A key selling point for legalizing cannabis is to rout out the illicit market, but to-date, the results have been mixed across the nation.
Now, two separate and independent efforts are underway to identify and track illicit marijuana businesses – one by a New York City entrepreneur unhappy with the proliferation of unlicensed cannabis sellers in his hometown, and another by a Connecticut-based business that is monetizing the info for clients that pay for marijuana market intelligence.
Bruce Sterman, a former restaurateur-turned-cannabis entrepreneur with ties to the New York City Cannabis Industry Association, is leading the charge in New York, while the broader effort is a new business venture by Cannabiz Media, which already collects and sells marijuana market intel to cannabis stakeholders.
Sterman’s goal – which he said is unaffiliated with NYCCIA and will eventually be under a new umbrella company named Cannabiz Solutions – is to “name and shame” as many unlicensed marijuana retailers in the Big Apple as possible – and to help regulators force them to close.
The website, www.unlicensednyc.com, just went live last month, and so far includes just a handful of the estimated 1,500 storefronts in New York City that are selling cannabis without proper state permits. But Sterman hopes to populate the site with help from residents who are just as unhappy with the shops as he is. He predicts there will be hundreds of listings on his site within a few more weeks.
“There are unlicensed stores across the street from schools. If it was my children, I’d be swinging from the chandelier, yelling and screaming. I’d be one of those people,” Sterman said. “Can we play hardball yet? These people are selling weed to children.”
Sterman also hopes to enlist the help of the five New York City borough community board presidents, he said, which could then make it even easier for the state Office of Cannabis Management and the Department of Tax and Finance to be effective in their ongoing crusade to shutter unlicensed smoke shops and bodegas that have been selling marijuana.
Sterman said his is a pressure campaign that he hopes to ramp up on both landlords that own the storefronts being used to sell cannabis illicitly and on the banks that hold mortgage notes on those properties.
“I can find out who the landlord is, the corporate name, I can find the mortgage lender, and I can find the insurer. And both of those contracts require not doing illegal things. Insurance companies get really unhappy, but so do mortgage lenders,” Sterman said.
The Market Analysts
Cannabiz Media’s approach, on the other hand, is almost the exact opposite from Sterman’s activist bent. The company is focused on providing solid intel on the unlicensed market that will give operators in the legal market a better handle on their competition. The company says it has nothing to do with an enforcement agenda.
The listings for illicit marijuana businesses also are behind a paywall as opposed to Sterman’s free content (Cannabiz Media subscription prices can be found here).
Although the new illicit market features on the Cannabiz Media site just went live in July, company co-founder and chief data officer Ed Keating said the new offering has already gotten positive feedback from clients.
“Every bit of information we get really helps. Because if, say, you’re planning your business, and you can see, ‘I’ll be surrounded by a lot of illegal stores,’ that could be an issue,” Keating said. “Having essentially a black list … is a really valuable asset.”
To date, Cannabiz has identified more than a thousand unlicensed cannabis businesses just in nine states, though primarily the Cannabiz team has focused on California, New York and Washington, D.C., three markets where the illicit trade is particularly sizable.
Those numbers include not just retailers but also growers, manufacturers, and delivery services, Keating noted.
And, he emphasized, there’s plenty of information available in the public sphere to be collected and organized regarding unlicensed marijuana businesses.
“It really is trying to get an understanding of, what do these markets look like?” Keating said. “It really is providing market data on a side of the market that everyone is talking about, but nobody has really measured.”
Cannabiz has 329 unlicensed marijuana companies identified in New York thus far, for instance, Keating noted. And he said about 75% of their intelligence on unlicensed businesses comes straight from government sources such as police departments and marijuana regulatory agencies. The rest comes from the company’s own direct research methods, which often include open records requests.
“This is real, legit stuff,” Keating said. “It’s not crowdsourcing. We don’t even have a way for people to submit something.”
A Changing Landscape
The primary difference between Cannabiz Media and Sterman’s ventures is the agenda. While Sterman is clear about wanting to shut down as many unlicensed retailers as possible, Keating said it’s unlikely that the Cannabiz info will be used for enforcement, in part because they often gather intel from law enforcement agencies after the fact. And Cannabiz Media is primarily focused on bolstering its suite of services for clients, as opposed to crusading for the common good, as Sterman is.
But both websites are certain to grow in their listings and content as both ramp up in coming months. Both teams also know their work will never be finished, as the unlicensed market is a continually moving target.
Keating said that clients have already utilized their unlicensed market data for various reasons, including to ensure that they’re not accidentally doing business with someone operating illegally.
“It just keeps them that much safer, to know they’re only dealing with good actors, at least in the eyes of regulators or bankers,” Keating said. “For that, it’s going to be a continuous improvement process.”
Sterman, on the other hand, vociferously wants every unlicensed cannabis dealer shut down for good.
“I will play every card there is to play to put an end to this,” Sterman said of New York City’s unregulated marijuana market. “The industry is not going to succeed unless these stores are shut down.”