The brave new world of legal marijuana is upon us here in the great state of New York, or so we’ve been told. Despite the hype, the actual regulated industry seems puzzlingly missing in action, and despite the fanfare around the opening of new regulated shops peddling their psychotropic wares under cover of law, they are hardly anywhere to be seen.

As Bloomberg News aptly pointed out recently, the three existing legal cannabis shops in New York City as of last month are within 3,000 feet of each other, all clustered around the Astor Place, Greenwich Village area, no doubt providing lots of convenience to the NYU and New School crowds but not exactly providing a robust citywide network.

Of course, that doesn’t mean there isn’t a robust citywide marijuana commercial sector, only that this sector is almost exclusively populated by unlicensed and unregulated sellers. This will probably come as no surprise to you, as all that is required to confirm this point is to walk down almost any commercial street in the city. Smoke shops will either tacitly or sometimes openly advertise their marijuana wares, both at existing smoke shops and litanies of new ones that have sprung up since marijuana was legalized two years ago. Beyond formal smoke shops, weed is sold at delis, bodegas, convenience stores, and other businesses.

Shops illegally selling weed is of course nothing new, but in the post-legalization landscape, they can inhabit a certain gray area where neither sale nor possession are inherently unlawful, but selling without a license is still not allowed. Many got around this by “gifting” marijuana with the purchase of a “membership” or some other item, prompting the state authorities to clarify that this is not allowed, though even prosecutors weren’t so sure if it was criminal. More recently, Manhattan District Attorney Alvin Bragg and Mayor Eric Adams launched an initiative targeting unlicensed weed shops by warning them their landlords could be forced to evict them, and filed public nuisance charges against four of them, though it seems like the efforts have had limited impact.

The pressure to act against the unlicensed pot shops comes from two primary concerns: one, that the marijuana they sell is untaxed — so the state isn’t receiving the revenues that were a big selling point in the legalization debate — and unregulated, meaning that the consumer has little insight into what exactly they’re buying — its potency, THC content, strain, or anything else. Two, that the prevalence of the unlicensed businesses is going to leave the licensed ones dead in the water, given the unlicensed businesses’ massive head start and ability to sell their untaxed marijuana more cheaply.

This last point is especially salient given that New York specifically attempted to distribute the initial batch of licenses and provide financial and business assistance to people or families that had been directly impacted by criminalization, as well as organizations serving those demographics, in a bid to somewhat redress the damage done. That leaves it in the somewhat uncomfortable position of pursuing enforcement against unlicensed sellers in order to protect a new legal market that is intended to be spearheaded by people who were previously affected by heavy-handed enforcement.

All of this is somewhat downstream from the state government’s trademark lethargy on actually implementing policy. The law passed two years ago this month, after all, and the fact that there are only a handful of open shops is certainly not because of a lack of demand, but because that’s as far as the state has gotten in actually granting licenses and clearing the way for shops to open. It’s true that setting up the Office of Cannabis Management and the Cannabis Control Board and getting regulations written and rules implemented is inherently time-consuming, but the lag left space for a large black and gray market sector to develop. With licenses now going out, it’s sometimes other agencies, like the Dormitory Authority, tasked with helping some shops find retail locations, that are slowing things down.

Still, enforcement against them has to be handled delicately. If the city and the state take too heavy-handed of a posture, they risk being perceived as simply replicating the broken windows approach that was so criticized, and which led to the licenses for justice-involved people initiative in the first place. It’s certainly more justifiable for the authorities to throw the book at a massive unlicensed cannabis business that’s marketing itself falsely as a formal weed seller and raking in the profits, but nobody really wants to slap the cuffs on the owner of a mom-and-pop bodega that’s just selling a little weed on the side, and it seems like most of the unsanctioned operators are more on the latter side of things.

With that in mind, Gov. Kathy Hochul introduced legislation this weekto massively increase fines on unlicensed sellers, which would allow the OCM and other state authorities to impose fines as steep as $200,000 for violations, in a move designed to discourage unlawful cannabis businesses without necessarily criminalizing them with heavy police enforcement. It’s now up to the State Legislature to decide whether it was to advance it.

Ultimately, this year as a whole will sort of set the tone for the New York cannabis industry going forward. The state had attempted to avoid the common situation of having large, well-funded, and often out-of-state companies swoop in and corner the market immediately post-legalization, crowding out local businesses and the communities impacted by prior marijuana enforcement. Now the question is whether it will be the unlicensed businesses that win out.

Felipe De La Hoz is an immigration-focused journalist who has written investigative and analytic articles, explainers, essays, and columns for the New Republic, The Washington Post, New York Mag, Slate,...

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