, with people from different backgrounds, the more we’ll grow a robust industry. You need a clear focus and direction when you first enter the industry."
K.C.on the current state of New York legislation:
"Two things are happening: legalizing adult cannabis use and setting up a cannabis regulatory structure. We believe that the regulatory structure should be established now, and afterward legalization can happen. We could create a structure around hemp and hemp extracts with the Department of Health under the Office of Cannabis Management (OCM) and then this system would be in place for when adult use is legalized. This will be an important revenue source for states and municipalities."
K.C. on making small businesses competitive:
Growers need to be able to sell directly to customers via a micro license; this is how small businesses can compete against huge multi-state operators. There needs to be another vertical category similar to a microbrewery license.
K.C. on using traditional agriculture methods versus farming skills specific to cannabis:
"Organic vegetable farmers are good at adapting. Hemp is a way to produce non-THC cannabinoids at scale and this is like growing an organic vegetable. You need to consider genetics, propagation, and how your cultivar reacts to different nutrient and pH levels. Cannabis growers do not necessarily have traditional agriculture skills, but traditional agriculture farmers don't necessarily have the skills needed to be successful growing cannabis. It's best for everyone involved to be humble, willing to listen, and learn."