Cannabis has a serious credit problem. New York is where that failure is most recent and easiest to see. The obvious fix is already available.

New York licensed hundreds of small outdoor farmers on a promise. The Marihuana Regulation and Taxation Act (“MRTA”) commits the state to strengthen its agriculture sector. It names distressed farmers as a priority group. The farmers did their part. They got licensed. They planted. Every October they harvest, cure, weigh, tag, and stack the flower in a barn, all at the same time, causing a temporary over-supply.

Each farm sells alone into a wholesale commodity market without any market infrastructure or liquidity. One phone call at a time. That biomass is a year of income. It loses value every month. A farmer with rent due in November and planting coming quickly in spring has no leverage. The farmer sells at a discount or waits.

The license itself is part of the problem. New York caps outdoor canopy at 100,000 square feet. That revenue base cannot cover the processing, packaging, marketing, sales, and compliance costs of bringing a branded product to market.  Each piece of the supply chain is a full-time job that each farmer tries to do alone, or higher employees the farm cannot afford. Every outdoor farm faces the same choice. It carries overhead it cannot support, or it sells biomass at the buyer’s price. Aggregation is not a preference. The economics require it.

The economics favors outdoor production for every product but top-shelf, craft, loose flower.  An outdoor canopy costs $15 to $50 per square foot to build. An indoor room costs $500 to $1,000. Outdoor flower comes off the field at $50 to $200 a pound. Indoor runs $300 to $1,000. And quality is subjective; reasonable palates can disagree. A 2023 Columbia University study grew genetically identical clones indoors and outdoors. The sun-grown samples carried more terpenes, more minor cannabinoids, and fewer degraded ones. A 2025 life-cycle assessment in One Earth found that moving cultivation outdoors could cut industry emissions by up to 76 percent. Outdoor cultivation costs less, produces better chemistry, and emits less carbon. It is also going out of business.

Why?

It cannot borrow.

The fix is in New York Law

New York’s own Social and Economic Equity Plan concedes that most financial institutions will not lend to cannabis businesses. The Office of Cannabis Management’s 2024 equity report carries the heading “Underwrite Default and Loan Loss Risks for Commercial Lenders.” The report describes no program. No funded reserve. No first-loss percentage. No eligible-lender standard. No claims process.

The state runs the mechanism in other contexts. Empire State Development operates a Capital Access Program. The borrower and the lender each pay a small premium into a reserve account at the bank. The state matches that premium up to 7 percent of principal. The reserve repays the lender if a loan defaults. The lender makes every credit decision. The state never meets the borrower. The state’s energy authority uses the same tool for clean energy lending.

That instrument is a loan-loss reserve. It is the most conservative tool in public finance.

New York already holds the money and the authority. State Finance Law § 99-ii directs cannabis tax revenue to incubators and “other assistance” for equity applicants. The statute expressly includes low and zero-interest loans. The state may lend directly and carry all the risk. It may also do the cheaper thing and cover a fraction of a loan a regulated bank makes.

This is not a bailout. It is not another state-run fund. New York tried a state-run fund. The Social Equity Investment Fund borrowed at 15 percent. It passed 13 percent loans to retailers on build-outs those retailers did not control. It financed roughly 21 stores. It stopped lending in 2024. Its borrowers now seek restructuring. That failure was structural, not personal. The state should cover the lender’s risk. It should not choose the borrower’s site, contractor, or price.

Test Case Proposal

The latest white paper from Cogent Law Group proposes a test. Fund a modest reserve. Guarantee one loan to Certified Sun Grown Collective (“CSGC”), a farmer-governed cooperative that pools members’ biomass, sells it at collective scale, and returns the margin to the farms. CSGC holds no license. It asks the state for no check. A reserve that makes this loan bankable makes the next hundred bankable.

Most states face the same problem with the same tools. They collect cannabis tax revenue. They run economic development authorities that already provide credit enhancement to other industries. They license operators no bank will finance. Existing programs have proven the instrument. The money exists. No state has funded a cannabis reserve.

The paper lays out the statutory and constitutional case. It explains what the last program got wrong. It analyzes the banking regulations under the 2014 Financial Crimes Enforcement Network guidance that still governs cannabis lending. We identify the weakest points in our own argument. We want responses more than praise.

Read or download the full white paper at Cogent Law Group: [LINK].

The farmers did their part. The crop is in the barn.

Now the state should guarantee one loan.