New York’s Legal Cannabis Operators Left in Lurch After Botched Rollout

It’s no secret that New York has struggled to get its recreational cannabis program up and running. You’d think, with so many other states across the country and at their own borders legalizing marijuana, that New York would have a good model from which to draw inspiration. However, the state has stumbled in its efforts to create a functional cannabis framework for marijuana retailers, cultivators, and producers.

With the boom of illegal cannabis shops filling the void left by the unstable launch of legal recreational cannabis retailers, many businesses struggle to get people in their doors and turn a profit. Almost two years after the New York Cannabis Control Board held its first meeting, the state’s efforts to regulate legalized cannabis seem to be crumbling and leaving cannabis retailers in the lurch. Some worry that turning to the illegal market and bypassing state regulations may be the only way to survive New York’s “Wild West” cannabis market.

What’s the Problem with Weed in New York? 

Nearly two years ago, New York passed a measure legalizing the possession and use of recreational cannabis for adults 21 and over. The legislation also established the Cannabis Control Board and the Office of Cannabis Management. However, as soon as the ink dried on the governor’s signature, pop-up weed shops hit New York streets. These shops operated in a sort of gray area. Cannabis was legal. However, the shops selling cannabis have not yet been properly licensed and opened. 

One of the first problems encountered by those seeking a legal and valid cannabis retail license came from a New York judge blocking the state’s retail marijuana licensing program. The judge ruled that cannabis regulators had created a licensing program at odds with state law after a group of veterans sued over rules allowing people with drug convictions to open the first New York dispensaries. Part of the reason the cannabis license rollout was so slow was that regulators were trying to prioritize offering retail licenses to individuals with previous marijuana drug convictions on their record. The goal of the setup was to extend equal access to entrepreneurs whom New York’s war on drugs may have disproportionately impacted, like people of color. This lawsuit and others like it slowed New York’s cannabis rollout even further.

One estimate shows only 23 licensees have been able to open cannabis businesses, while over 400 others still wait in the wings. In the meantime, at least 1,500 unlicensed businesses are operating in New York City alone. Instead of legitimate storefronts established by reputable owners following proper procedure and the law, illegal pot shops have flooded the field, filling the void and reaping a financial windfall. 

Other roadblocks to progress include difficulties finding suitable locations and financing to shop in New York. The problems are leaving many hopeful cannabis retailers and businesses in limbo. 

Slow Rollout Leads to Other Significant Issues in the Cannabis Market 

Bureaucratic red tape and continuing legal battles aren’t the only things affecting the vulnerable New York cannabis market. Retailers and cultivators are losing money as they wait to open their doors to customers. In the meantime, some in the industry are sitting on massive cannabis stockpiles. Some estimates put the value of these stockpiles at nearly $6 billion. That is close to $6 billion worth of cannabis in warehouses across New York, leaving cultivators and retailers unable to push their products, losing money each day the cannabis sits untouched and unsold. 

Cultivators and retailers who expected exponential sales figures from the newly emerging New York recreational cannabis market sorely miscalculated. Although many states experienced a marijuana boom in the months following recreational legalization, New York’s slow start meant retailers prepared for the boom, only for the market to go bust because they couldn’t open their shops in time. 

Not only do the problems impact retailers, but they also hurt cannabis consumers. Cannabis licenses exist for a good reason: to ensure that retailers follow New York laws and provide safe, effective cannabis products to the public. Unregulated cannabis retailers are dangerous because there are no such guarantees that the product you take home is safe. When tested, nearly 40 percent of unregulated pot shop products contained pesticides, E. coli bacteria, salmonella, and heavy metals.

Unfortunately, the state’s good intentions may backfire and cause reputable business owners to use illegal means of staying afloat, like circumventing the licensing process and establishing their own unregulated marijuana storefronts. Some AUCC farmers admit to speculating in marijuana sales out of state instead of raising crops in New York. With nowhere in New York to sell their product and stockpiles of cannabis going to waste, they are buying smaller amounts in other states and selling it. Since federal law still labels marijuana as a Schedule I illegal substance, conducting cannabis business and trading across state lines is prohibited.  

The rise of unregulated cannabis businesses hurts those legally moving through the licensing and regulation process, and it seems to be incentivizing the illegal drug market in New York, something legalizing recreational cannabis was meant to curb. 

Fixing the Problem 

The Office of Cannabis Management expects to issue nearly 1,500 new cannabis licenses as the state begins accepting applications for new cultivators and retailers on October 4. The state will also process microbusiness licenses allowing cultivators to sell their cannabis from a farm stand or other small venue. Although litigation continues to frustrate many would-be cannabis business owners, the state has issued close to 700 conditional licenses to cultivators, processors, and justice-involved retailers. It has also issued ten conditional licenses to not-for-profit retailers.

New York regulators hope that issuing new cannabis licenses jump-starts the recreational cannabis industry in New York while pushing out unregulated shops. New York law enforcement is also cracking down on illegal marijuana shops, trying to shut down businesses without a valid license, giving legitimate cannabis retailers the time and space they need to grow and flourish. The state’s cannabis woes cannot be fixed overnight. However, regulators hope their next steps will give the New York cannabis industry the boost it desperately needs. 

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