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New York City’s crisp autumn air has a distinct scent to it, and this year that scent is weed. Many of the city streets have a fresh look to them, too — marijuana and cannabis products are for sale, out in the open, everywhere. New York legalized recreational marijuana in the spring of 2021, but the state is still in the process of doling out licenses to legally sell it, which makes the situation ... confusing.
So I recently treated myself to a little NYC cannabis secret shopping-reporting tour to try to figure out what was going on. A tarot card reader sold me a pre-rolled joint off of a table in Washington Square Park, warning me to watch out for other sellers who might not know what they’re talking about. An issue to ponder for another day, on both of my merchant’s entrepreneurial fronts. Later, I bought an edible from a smoke shop even though neither I nor the guy selling it seemed clear on what it was. CBD? Just regular marijuana? The synthetic stuff that might set me up for a very bad time? Maybe the tarot reader had a point.
In the Lower East Side, I popped into a store with marijuana-leaf stamps adorning its facade. “This dispensary is not a speakeasy bar ... or is it ... sorry,” a sign outside read. Then, in some fine print, it got to the point: “We sell weed.” There, I bought what I think are more reliable edibles and chatted at length with the guy behind the counter about his plans for the store. A group of teens walked in to make a purchase, and he turned them away — a move I’m not sure he’d have made had I not been there. (The legal age to buy is 21.) He seemed optimistic about his operation’s prospects. I didn’t mention that a rival shop was going up within eyeshot of his own, or that trucks selling marijuana have popped up on corners across the city.
We didn’t discuss what could become the biggest threat to his budding cannabis operation, a threat faced by every open seller I talked with that day: the fact that none of these operations are really legal. New York is in the process of handing out the first round of 150 equity-focused licenses to adult-use retail cannabis dispensaries across the state. Not a single one has gone out yet.
“None of them are compliant, none of them are allowed,” said Aaron Ghitelman, a spokesperson for New York state’s Office of Cannabis Management (OCM), in an interview. “They’re jumping the gun.”
David Holland, an attorney who focuses on cannabis law, added context: “It’s New York, there will always be some whom if you give an inch they take a mile.”
New York’s weed situation is a bit of a mess. There are a lot of regulatory affairs to get in order between marijuana being legalized in the state and products actually hitting the shelves, and those affairs take time. The state has placed a social justice emphasis on its process, meaning it’s trying to give a leg up to people in the legal industry who have in the past been hurt most by the war on drugs. It’s done so in a well-intentioned but somewhat awkward way that has shut a lot of people from the legacy market — meaning people who have been selling cannabis and marijuana for years — out.
Now, a so-called “gray market” has popped up across the state and city in the form of smoke shops and dispensaries and trucks and delis selling cannabis. Some of them are engaging in a gifting scheme, where you pay $60 for a sticker or other token product and they give you weed as a present alongside it, since gifting marijuana is now legal in the state. The OCM says that this is, in fact, not a legal workaround because, sorry, a sticker doesn’t cost $60, though some attorneys I spoke with, including Holland, disputed that. Regardless, many are just selling it flat out.
Enforcement efforts to curb the activity have been a little bit tricky because neither state officials nor local authorities want the NYPD going in to raid stores and make arrests.
“The idea of rounding up Black and brown bodega store owners is a political nightmare,” said Jesse Campoamor, a chief architect and negotiator of the Marijuana Regulation and Taxation Act (MRTA), New York’s landmark cannabis legislation. But unregulated, they stand to create another political nightmare. Once retail licenses go out, if some sort of enforcement actions aren’t taken against these gray market actors — which some sources suggested are largely engaged in a “cash grab” — those who go the legal route could be set up to fail.
It’s an incredibly complicated situation, one where there are no clear heroes or villains. An early win — such as getting one of the legal equity licenses — won’t rule out an eventual loss.
“The first mouse gets the trap, the second mouse gets the cheese,” Campoamor said. What’s not evident right now is who’s the first mouse — the gray market guys or the first license holders — or what the trap looks like.
New York is doing its best-ish to get marijuana legalization right
On March 31, 2021, then-Gov. Andrew Cuomo signed the MRTA into law in New York, setting ahead a path to regulate adult-use, medical, and hemp cannabis across the state. But he wasn’t exactly in a hurry to get all of the implementation part going, causing a months-long delay in setting up the OCM and getting people in place to get people in place to get regulations rolling.
“Cuomo decided to play politics,” said Melissa Moore, civil systems reform director at the Drug Policy Alliance. It wasn’t until Cuomo resigned in the summer of 2021 and Gov. Kathy Hochul took over that things really started moving. “Within about a week of coming into office, she had done more than Cuomo did,” Moore said.
