The nascent legal New York recreational marijuana market – which launched in December 2022 – is on the financial brink, according to the president of one of the state’s larger cannabis trade organizations, who said a lot of license winners have been either flipping their permits or selling equity stakes just to get cash to continue operations.

“I see the market collapsing on itself,” Damien Cornwell, the president of the Cannabis Association of New York, told Green Market Report in a recent interview.

“There’s clearly a problem of inversion in the market, where outside products are finding their way through different partnerships and licensing deals to enter into New York state,” he said. “New York farmers are suffering from it.”

Cornwell said the standard barriers to business capital that most of the U.S. marijuana industry faces due to federal illegality and a lack of traditional business financing options hampered business licensees’ ability to pay for build-outs so they can open in the first place. For operational retailers, it’s meant struggles to afford restocking costs, and for farmers, an inability to pay for much-needed repairs.

“People have liquidity issues. They have a shortage of cash,” Cornwell said. “I have some people that are CANY members that lost their greenhouses in upstate New York due to the weather. … What the hell does that person do? Has a thriving business, but now needs x amount of dollars to go get that (fixed), and the only person they can talk to is either family friends, or probably some kind of investment person that’s going to have predatory lending.”

Another major issue that’s causing a cash crunch for retailers like him – Cornwell owns Just Breathe, a licensed dispensary in upstate New York – is the major price compression over the past two years.

“When the market first opened, let’s say maybe February of 2023, you could see eighths (of cannabis flower) that were coming in the door at $25, $27, $30 an eighth” before retail markups, Cornwell said. “Today, you can get eighths that are $7, that you then would sell at $14, and then you’ll find a new store that will reduce that to $12. It’s crazy. It’s a really, really tough situation.”

Cornwell said that one possible solution that CANY has floated to state lawmakers – and which was mentioned during a legislative budget hearing last week – is a revolving loan facility or credit line with the state of New York, which could be a source of business capital for licensed marijuana companies. He said that Sen. Jeremy Cooney, a longstanding cannabis industry ally in Albany, expressed interest in such an idea during last year’s legislative session.

“We had a proposal on the table last year to help farmers and call people on the supply side to see if we could get relief of up to $150,000 per farm. At the same time, I’ve seen other people say that they would like to see a revolving loan fund that allowed people to apply for up to $675,000,” Cornwell said.

But, Cornwell cautioned, that proposal is far from solidified, even in concept. The major question – particularly after Gov. Kathy Hochul’s 2025 budget proposal called for repayment of $50 million that was dedicated to a cannabis social equity fund three years ago – is where exactly the money would come from.

“We’re a little worried about some of that stuff only because I’m not sure how it pays for itself without inviting private sector funding into it, which could be dangerous to the long term. You would essentially have the DASNY (Dormitory Authority of the State of New York) effect again,” Cornwell said, referring to the $50 million state fund that only paid for 22 dispensaries, far short of its 150 store goal.

With all of these obstacles rolled together, Cornwell said, the upshot is an increasing number of licensees – including social equity businesses – are either selling ownership stakes or cashing out altogether for whatever they can get on the secondary market. Those walking away include many of the early conditional adult use retail dispensary (CAURD) permit holders who were simply unable to find capital with which to open dispensaries, he said.

“There’s an increased amount of people that are willing to take on new partners, or sell their licenses, so to speak. We’ve seen that happen. That’s happening all around,” Cornwell said.

“If you were one of these folks that had a golden ticket to get going, but you failed to either get the real estate funding, the plans, whatever it may have been, then your question is, what can I do with this thing? And some people have sold those for pennies on the dollar and some people have sold them for a good amount of money,” he said. “Ultimately I find that heartbreaking.”