Weed is legal in New York, but the illegal market is still booming. But why?
New York’s first legal marijuana dispensaries are now up and running. But with the opportunity for both consumers and sellers comes questions about how the new legal market will compete with illegal sales.
Marijuana is the most commonly used federally illegal drug in the United States. New York is one of 21 states, plus the District of Columbia, to legalize it for recreational use. It’s been more than a decade since voters approved the first ballot initiatives legalizing marijuana in Colorado and Washington. The state laws that followed have tried to capture growing public approval for a drug considered less harmful than nicotine and alcohol, and acknowledgement of the communities disproportionately affected by the criminalization of marijuana. In 2020, prior to New York’s legalization of marijuana in 2021, which included expungement of past criminal marijuana convictions, Black and hispanic residents made up 93% of marijuana arrests in New York City, despite making up 52% of the population.
The state put social restoration front and center of its approach to a legal cannabis marketplace, reserving the first licenses for “those most impacted by the enforcement of the prohibition of cannabis or non-profit organizations whose services include support for the formerly incarcerated,” according to the state.
The first licensed dispensary for recreational marijuana in New York is run by Housing Works, a non-profit that provides housing and healthcare to those living with HIV and AIDS.
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“People of all different races used and sold marijuana at similar rates. Yet everywhere we saw Black, Indigenous and Latinx people being targeted with arrest and incarceration,” said Shaleen Title, a former commissioner of the Massachusetts Cannabis Control Commission, and the founder and director of the Parabola Center, a drug policy think tank. “New York has completely reframed the approach compared to other states. It has started from scratch in the way that it’s looking at licensing, in the way that it’s setting up the market structure.”
As the first dispensaries have opened across the city in the last several months, and more than 60 licenses have been issued across the state, a sea of unlicensed, illegal shops still dot the streets of all five boroughs, selling marijuana everywhere from small bodegas to large operations that one might confuse for a legal retailer. “Officials have calculated conservatively that there are 1,400 unlicensed shops in the five boroughs. I think that number is probably quite a bit higher,” said Alyson Martin, founder of Cannabis Wire, which covers the marijuana industry in New York and nationwide.
When the COVID-19 pandemic caused many stores to close, illegal shops sprouted up hoping to cash in on the cannabis industry in America’s largest city, Martin explained. For consumers, illegal sellers can be more easily accessible and offer cheaper cannabis.
“Consumers generally choose illegal shops because of price. Why would you buy an $80 eighth of weed at a legal shop when you can get a $25 eighth of weed at an illegal shop?” said Amanda Chicago Lewis, a freelance investigative reporter who covers the marijuana industry. And in a city as large as New York, the nearest legal dispensary could be over an hour away, while one might have an unlicensed store in their neighborhood.
However, illegal weed also presents risks to the consumer’s health, and the health of the legal industry, Martin said.
Legal marijuana sold in New York has to be grown in New York, as federal law prohibits interstate commerce of marijuana. Illegal weed operates outside of that system, and cannabis sold in New York is frequently grown in California due to the favorable growing conditions and well-established cultivators. Weed grown illegally in California skirts that state’s environmental regulations for legal weed, as well as state labor laws. Illegal weed also avoids testing laws, leading to confusing or inaccurate dosage labels.
Researchers involved in a study commissioned in 2022 by the New York Medical Cannabis Industry Association, a trade group which represents legal, licensed cannabis growers, purchased 40 products from illicit marketplaces across New York City and tested them at a third-party lab for THC levels, as well as for the presence of pesticides, e. Coli. salmonella and heavy metals. Their study found that 40 percent of the products purchased would have failed at least one of these tests given to legal cannabis products. Many did not have the THC levels advertised, and all would have failed the state’s standards for the legal marketplace, the study found. Marijuana sold outside of the legal marketplace also skirts New York state packaging laws, leading to some products containing images that are widely familiar to kids, mimicking cartoons or popular candies.
These challenges between the legal, and illegal cannabis market are not unique. “The state that is generally understood to have the strongest legal market is Colorado. In Colorado, there’s about a 30 to 35% illicit market rate. That’s the best case scenario,” Chicago Lewis said. “In a place like California, the illicit market controls 80 to 90% of the market.”
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In New York, that creates some difficult questions, as legislators hope the market will contribute to social restoration. To curtail illegal businesses, without sending individuals to jail, the state is turning to civil enforcement. “At least something like 400 letters have been sent to landlords and building owners saying, ‘Hey, if you’ve got unregulated activity happening within your building, we’re sort of putting you on notice that if you don’t stop, we’ll intervene,’” Martin said.
To Shaleen Title, it is up to regulators to provide a pathway for underground businesses to become legal.
“Think about this. If you’ve never had a legal business at all, and now you’re going to have a business in possibly the most regulated market there is, that’s certainly going to be a process,” she said.
Title points out that in her state, Massachusetts, the legal cannabis industry took time to establish. “The first year it was estimated that 90% of consumers were still in the underground market,” Title said. At this point, five years in, prices have dropped significantly. My guess is that probably 50% or more of sales are actually taking place in the regulated market. And so if we see that consistent change, then I think we’re meeting the goals of legalization.”