The month after Hochul was sworn in, she appointed Chris Alexander as the executive director of the OCM, and the agency started to staff up and build out. The state had to first award licenses to cultivators and then to processors, and in late September, it closed its application process for retailers. It received over 900 applications for Conditional Adult-Use Retail Dispensary (CAURD) licenses and eventually plans to award a total of 150.
New York set out to award its initial retail licenses in a way that both takes social justice into account and is a little wonky. Applying entities must be “justice involved,” meaning they or a family member have to have been convicted of a marijuana-related offense in the past (if a case got dismissed or certain pleas were reached, it didn’t count). Applicants also had to be at least the 10 percent owner of a profitable business for two years.
You can start to see where the Venn diagram problem resides here: Because of so many structural barriers, the stigma of criminal convictions, and racial inequality, there aren’t a ton of people walking around with marijuana convictions who then went on to run profitable businesses — at least not legal ones. Many operators in the legacy market are quite profitable, but that doesn’t count.
Sam, who has been part of the legacy market for 17 years and runs a delivery service in Brooklyn and Queens, is one of those money-making operators who was shut out. (Sam is a pseudonym, to protect his privacy and business.) He’s had multiple cannabis arrests and has done jail time but can’t meet the business standards. “If they didn’t set up that one requirement, I would have been applying with a smile on my face,” he said. He doesn’t see the current scheme as truly just and thinks everyone should have been given a shot. “I’m just a sitting duck until they give me my opportunity.”
From a bureaucratic perspective, one can see some of the logic behind the application parameters. The OCM didn’t want to be dealing with tens of thousands of applications, and those with a background in running a successful business may have a better shot at running a successful cannabis business if they get one.
Cristina Buccola, an attorney based in New York and one of the founders of the Bronx Cannabis Hub, which helps people navigate the licensing and application process, dealt with many people who thought they would qualify for the CAURD program and didn’t. Ultimately, she estimates she assisted in the submission of 30 applications and describes the process as “crazy” with all it entailed.
“It was a very narrowly drawn pool for a variety of reasons,” she said. “Gathering all this documentation was part of the process, but it was grueling. I’m an attorney and I’m accustomed to this kind of stuff and I thought it was grueling.”
High hopes for potential retailers
With only 150 initial licenses for the 900 CAURD applications, there were always going to be more losers than there are winners here, but the winners are winning relatively big. They are getting more than just licenses — they’re also getting a place to do business. Those who are awarded licenses will get access to turnkey storefronts made possible by a $200 million social equity cannabis fund supported by the state and private actors. (It’s going to be split among up to $50 million from the state and up to $150 million in money raised from the private sector.) The fund is being used for construction and renovations on the storefronts and to purchase equipment, and the cost of that work will be turned into a loan to be repaid by the license holder.
New York City Mayor Eric Adams has invested $4.8 million for fiscal year 2023 to help support the city’s cannabis industry, including setting up Cannabis NYC — which will be run by the NYC Department of Small Business Services — to help out entrepreneurs in the space.
“Cannabis NYC will plant the seeds for the economy of tomorrow by helping New Yorkers apply for licenses and understand how to open and successfully run a business, while simultaneously rolling equity into our economy by giving those who have been justice-involved and those with a cannabis conviction a chance to succeed,” Mayor Adams said in a statement announcing the launch. “This is about creating good jobs, successful small businesses, and finally delivering equity to communities harmed by the ‘War on Drugs.’”
Advocates generally see this funding as good, but it’s only a start. The money will dry up fast. “Where’s the actual mechanism to effectuate aiding these people?” said Joseph A. Bondy, a criminal defense and cannabis business attorney in New York, who also sits on the national board of directors of the National Organization of the Reform of Marijuana Laws (NORML). “It’s one thing to say you have $200 million to fund these programs, it’s another thing to have someone there to pick up the phone.”
A spokesperson for the SBS said in a statement that they recognize receiving a license is “just the first step” for a New Yorker. With Cannabis NYC, they plan to “go beyond licensing and really push toward having these businesses thrive,” including providing free business courses and networking opportunities.
Among applicants, hope springs eternal, and they believe their efforts (which came with a $2,000 nonrefundable application fee) will pay off.
Jessica Naissant owns Wake & Bake Cafe, which focuses on CBD, on Long Island, but she dreams of setting up a legal recreational cannabis store near the Barclays Center in Brooklyn. Her business is profitable, so she has her bases covered on that front. However, she almost didn’t qualify on the justice front because she was able to plead down her cannabis arrest to a lesser charge of disorderly conduct.
