Can Legal Cannabis Succeed in New York?

Can Legal Cannabis Succeed in New York?

New York legalized recreational cannabis in 2021. Since then, the state has been establishing guidelines and preparing an infrastructure to ensure quality and collect taxes correctly. According to the new law, any adult age 21 and over can purchase and possess cannabis. They can also grow a small number of cannabis plants at home.

As of October 2022, the state still didn’t have any dispensaries selling recreational cannabis. The state legalized medicinal marijuana in 2016, so it already has a system to build on. The delay, and other factors, have led many people to wonder whether a legal cannabis market can succeed in New York.

New York has struggled to issue licenses for recreational cannabis dispensaries. The cannabis industry, however, was fully prepared to launch in 2022. A lack of licensing hasn’t held it back, especially in New York City.

New York City currently has ample bodegas selling cannabis products without requiring prescriptions. These unlicensed stores often look tacky, but they provide a service many New Yorkers have come to appreciate. One group says it operates nine cannabis stores in the city. NYC even has a “weed truck” selling diverse products on the go. Many residents say that it’s like the city has a weed bodega on every block.

Some of the business owners say they hope to qualify for licenses when they’re available. Until then, they plan to operate in a gray market and hope officials don’t crack down on violations.

Why Hasn’t New York Issued Cannabis Licenses Yet?

Plenty of states take a year to build the system needed to license businesses for recreational cannabis sales. The process in New York has seemed painfully slow, though, because it already had an existing infrastructure for these processes. Many dispensaries expected the state to add some requirements, list required taxes, and start distributing licenses quickly. After all, these dispensaries were already licensed to sell medical marijuana. Recreational sales should only add a few steps.

However, state legislators have spent a lot of time arguing about where tax revenues will go. Ongoing debates put the industry in a difficult situation, especially since the state has already licensed cultivators to grow crops to sell via recreational storefronts.

The state also said that it has been slow to issue licenses because it wants to focus on the needs of small- and medium-sized businesses. This requires a lot of redundant steps. Instead of licensing a large corporation and its individual storefronts, the state has chosen to license each shop individually. That approach might benefit the overall industry in years to come. At the moment, it has cannabis investors wringing their hands.

An unexpected delay occurred on November 10, when a US District Court Judge issued an injunction that halted the licensing process. The judge’s temporary block is the result of a lawsuit brought by the owner of Variscite, a cannabis retailer that wants to operate in New York. The owner was denied a license because of a previous cannabis-related conviction in Michigan.

Variscite wanted to open locations in five areas:

  • Brooklyn
  • Central New York
  • Mid Hudson
  • The Finger Lakes
  • Western New York

Technically, the state could start sending licenses to retailers outside of those areas. In reality, the legal challenge has encouraged cannabis regulators to take a pause and reevaluate their process. They still promise some retail stores will receive their licenses before the end of 2022. As time passes, that looks like an increasingly challenging goal to meet.

Cultivators Have Product to Sell… But Nowhere to Sell It

The disrupted licensing process in New York has very real economic consequences for the state. In late November, New York had issued enough cultivation licenses that businesses produced 300,000 pounds of the crop to sell. Without a legal market, though, cannabis flowers are left sitting in warehouses. Cultivators concerned about losing their crops and investments are doing everything possible to keep their products fresh. If quality drops, the legal market will likely reject it.

Cultivators risk losing about $750 million of cannabis. If those cultivators sell to the gray-market stores operating in NYC, they risk losing their licenses.

New York doesn’t expect that its legal cannabis industry will completely replace the black market. The sooner it can get stores open and selling, though, the more of an influence the legal market should have on businesses, consumers, and taxpayers.

November 26, 2022Comments Off

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