The New York State Office of Cannabis Management’s (OCM) 2024 Annual Report shows incredible growth with over 5,250 licenses, permits, and registrations issued or provisionally approved to date in state fiscal years 2023-2024 and 2024-2025.
As the new year begins, we checked in with local attorneys and accountants who work with businesses in the legal cannabis space to get their insights on the year ahead, including what they see as the biggest obstacles.
“One of the biggest and most frustrating obstacles, because of how many of them there are and how much uncertainty they create, is the litigation,” said Jacob H. Zoghlin, an attorney and partner with Underberg & Kessler, who is also a member of the New York State Bar Association’s Cannabis Law Section, where he has chaired the Local Government Committee since 2022.
Jacob Zoghlin
Zoghlin says there has been a significant amount of litigation surrounding the cannabis system not just in New York, but throughout the country in states that have created regulatory systems to legalize either medical or adult-use cannabis.
“Some of them have been really disruptive, particularly in New York,” Zoghlin said. “And they’ve been disruptive precisely because some of them have resulted in injunctions that have affected the entire market.”
He does not anticipate 2025 will see an easing of litigation.
“Fortunately, that’s what the attorneys are here for,” he said. “We are in a position of following along with these laws and the litigation so that we can advise people about what’s going on so that they have less uncertainty than they would have in a vacuum if they were going out of themselves.”
Zoghlin also points to staffing within OCM and its Cannabis Control Board as a continued potential challenge in the year ahead, as well as uncertainty as to what direction the new Trump administration might go in terms of possibly rescheduling or de-scheduling cannabis.
A positive is how the state’s focus on social equity in the cannabis space appears to be shaping up, Zoghlin said. Per OCM’s 2024 Annual Report, of the adult-use cannabis licenses approved to date, 54.1% were awarded to social and economic equity-eligible applicants, surpassing the Marihuana Regulation and Taxation Act’s goal of 50%.
“A lot of states have tried to work on correcting historical injustices and tried to get licenses into the hands of people disproportionately impacted,” Zoghlin said. “And although there’s been a lot of litigation in New York, some of the reporting from the state has been that they have succeeded to a limited degree in getting the first round of licenses to those groups.”
Francis L. Gorman, III is an attorney and partner with Harris Beach Murtha whose roles include co-leader of the firm’s Cannabis Industry Team. He’s worked in the cannabis space for six years, including as a real estate partner at one of the country’s leading cannabis boutique law firms.
F. L. Gorman
“What I think the biggest legal issues are right now are really of a financial nature in that you don’t have federal legalization,” said Gorman, about cannabis. “And because of that, lenders are very reluctant to enter the space.”
Gorman explains that outside of private lenders, there are very few lending sources available to businesses in or looking to enter the cannabis space. The few banks that are open to working with cannabis businesses typically limit their relationship to depository accounts only.
He also points to Section 280E of the Internal Revenue Code which disallows all deductions or credits for any amount paid or incurred in carrying on any trade or business that consists of illegally trafficking a Schedule I or II controlled substance within the meaning of the federal Controlled Substances Act.
“Because cannabis is a Schedule 1 controlled substance you can’t take normal business deductions for things like your rent or marketing or utility bills, you can only deduct cost of goods sold,” he said.
Another challenge Gorman notes is continued litigation, such as the recent case of Organic Blooms, LLC, et al. v. The New York State Cannabis Control Board, et al.
On December 12, the Albany County Supreme Court issued a preliminary injunction in the case – immediately barring the state from processing Conditional Adult-Use Retail Dispensary applications missing a proper Notice to Municipality after November 17, 2023, and all other provisional adult-use applicants without a secured location until the matter is resolved.
“There’s a lot of litigation out there,” says Gorman, who does not expect to see it temper in the year ahead.
Krystal Zawodzinski
The Bonadio Group’s Richard Long, CPA, and Krystal Zawodzinski, CPA, are part of the firm’s Small Business Advisory Group – Long as manager and Zawodzinski as a principal. They work with businesses in all facets of the cannabis industry from cultivating to distribution.
Richard Long
“There’s a lot of potential for some positive growth within the industry in 2025, but there’s still some challenges,” Long said. “Currently one of the things we’re seeing with our clients and potential clients is that they’re struggling to find a bank that will deal with them, especially at the local level.”
Zawodzinski says that one of the most advantageous services the team offers for businesses in the cannabis industry is education and consultation, especially when it comes to 280E.
“There’s so much planning that needs to be done with the 280E restrictions,” she said. “There’s a lot of inventory and overhead allocation that’s super important because the businesses can only deduct goods sold,” she said.
The team at the Bonadio Group was formed before adult-use cannabis even became legal in New York and that experience, Zawodzinski said, is vitally important to those they serve.
For businesses getting into the space and looking for an accounting firm she suggests one that specializes in the cannabis industry and tax law, specifically 280E.
Zawodzinski also recommends looking for a team with strong knowledge of state and local taxes and Seed-to-Sale tracking for inventory purposes; an emphasis on proper record keeping; experience in audit preparation and access to a network of professionals in other fields like law.
Caurie Putnam is a Rochester-area freelance writer.
n The New York State Office of Cannabis Management’s (OCM) 2024 Annual Report shows incredible growth with over 5,250 licenses, permits, and registrations issued or provisionally approved to date in state fiscal years 2023-2024 and 2024-2025. Read More