She says the application was “mentally taxing” and the process hard to maneuver, between getting the right documentation and her taxes all together. “They wanted a full true party of interest understanding of who is going to be in this application, and I do appreciate that because they’re not letting just anybody come into the industry and take it over,” she said. The state is requiring extensive information on every stakeholder in would-be businesses in order to try to make sure the people with prior convictions applying for licenses aren’t being taken advantage of and that bigger companies aren’t cornering the market behind the scenes, which has happened in other states.
Naissant, who has operated in the legacy market in the past, acknowledges there’s a temptation to try to make some extra money now by dipping into gray market territory, but she doesn’t think the trade-off is worth it. “I have people coming in all the time asking for marijuana, and know that the temptation is there, but I have tunnel vision on what my goal really is, so I’m not willing to lose that over a small sale,” she said.
Vlad Bautista, the co-founder of Happy Munkey, a cannabis lifestyle company, is also hoping to be granted a CAURD license, his group’s first choice for operation being in Manhattan. Happy Munkey ran a consumption lounge in Times Square from 2017 to 2020 before transitioning into more lifestyle and advocacy when the pandemic hit. They just celebrated their fifth anniversary with a BYOC (bring your own cannabis) party at the Classic Car Club in Manhattan.
“A big obstacle for people like ourselves was that you had to have two years of a profitable legal business.” Of the application process, he jokes, “I had to get my baby shoes, my first tooth, it was rigorous.”
Can the legal market live if the gray market doesn’t die? It’s an open question.
New York has said that they think some licensed retail operators should start operating by the end of the year, but among those I spoke with, the expectation is it’s going to take a while for the legal retail market to get up and running. There are still open questions, ranging from whether there will be enough supply from in-state cultivators to what packaging for cannabis products will look like.
“Realistically, there might be a handful of retailers open this year, and everyone else’s expectation is that the retail market isn’t actually going to be up and running in any meaningful way until mid-year next year now,” said Verena von Pfetten, the co-founder of Gossamer, a cannabis lifestyle brand.
While right now the initial round of retail licenses is in a bit of limbo, once that limbo ends, a new and even hairier phase begins, she said, namely for the equity justice-based license holders. “I think the big question, from an industry perspective, is if the city and state don’t crack down on these gray market sellers the moment these equity licenses are issued and places are opening, what does that mean for the people trying to compete with them?”
If I’m operating a legal cannabis store and dealing with all the taxes and rules included in that, and there’s a bodega down the street that’s selling product for much less and looks fairly indistinguishable from my shop to the consumer, it’s going to be a problem for me. California’s legal weed industry, for example, has seriously struggled to compete with the illicit market.
Currently, New York City’s sheriff’s office has made an attempt at slowing the gray market down by impounding some of the trucks or ticketing them, and some cease-and-desist letters from the state are going out. These efforts haven’t been super impactful, given how prolific the trucks and bodegas remain.
Most sources I spoke to for this story agreed that something had to be done to try to give the legal market a better chance at success, but specifics are complicated. Nobody wants the police to crack down on gray market stores and trucks and start making new cannabis-related arrests. There’s an awkward dance going on between the city and the state, with the city saying it’s taking the state’s lead and the state trying to tread lightly to make sure it’s going about this in a fair way.
Buccola, from the Bronx Cannabis Hub, said she believes it will be tax and finance enforcement arms that attempt to shut things down, pursuing illegal cannabis operations in the same way they would any business operating illegally. “It has to shut down in order for the CAURD licenses to succeed, and New York has a vested interest in seeing them succeed,” she said.
“I doubt they’ll be okay with losing all this tax money, especially Gov. Hochul, hell no,” Naissant, one of the CAURD applicants, said. (She added that she hopes the state doesn’t “kill us” with taxes if she gets a license.)
The government may need to get a little creative in its approach. Campoamor pointed to the city’s efforts in the early 2000s to clean up Canal Street’s strip of shops selling knock-off designer handbags and watches in the open. Officials started using public nuisance laws to sue landlords of buildings where counterfeits were being sold and were able to curb the practice. (You can still get knock-off bags on Canal Street, but it’s a more complicated, secretive ordeal.) If something isn’t done about the saturation of illegal stores, he said, “my concern is these licenses won’t be worth the paper they’re printed on.”
Some advocates also expressed safety concerns. Gia Morón, the president of Women Grow, an organization dedicated to elevating women in the cannabis space, warned that the gray market operators create confusion for “the uninformed shopper” who might not know what they’re looking for, or even whether they’re in a legally operating store. “You want to believe that the products are safe,” she said. “When you have these gray market operators, you don’t know where they’re sourcing those products. I’m not saying they’re not educated and informed about the plant, because I’m sure many of them are.”
I recently stopped into one of a chain of dispensaries operating in Brooklyn to chat. I asked the guy at the counter if they were applying for a license. “Maybe we already have one,” was his reply. (An impossibility, to be clear.)
