ByAndrew Adam Newman
April 6, 2023
New laws allow recreational cannabis sales in more than 20 states, but it remains illegal under federal law, making starting a retail cannabis business complicated. This is Part 3 of a series, Spliff & Mortar.
Unlicensed cannabis stores in New York are growing like—what else?—a weed.
Since the law legalizing recreational marijuana passed in the state in 2021, only four licensed cannabis retailers have opened in New York, compared to more than 1,400 unlicensed stores.
And while some of those stores may appear illicit, others are major and impressive build-outs.
“Some of these stores are awesome,” Joanne Wilson, the angel investor and founder of Gotham, a licensed retail dispensary scheduled to open on the 420 holiday (April 20), told us. “They’re branded, they’re on point, they’re entrepreneurial. It sort of speaks to that entrepreneurial spirit that lives inside New York City.”
But while Wilson may have a grudging respect for some of those stores, she resents that they’re not bound by the many rules licensed retailers must follow, or tax rates that Politico estimated are as high as 70%. And she said that fines and other measures that have been taken against unlicensed stores have been insufficient.
“They should be fining them half a million dollars,” Wilson said.
But as city and state officials weigh more aggressive measures to close the stores, they want to avoid war-on-drugs tactics that may seem antithetical to cannabis legalization. Still, while the proliferation of unlicensed weed stores may seem as intractable as the city’s rats, they say a solution is taking shape. That solution can’t come soon enough for licensed stores, which expected to benefit from the novelty of selling cannabis only to open their doors in neighborhoods crowded with unlicensed stores.
Pot in my backyard: In New York, the most populated city in the US, 1,400 unlicensed cannabis stores may not seem like all that much. But that’s more than the total number of retail locations of the top three chains in New York combined:
Dunkin’ has 620 locations in New York, Starbucks has 316, and Metro by T-Mobile has 295, according to 2022 data from the Center for an Urban Future.
Joint efforts: New York gave priority to applicants with past marijuana convictions for the first batch of cannabis licenses to take what Trivette Knowles, public affairs press officer and manager of community outreach at New York’s Office of Cannabis Management (OCM), told us was an “equity-first approach to legalization.”
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Coming down too hard on unlicensed cannabis dealers risks being exactly the overaggressive punishment for selling marijuana that the OCM means to address.
“We do not want a war on drugs 2.0,” Knowles said, but stressed that while his agency wasn’t “there to put you in jail or lock you up,” it didn’t plan to ignore the unlicensed stores either.
“OCM is working with our local law enforcement partners to ensure that these unlicensed stores are shut down,” Knowles said.
New York Mayor Eric Adams and District Attorney Alvin Bragg announced in February that they were targeting landlords who lease to unlicensed stores.
Bragg’s office sent 400 letters to landlords urging them to evict unlicensed stores, and warning a state law authorizes the city to take over eviction proceedings if landlords dawdle.
“We won’t stop until every illegal smoke shop is rolled up and smoked out,” Mayor Adams told a press conference.
The bong and winding road: Jesse Campoamor, who focused on cannabis policy as deputy secretary of governmental affairs under former New York Governor Andrew Cuomo, is the CEO of Campoamor and Sons, a consulting firm that works with cannabis clients.
Campoamor, who estimates the number of unlicensed stores has grown to “closer to 2,000,” said the strategy of appealing to landlords could help, noting that the Bloomberg Administration used a similar tactic to shut down dozens of stores selling counterfeit goods in Chinatown in 2008.
“This will get resolved; the question is how quick,” Campoamor told us. “It took 20–50 years to destroy the bootleg alcohol industry after Prohibition, so nothing’s going to happen overnight.”
But Campoamor said that if the unlicensed stores eventually do get shut down, the licensed retailers who open afterward may be on better footing than the few “first market movers” open now.
“The first mouse is going to get the trap,” Campoamor said. “The second mouse is going to get the cheese.”
Post time: Apr-18-2023