The black market has strangled the legal weed industry in California.  Now he's coming to New York.

The black market has strangled the legal weed industry in California. Now he’s coming to New York.

“I can also sell you mushrooms,” he adds.

It has become a familiar scene in New York. The state legalized adult marijuana more than a year ago, but has yet to issue a single dispensary license. The result was weed free for all: Cannabis seems to be on sale everywhere – in main shops, bodegas, even on folding tables on street corners. Some dealers brazenly sell in public, and many brag that their produce was grown in California.

The result is not unlike what happened when California legalized marijuana. Six years later, illegal vendors and growers continue to thrive there. Despite these struggles, New York leaders decided to take a soft approach with anyone selling without a license. Now, an industry expected to generate more than 20,000 new jobs and a $4.2 billion market by 2027 could stumble upon its arrival as it competes with the burgeoning black market.

Already, some legitimate companies that were planning major investments are heading for the hills.

“Everyone seems to be selling cannabis, and as long as there’s no enforcement, there’s really no concern about punishment,” said Owen Martinetti of the Cannabis Association of New York, who personally calls for stricter civilian enforcement. “If there is already competition and it is not being enforced, that begs the question a bit, are they [the regulated stores] really set up to succeed? »


When New York became the 15th state to legalize cannabis last year, lawmakers saw an opportunity to reverse past wrongs. They expunged certain marijuana-related criminal records and offered priority on marijuana business licenses to “people involved in justice” with previous weed convictions.

Against this backdrop, lawmakers have been reluctant to throw the book at those now caught selling unlicensed cannabis and have issued unclear enforcement instructions to the state’s Office of Cannabis Management.

“Since we didn’t think this was going to happen, we didn’t put anything in the bill that would give the CMO and police departments very clear rules of the road to shut them down,” the senator said. ‘states Liz Krueger, a sponsor of the bill to legalize recreational cannabis.

Krueger believes the police already have the right to seize illegal products and shut down offending stores. New York Mayor Eric Adams, a fellow Democrat, doesn’t seem to share that view, however.

“A police officer cannot just come in and make an apprehension, or an arrest, or confiscate the item – there is a process,” he said last month. Adams, a retired police captain, urged New Yorkers to tell police about illegal stores and said he plans to lobby the state legislature in January for clarity on what the NYPD and the New York Sheriff’s Office can do.

City hall spokeswoman Kayla Mamelak said Adams made it clear that illegal businesses would not be tolerated.

“Multiple agencies — both at the city and state level — are coordinating closely to ensure compliance and fairness in the emerging cannabis market,” she said in a statement. “The New York City Department of Treasury Sheriff’s Office has conducted hundreds of business inspections so far this year to ensure compliance with all applicable laws. During these inspections, thousands of products believed to be contraband were seized and criminal and civil penalties were imposed where appropriate. We will continue to work collaboratively with all of our partners to ensure compliance with all laws affecting the public safety of New Yorkers. »

Earlier this year, a stalled Albany bill would have toughened penalties for illicit cannabis sales and clarified the CMO’s role in law enforcement. Some lawmakers feared the measure would establish new criminal penalties.

Many stores selling unregulated cannabis products are already licensed to sell alcohol, tobacco and lottery tickets. Governments could revoke the licenses of offending stores,” Assembly Majority Leader Crystal Peoples-Stokes said, but “we haven’t sought to do that at all.”

In August, Adams confiscated 19 trucks that were selling cannabis illegally. The alleged violation: Selling edibles and other food products without the proper permits from the city’s health department.

Some smaller municipalities in other parts of the state have closed stores and the cannabis management office sent cease and desist letters to 52 retailers statewide earlier this year.

“Prepared to Fail”

But the recent law enforcement surge may not be enough to mitigate the impact of the illegal market, especially with the first regulated stores expected to open in the coming months.

“I think we’re already approaching the point of no return,” said an executive at a medical and adult-use cannabis company operating in New York, who asked that his name be withheld as regulatory negotiations are pending. In progress. If lawmakers don’t get the problem under control by next year, “the first set of dispensaries will have been set up to fail, and the state will either have to spend money bailing them out or we’ll see people return their licenses”.

In a statement, CMO spokesperson Aaron Ghitelman said the agency has maintained “an open line of communication with law enforcement and other government entities across the state” since then. its creation, adding that it had pledged to investigate and shut down unlicensed stores.

“From the town of Cheektawaga to New York City, CMO and law enforcement have effectively shut down illicit activity across the state,” he said. “This activity has included seizing products, issuing cease and desist letters and removing trucks used for the illicit sale of cannabis. …These illicit stores undermine the mission of our Office and the fair marketplace we are building, and we will continue to enforce applicable laws to shut down their operations.

To complicate matters further, consumers in New York have grown accustomed to the illicit market, and the state must persuade them to switch to regulated weed if it wants the legal industry to succeed.

Clandestine stores can sell at significantly lower prices. They pay no taxes or license fees, and their goods often come from states with lower production costs.

“Speaking as the sole sponsor of the original bill, I am totally open to reassessing how we tax, what formulas we use and how we calculate it” if the current rates prove too burdensome for legal operators, Krueger said.

The California-New York cannabis pipeline is “very old and very well established,” according to Amanda Reiman, knowledge manager at cannabis intelligence firm New Frontier Data.

California’s black market has undermined its own legal industry. Six years after the state voted to legalize recreational marijuana, illegal sales have far outstripped the regulated market and many operators have gone out of business. High taxes, opposition from local governments and competition from the underground market have stifled the success of the legal cannabis industry in the nation’s most populous state.

“We haven’t been successful in California in getting people to embrace the regulated market in a big way,” Reiman said.

New York could experience a honeymoon period as the novelty of legal dispensaries attracts consumers. But industry members fear that long-term success is waning.

Hurry up

The sooner legal dispensaries are established, the easier it will be to shut down unlicensed businesses, according to Peoples-Stokes, who added that she has “no desire to criminalize people for products we’ve made legal and not legal.” ‘ve not put in place any regulations. ”

Meanwhile, New York has lost significant investments in cannabis. In August, Ascend Wellness dropped a $73 million bid to acquire medical licenses from a New York company, citing, among other things, concerns about the state’s establishment of the recreational market and insufficient oversight of the illicit market.

“It erodes confidence, not only of investors, but also [longtime illegal] operators” that the state should encourage to go mainstream, the industry insider said. “They’re not sure the state is going to help them succeed if they make this transition.”

If the industry deteriorates, legal operators “are going to put a lot of pressure — politically and otherwise — on politicians,” said Robert DiPisa, co-chair of the Cannabis Law Group at law firm Cole Schotz PC.

“If you don’t follow the rules, there has to be some sort of penalty,” Martinetti said. “If we’re going to spend money on a license and pay taxes and invest money and build these businesses, then there’s got to be an attraction – there’s got to be a reason…and it’s got to be the concern of be contested by the State.”

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