New York’s adult-use cannabis market expects to be immense once it reaches maturity. Various reports suggest the marketplace could earn between $1 billion and $3 billion annually in the coming years.
Success will be determined, in large part, by the state’s ability to address the unlicensed market, sometimes referred to as the legacy market. States like California and Colorado have generated high sales but continue to struggle with unlicensed grows and dispensaries.
New York’s Cannabis Control Board (CCB) and Office of Cannabis Management (OCM) have released legislation incrementally. In April, the state granted over 200 conditional marijuana cultivator licenses to existing hemp farmers. On June 1, the CCB approved its first set of packaging, labeling and advertising regulations. Plans have also been made to issue approximately the first 100 licenses to people most affected by the drug war.
No further clarity has been given regarding license availability. In the meantime, a surge of unlicensed dispensaries has begun to open. Stores include brick and mortar, pop-up and mobile sales sites using the state’s current grey area gifting laws. Numerous operators assume early launching is the natural step to gaining an adult use license. Others caution that such a measure may eventually bite aspiring legal operators.
How Many Businesses Are Selling Weed In New York City Right Now?
Unlicensed stores and sellers are popping up across the state. No more so than New York City, which consumed 77.44 metric tons per year of pot per year, according to a 2018 study. Sources offered various broad estimates of how many operate in New York City today, with most answers ranging between 100 and over 1000.
The city has its fair share of licensed locations, with names like Curaleaf (OTC: CURLF), Columbia Care, MedMen (OTC: MMNFF), RISE and Etain, all having a presence across the boroughs. A search on Google reveals scores of unlicensed shops. A deeper dive via community cannabis contacts or a stroll in certain parts of the city will likely show others, including standalone sellers in the park and bodegas.
Most sources noted that tracking how many sellers operate in New York City today is difficult.
“If you include every bodega and smoke shop selling unlicensed and untested cannabis, it’s easily in the hundreds, if not the thousands,” said Mike Zaytsev, academic director for LIM College’s cannabis degree program.
Gregory M. Tannor, executive managing director and principal at real estate firm Lee & Associates NYC, said that when considering illegal shops and bodegas, “Every day there are new smoke shops opening throughout the city.”
If using recent OCM reporting, there were at least 52 illegal storefronts across the state as of early 2022. In July, five months after announcing it had sent out cease and desist letters, the OCM announced it issued 52 warnings to various unlicensed operators that you can read here. However, some outlets report that non-cannabis operators were named, calling into question the list’s accuracy.
Why Open Now?
Some unlicensed operators believe that if they open now, they are likely to win a retail license once the state begins issuing permits. Some offered caution to those individuals.
Kassia Graham, co-founder and social media director for Cannaclusive, said that the state is taking note even if it seems lax on enforcement. She feels that entering the market now only makes sense if the operator has no interest in becoming licensed. Graham expects the illicit market to continue in New York past legalization like in other states.
“We’ll continue to see a thriving legacy market due to the costs, compliance, and legal issues related to making the jump to the legal realm of the industry,” she opined.
Andrew Livingston, the director of economics and research at Vicente Sederberg LLP, offered a similar opinion.
“The risk of being disqualified for operating an illegal enterprise is not a significant cost to those who are not interested or do not have the ability to open a licensed cannabis business,” He said.
Livingston added that the allure of quicker revenue in the illicit market likely further fuels the interest of some illegal operators.
Potential licensing bans might not faze existing grey operators already doing well for themselves. LIM’s Zaytsev feels it’s safe to assume that operators will continue on if they already have success.
“Why would any of them stop,” he asked, adding, “They’re doing quite well, from what I’ve heard.”