New York’s marijuana scorecard: 85 legal stores, 2,000 illegal stores

After three years of fits and starts, the rollout of New York’s recreational cannabis market gained momentum in 2024, especially with the opening of about 50 licensed dispensaries so far this year.

But the number of licensed retailers, which total about 85, vastly outnumbers the more than 2,000 rogue head shops targeted by complaints that they siphon off customers, sell to children and attract crimeinals.

The swift and brazen takeover has left many frustrated with the government’s slower and tougher approach to expanding the legal market and has emerged as the most pressing challenge facing the rollout as authorities struggle to deliver on the promise of the state to create a $5 billion market for the market. several small businesses and people harmed by past anti-marijuana policies.

“They need to get a handle on that quickly,” said James Stephenson, co-founder and CEO of oHHo, a wellness brand that relies on dispensaries to sell its cannabis-infused chocolates, gummies and seltzers. “You can’t have one group of people following the rules.”

While the number of illegal stores increased, legal dispensary openings remained stagnant for months due to lawsuits, the regulatory process and the state’s broken promise to fund the leasing and renovation of the first 150 licensed dispensaries. With help from the state, only ten stores are in operation, while another 375 pharmacies, licensed for nine months or more, have yet to open their doors.

Governor Kathy Hochul, who has increasingly expressed her disappointment, recently ordered a review of the Office of Cannabis Management, the agency handling the rollout. She has also proposed legislation that would increase the power of local authorities to punish unlicensed shops and complicit landlords, as well as a measure to reduce taxes that drive up the price of legal products. The changes have broad support in the state legislature.

The review began days after Damian Fagon, the cannabis agency’s chief social equity officer, was placed on administrative leave amid a misconduct investigation. Jenny Argie, the founder of a licensed cannabis company, accused him of taking revenge on her after she recorded a conversation with him that was used in an article criticism of the agency.

Ms. Argie sued the state, adding to the list of lawsuits against the agency. They include a complaint that the state’s social equity policies discriminate against white men in favor of women and minorities. Another case seeks to stop the state from using lotteries to determine the order in which new applications will be processed. Others protest decisions about where pharmacies can open and oppose the use of taxpayer money to support them.

Chris Alexander, the executive director of the state cannabis agency, has defended his agency’s “deliberate and methodical” focus on licensing companies owned by a wide range of people that regulators believe can survive in a notoriously difficult environment. He points to the failures in states that moved faster. And officials are angry about how frustrations over the rollout have overshadowed what they have accomplished in the two years since the agency was created.

New York now has more licensed recreational dispensaries than any state on the East Coast except Massachusetts. Owners include people with criminal convictions, veterans, women, nonprofits and people of Black, Latino and Asian descent. The stores have added more than 1,000 jobs to a retail sector struggling to recover from the pandemic, lifted the state’s mountain of unsold cannabis and paid millions of dollars in taxes. Several are profitable and to expandand many newcomers are almost breaking even.

But they are struggling to break the grip of the illegal shops on consumers, who often do not know or care which stores are licensed. Last year was the first full year of legal sales, and state-licensed dispensaries sold about $150 million. By comparison, stores in New Jersey, where recreational sales started eight months before New York, raked in $673 million last year.

While New Jersey and Massachusetts allowed medical dispensaries to jump-start recreational sales, New York reserved its first retail licenses for people with criminal convictions and only began allowing medical dispensaries to sell to the public this year. Critics, and even some supporters, said the decision left the program vulnerable to lawsuits that held up the rollout for months as the illicit market boomed.

With few places to sell their products, New York’s cannabis farmers have found themselves in financial trouble just as the market expands.

The Cannabis Control Board will be voted on on Friday a resolution to waive new licensing fees for those who want to continue growing for the state or open craft businesses.

Damien Cornwell, the president of the Cannabis Association of New York, said the board should approve the measure because the fees, which could be as high as $40,000, are unaffordable for farmers whose money goes to taxes while they wait for retailers to reimburse them for the product. orders.

“They have little money,” said Mr. Cornwell, who also owns a pharmacy called Just Breathe in Binghamton. “They’re not fluid enough to do this.”

Local and national authorities have raided dozens of illegal shops millions of dollars in fines and sent hundreds of letters pressuring landlords to evict businesses selling cannabis without a permit. But the unlicensed retailers have continued undeterred, open again within a few hours or days of raids and challenging fines in administrative hearings that take months.

In addition to Ms. Hochul’s enforcement and tax proposals, state lawmakers are considering measures to provide financial relief to struggling farmers and a special licensing program for business owners with marijuana-related convictions to protect from lawsuits. New York City prosecutors have also requested changes that would increase their power to evict stores that market and sell cannabis.

“I want a system that works,” said Jeremy Cooney, a senator from Rochester and chairman of the cannabis subcommittee. ”

Pilar DeJesus, a housing activist who also fought for cannabis legalization, said the state should do more to help people harmed by anti-cannabis policies develop legal businesses.

The need for such help has grown. Last fall, the Office of Cannabis Management received 7,000 license applications, and about 4,800 applicants qualified for loans and grants, which are required by law, to support businesses owned by low-income people who have previously been arrested, as well as by women , minorities, veterans and distressed farmers.

The Office of Cannabis Management provides some reimbursement to organizations that help people file applications, but Ms. DeJesus said the money should be increased and paid to grassroots organizations that are already helping people develop the skills they need to run businesses in run the sector.

“We’re talking about a lot of different skills that the community doesn’t have because of the barriers that have been put up by the war on drugs,” she said. ”