Grown in Oklahoma, smoked in New York: the legal roots of illegal marijuana

Last April, state drug agents in Oklahoma intercepted in the dead of night an 18-wheeler heading east toward the Arkansas border smuggling 7,000 pounds of marijuana hidden in boxes mounted with security cameras.

According to the State Bureau of Narcotics, the marijuana came from licensed farms in Oklahoma. But the driver was bound for New York, where his cargo could fetch millions of dollars from old street dealers and new, rogue pharmacies that make up the illicit market, officials said.

The episode, part of a broader crackdown on Oklahoma’s rogue operators, offered a glimpse into a troubling trend emerging from the country’s patchwork on legalization. New York, like other states, has legalized marijuana but has been very slow to open licensed stores and expand licensed producers. As a result, many states with a surplus of legal weed, such as Oklahoma, have found a lucrative market for their products on the streets and in unlicensed dispensaries in New York.

It’s a paradox of legalization: What was intended to weaken the illegal trade has instead helped fuel illegal sales that undermine the tax revenues and job creation that legalization promised.

Nearly all the marijuana in New York State arrives illegally, stashed in vehicles, packages and freight. But much of it is legally produced and shipped from places like California and Canada. The Attorney General of Oklahoma Has claimed that 40 percent of the marijuana consumed in New York City comes from his state.

By keeping marijuana illegal at the federal level, Washington prevents states from engaging in interstate commerce that would make the trade less lucrative, said Jonathan Caulkins, a professor of public policy at Carnegie Mellon University’s Heinz College. And the heavy state and federal taxes placed on pot are pushing some state-licensed businesses to sell into the illicit market to survive, he added.

At the same time, he said combating marijuana trafficking has become less of a priority for federal and state governments, whose focus has shifted to tackling a deadly fentanyl crisis and who are reluctant to use heavy-handed enforcement tactics for a drug that affects 41 states at a time. legalized in some way. According to the United States Sentencing Commission, federal marijuana trafficking cases have dropped 62 percent since 2018.

“To the extent that the country hopes to replace criminal production, we are doing a poor job of getting participants to play by the rules,” Professor Caulkins said.

Officials in New York have discussed working with other states to crack down on the legal marijuana trade. But those partnerships have yet to materialize, and enforcement has barely scratched the surface.

Regulators have focused most of their efforts on expanding the legal market, betting that giving consumers more options to buy from licensed businesses will ultimately make New York more like Washington state, where the vast majority of weed is sold legally, and less in California. where the illegal market reigns.

John Kagia, policy director for the New York State Office of Cannabis Management, said the state’s licensed dispensaries — of which there were 75 as of Friday — were already offering a larger selection of products than what was available on the illicit market, and at competitive prices. The problem is that there are not yet enough legal stores to make it easy for consumers to choose between illegal outlets.

“It’s really about access and not value,” he said.

New York has long gotten its cannabis fix from California, where legalization gave rise to “burner” distributors: companies that obtain licenses to buy weed wholesale with the intention of supplying the illicit market, then give up their licenses to avoid detection bypass. Sometimes growers and dispensaries participate in the scheme and write off the weed as damaged or destroyed, while it is instead sold through supporters.

In Oklahoma, investigators suspect that at least a third of the state’s 9,400 cultivation licenses issued after medical marijuana was legalized in 2018 were fraudulently obtained by out-of-state growers, according to Bureau of Narcotics spokesman Mark Woodward of the state. . They often used a “ghost ownership scheme”, hiring local residents to pose as majority owners of the farms to avoid residency requirements, Mr Woodward said.

Some farms in Oklahoma have had ties to criminal organizations that already send pot from California to New York, Mr. Woodward said, leading authorities to suspect that traffickers had moved their operations to the state because it was cheap, centrally located and loosely regulated. .

The farms have fueled a massive glut of cannabis that is 32 times more than Oklahoma’s medical marijuana patients need, according to a state-commissioned report released last year. Trucks smuggling pot out of the state have popped up from California to Florida and from Texas to Rhode Island, Mr. Woodward said.

“Across the East Coast, we’ve heard from law enforcement that we are their No. 1 supplier,” he said.

New York City may have the biggest hunger of all. According to a survey of global consumption habits in 2023, the city smokes, eats and vapes an average of almost 70 tons of marijuana annually, putting it at the top of the list of 140 cities. Although New York has long had legacy growers, the state has never produced enough to meet demand.

Many consumers have turned to out-of-state weed, some of which arrives in boxes shipped to Albany and Troy. That product is then sold at so-called knock spots — apartments where customers can purchase smokable flowers and edibles through a slot in the door. Truckloads of marijuana also typically end up in warehouses in Flushing, Queens and Williamsburg, Brooklyn, where the weed is then distributed by couriers to local dealers and dispensaries.

While regulators believe New York’s legal market will eventually prevail over illegal competition, some experts say that’s an impossible challenge. Raymond Donovan, who retired last April as the Drug Enforcement Administration’s chief of operations, said the size, sophistication and flexibility of New York’s illicit market make it a formidable opponent.

“They will never win against black market marijuana because it is so widespread and it will undermine the market at every opportunity,” he said.

The unfettered competition of the illegal market has stirred confusion and suspicion among legal suppliers, retailers and consumers.

Products from some of California’s most successful brands have popped up in both licensed and unlicensed stores in New York. Lawsuits have accused companies as such Stiiizy And Glass House to deliver them both. But the companies have denied knowing how their products ended up in unlicensed stores, with some suggesting the items may be counterfeit.

Kristi Palmer, the co-founder and president of Kiva Confections, said unlicensed stores were selling authentic cans of the company’s popular gummy brand, Camino. But she said it was nearly impossible to determine how they got there because the company sells a typical lot to multiple buyers and the state’s tracking system doesn’t show her what they do with it.

“It’s getting a little murky,” she said.

Starting this year, brands doing business in New York will have to obtain licenses to place their products in legal dispensaries. Currently, brands only need to privately agree that their products are made by licensed growers and processors to do this.

Mr Kagia said the change would allow regulators to scrutinize companies’ business practices and pressure them to crack down on the supply of their products to the illicit market.

Axel Bernabe, the former chief of staff for the Office of Cannabis Management, said it was frustrating for regulators to visit unlicensed stores and see how consistently they were stocked.

“This isn’t just someone bringing in a package and bringing in one brand,” he said. “They have to have a very serious supply chain and distribution network.”

New York has delayed the implementation of an automated cannabis tracking system for months as it moves from growers and processors to retailers and consumers. The state currently relies on compliance inspections and suppliers’ own data. Mr Kagia said regulators were working “feverishly” to get the tracking system in order.

Matthew Krupp, the owner of Canterra, a dispensary in the Buffalo area, said a customer who recently purchased a Rove brand vape pen removed a sticker tagging the item as a New York product and a label from California.

“He said, ‘Did you sell me California weed?’” Mr. Krupp recalled.

All marijuana sold legally in New York must be grown and sold to consumers through a chain of state-licensed entities.

Mack Hueber, the president of Ayrloom, Rove’s processor in New York, said that if the vapor came from his facility — and not from an unlicensed seller — it was “100 percent compliant” with state rules.

The Office of Cannabis Management said it was investigating the episode.

Mr Krupp said he found Ayrloom’s response credible. But the incident left him questioning his ability to ensure that everything he sold was legal.

“How do you know it’s a New York product?” he said.