New York's Cannabis Market Faces Uphill Climb as Adult-Use Sales Begin

A slow rollout, high taxes and uncertain regulation leave many wondering if independent legal cannabis shops can survive.

This story was written in partnership with Crain’s New York, the trusted voice of the New York business community. 

The New York state cannabis market is projected to be one of the biggest in the world, with some industry estimates forecasting sales to surpass $2 billion within just a few years. But the slow rollout and uncertain regulations—after all, the rules are still in draft form—leave many wondering if a large chunk of sales will continue going to unlicensed dealers.

On top of that, the state’s unclear timeline for when licenses will be issued and storefronts will be fully operational as well as concerns about how much consumers will be willing to spend once potency and excise taxes are baked in, among other hurdles, have given some stakeholders pause about how successful smaller players will be in the market.

“This is a very optimistic time, but the business owner in me is very stressed out every single day on how I’m actually going to make this work,” said Brittany Carbone, a board member of the Cannabis Association of New York and the CEO of Tricolla Farms, near Ithaca. “There could be thousands of millionaires rather than a few billionaires created through the New York market, and the first step is getting more people licensed.”

Cultivation licenses were the first to be issued, but they were restricted to existing hemp farmers who could convert to growing marijuana to supply product rich in THC, the chemical that provides users with the sensation of being high, when the adult-use market launched.

There’s a long way to go, however. As of early January, the New York Office of Cannabis Management had awarded 354 conditional licenses, made up of 279 growers, 39 processors and 36 retailers, on top of the 10 registered organizations, or ROs, that are allowed to sell medical cannabis.

That includes 26 new adult-use retail licenses for four of New York City’s boroughs and Long Island. (Brooklyn was one of five regions where licensing has been delayed by litigation.) Each of those licensees can open three stores.

In addition, Manhattan, Queens, the Bronx, Brooklyn and Staten Island are already home to eight medical dispensaries, including three in Brooklyn.

It’s not clear when authorities will grant more permits; 903 applications were filed for the first round of retail licenses alone last year, so timing is a major question mark.

Not only that, but the sheer price difference between the first legal retailer in New York thus far Manhattan’s — Housing Works — and the enormous number of unlicensed dealers have some fearing that many companies won’t survive.

“It is an uphill battle, but again, it’s always an uphill battle when you don’t have massive capital, no matter what industry you’re in. But when you throw in the illicit market side, it makes it even harder,” attorney Jason Klimek, a member of the New York Bar Association’s cannabis law section, said when asked how he thinks the market—which is centered on small mom-and-pop businesses—will perform.

The most immediate obstacle for many New York cannabis hopefuls is getting licensed and operational, but the timeline on that front is painfully unclear.

The state has no limit on the number of business permits it will award—in theory—but regulators have been painstakingly slow on that front, particularly for retailers. The first round, which is so far only partially completed, will award 175 retail permits, including 150 for “justice-involved” individuals and an additional 25 for nonprofits.

The longer those retailers have to wait, the closer they’ll get to the three-year deadline, at the end of 2025, when the 10 multistate operator ROs will be allowed to fully enter the recreational cannabis side of the market. For now those behemoths are relegated to wholesaling cannabis products to licensed adult-use firms.

Most industry observers agree that the 10 will likely start dominating quickly because they’ve got an edge that no other retailer will have: vertical integration, their own in-house supply chains and branded product lines.

All the other retailers are prohibited from building such infrastructure or even having their own brands—another complaint of some license hopefuls.

“That is not good, because the only way we can level the playing field is for the smaller players like myself … to be able to support each other and be able to have each others’ products. The way the regulations are set up, I don’t think we could do that,” said Vladimir Bautista, CEO of New York City–based cannabis lifestyle brand Happy Munkey, one of the contenders for a retail license.

There’s even more uncertainty about the licensing rollout because of ongoing litigation that has held up at least 18 retail licenses thus far and has the potential to delay the permitting even more.

John Schroyer

John Schroyer has been a reporter since 2006, initially with a focus on politics, and covered the 2012 Colorado campaign to legalize marijuana. He has written about the cannabis industry specifically since 2014, after being on hand for the first-ever legal cannabis sales on New Year’s Day that year in Denver. John has covered subsequent marijuana market launches in California and Illinois, has written about every aspect of the marijuana trade, and was part of the team that built the cannabis industry’s first-ever trade show, MJBizCon. He joined Green Market Report in 2022.

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the latest cannabis news delivered right to your inbox

The Morning Rise

Unpack the industry with the daily cannabis newsletter for business leaders.

 Sign up

About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


Recent Tweets

Get the latest cannabis news delivered right to your inbox

The Morning Rise

Unpack the industry with the daily cannabis newsletter for business leaders.