As for the legacy market, including delivery operations — which are prolific, established, and tightly run across much of the city — reactions are mixed.
Sam, the legacy delivery operator, had concerns about the gray market especially. “A person might rather go and walk down the block and get everything they need in a one-stop shop than wait for me for 10 or 15 minutes because I got a couple people before him,” he said.
But Marshall, another delivery operator who has been in the legacy market for seven years and who asked to remain anonymous, isn’t worried. “New York is such a massive market that if anyone has any fear about their inability to penetrate it, they’re just not being creative,” he said. He shrugged off concerns about the gray market, too. “A lot of these bodegas were hit so hard doing Covid, they deserve it,” he said. “If you think that the bodegas on your block are cannibalizing your traffic, then you are admitting that you have a brand that can’t differentiate itself from bodega-grade weed, and you kind of deserve to be cannibalized.”
Just because what’s going on is messy doesn’t mean it’s bad
Most of the people I spoke with for this story had some critiques about how New York is going about legalization efforts. (To be clear, I didn’t talk to any “weed is evil and should be illegal” people.) But that legalization and decriminalization efforts would be imperfect anywhere is inevitable.
Vikiana Reyes, program coordinator for cannabis education at Medgar Evers College and the head of the Legacy CORE Foundation, which provides support services to those in the legacy cannabis space, lamented how many people were left out of CAURD application opportunities. She also worried, for those who are awarded licenses, that while they’ll get loans through the social equity fund to set up their businesses, they’ll struggle to get funding to buy products to fill their shelves. “Where are they going to get the money?” she asked. They could wind up in deals with shady lenders or creditors with unfavorable terms, or that leave them without much control over their stores.
That retail equity license holders will be doomed to fail is a concern Sam, the legacy operator, shares. “They’ve got to go up against every other shop that’s not paying taxes right now,” he said. “Are they really setting up these CAURD applicants for generational wealth? Or generational debt?”
Holland, the cannabis attorney, thought there were better ways to go about legalization that would get more of the legacy market in faster. “One option would be to legalize the existing market and everybody buy a license,” he said. Or you’d put in place an amnesty program for legacy operators. “If you created amnesty, you would have a pretty significant inroad for a lot of people.”
Bautista, who helped push for New York’s marijuana legalization to be passed, acknowledges the system in place right now has its own shortcomings, but he doesn’t think that’s what matters. “No other state in the country has really tried to embrace social equity and the legacy market,” he said. Instead, other states have tried to “alienate and ostracize” the legacy market. “I don’t know if it’s going to be perfect, but we can’t let the perfect get in the way of the good.”
Police are no longer able to use cannabis odor as a reason to justify stop-and-search. The stigma so many people grew up with around marijuana in New York and across the country is declining. Communities that have disproportionately been harmed by the war on drugs are getting a chance at some reprieve. A couple of months ago, I watched an older woman roll a joint on a late-night subway car and then share it with a group of four young men. Smoking on the subway is not allowed, and I’m sure plenty of people were annoyed. But it was also really fun to see happen.
“It’s refreshing to see in my practice today people who come not to discuss getting their loved ones out on bail or avoiding prison, but asking how they can best position their business, obtain a license, brand a product, or raise capital,” Bondy said. However, he understands many people’s continuing interest in the legacy market. For some, “it’s more fun to be a pirate than to join the Navy.”
Where does this leave everything? It’s hard to say. The entire conversation and legal framework around marijuana is pretty muddled right now in New York, not to mention the entire country. While many states have legalized and decriminalized marijuana, at the federal level it remains illegal. President Joe Biden recently announced a pardon of thousands of people with federal marijuana possession convictions and also said the administration would take a look at the legal category pot is in, which is currently at the same level as heroin. Still, that doesn’t immediately change much of the landscape for retailers.
Even state-sanctioned sellers have to operate in cash and debit, and they’re not subject to the same tax treatment at the federal level that other businesses are. There’s also the simple fact that legal marijuana is being taxed and illegal marijuana is not, meaning the latter is cheaper for consumers and sellers in the recreational space.
Nobody’s quite sure how any of this is going to shake out. There’s a lot of money in play, and there are a lot of unanswered questions. What’s happening on New York City’s streets looks like progress, even if it’s uneven and imperfect.
Bautista, from Happy Munkey, knows that he might not get a license, but either way, he’s glad to have gotten a shot. His outlook on life, which he laid out at the end of our conversation, is one we could all probably adopt: “You’re too blessed to be stressed, things will get greater later, and always choose happy.” The cannabis industry, like every industry, is messy. But it’s hard not to root for an attitude like that.
