Grown in Oklahoma, Smoked in New York: Illicit Marijuana’s Legal Roots
Surplus Weed from States Like Oklahoma Feeds New York's Illicit Market.
Surplus weed produced in states like Oklahoma is increasingly ending up in New York, fueling its illicit market and complicating the state’s efforts to expand legal cannabis sales.
In the dead of night last April, state drug agents in Oklahoma intercepted an 18-wheeler rumbling east toward the Arkansas border smuggling 7,000 pounds of marijuana hidden in security camera boxes.
The weed was from licensed farms in Oklahoma, according to the State Bureau of Narcotics. But the driver was heading to New York, where his cargo could fetch millions of dollars among legacy street dealers and new, rogue dispensaries that make up the illicit market, officials said.
The episode, which was part of a broader crackdown on Oklahoma’s rogue operators, offered a glimpse of a troubling trend that has emerged from the nation’s patchwork approach to legalization. New York, like other states, has legalized marijuana but has been very slow to allow licensed retail outlets to open and licensed producers to expand. As a result, many states with a surplus of legal weed, like Oklahoma, have found a lucrative market for their products on the streets and in unlicensed dispensaries in New York.
It is a paradox of legalization: What was intended to weaken the illicit trade has instead helped to bolster illegal sales that undercut the tax revenues and job creation that legalization has promised.
Nearly all of the weed in New York State arrives illegally, stashed in vehicles, parcels and cargo. But much of it is produced legally, dispatched from places like California and Canada. The attorney general of Oklahoma has claimed that 40 percent of 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 trafficking less lucrative, said Jonathan Caulkins, a professor of public policy at Heinz College at Carnegie Mellon University. And the heavy state and federal taxes placed on weed push some state-licensed businesses to sell to the illicit market to survive, he added.
At the same time, he said that combating marijuana trafficking has become less of a priority for federal and state governments, whose focus has shifted to confronting a deadly fentanyl crisis and who are reluctant to use heavy-handed enforcement tactics for a drug that 41 states have legalized in some way. The number of federal marijuana trafficking cases has fallen 62 percent since 2018, according to the United States Sentencing Commission.
“To the extent that the country is hoping to replace criminal production, we’re doing a lousy job of getting the participants to be rule abiding,” Professor Caulkins said.
New York officials have discussed collaborating with other states to address the trafficking of legal weed. But those partnerships have yet to materialize and enforcement has barely scratched the surface.
Regulators have focused the bulk of their efforts on growing the legal market, betting that giving consumers more avenues to buy from licensed businesses will eventually make New York more like Washington State, where the vast majority of weed is sold legally, and less like California, where the illicit market reigns.
John Kagia, the policy director for the New York State Office of Cannabis Management, said that the state’s licensed dispensaries — of which there were 75 as of Friday — already offered a greater selection of products than what was available in the illicit market, and at competitive prices. The trouble is that there are not yet enough legal shops to make them convenient for consumers to choose over illicit 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 wholesale weed with the intention of supplying the illicit market, then abandon their licenses to evade detection. Sometimes, growers and dispensaries are in on the scheme, and write off the weed as damaged or destroyed when it is instead sold through back channels.
In Oklahoma, investigators suspect that at least a third of the 9,400 cultivation licenses issued in the state after it legalized medical marijuana in 2018 were obtained fraudulently by out-of-state growers, according to Mark Woodward, the spokesman for the state’s Bureau of Narcotics. They often used a “ghost” ownership scheme that involved hiring local residents to pretend to be majority owners of the farms in order to skirt residency requirements, Mr. Woodward said.
Some Oklahoma farms have had ties to criminal organizations that are already sending weed from California to New York, Mr. Woodward said, leading the authorities to suspect that traffickers may have 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 weed out of the state have shown up from California to Florida and from Texas to Rhode Island, Mr. Woodward said.
“Up and down the East Coast, we’ve heard from law enforcement that we’re their No. 1 supplier,” he said.
New York City may have the biggest appetite of all. According to one survey of global consumption habits in 2023, the city smokes, eats and vapes an average of nearly 70 tons of marijuana each year, topping a list of 140 cities. While there have long been legacy growers in New York, the state has never produced enough to fulfill 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 buy smokable flower and edibles through a slot in the door. Truckloads of marijuana also typically end up at warehouses in Flushing, Queens, and Williamsburg, Brooklyn, where the weed is then distributed by couriers to local dealers and dispensaries.
Although regulators believe that New York’s legal market will eventually prevail over its illicit competition, some experts say it’s an impossible challenge. Raymond Donovan, who retired last April as the chief of operations for the Drug Enforcement Administration, said the size, sophistication and agility of the illegal market in New York make it a formidable opponent.
“They’re never going to win against black market marijuana, because it’s so prevalent and it’s going to undercut the market at every turn,” he said.
The unfettered competition from the illicit market has stirred confusion and suspicion among legal suppliers, retailers and consumers.
Products from some of the most successful California brands have shown up in both licensed and unlicensed shops in New York. Lawsuits have accused companies like Stiiizy and Glass House of supplying them both. But the companies have denied knowing how their products wound up in unlicensed shops, with some suggesting that the items may be counterfeit.
Kristi Palmer, the co-founder and president of Kiva Confections, said unlicensed shops carried authentic tins of the company’s popular brand of gummies, Camino. But she said it was almost impossible to determine how they got there because the company sells a typical batch to multiple buyers, and the state’s tracking system doesn’t let her see what they do with it.
“It gets a bit murky,” she said.
Starting this year, brands doing business in New York will be required to obtain licenses to place their products in legal dispensaries. Currently, brands only need to agree privately to have their products made by licensed growers and processors in order to do so.
Mr. Kagia said the change would allow regulators to scrutinize companies’ business practices and pressure them to address the illicit market’s supply of their products.
Axel Bernabe, the former chief of staff in the Office of Cannabis Management, said that it was frustrating for regulators to visit unlicensed stores and see how consistently they were stocked.
“This isn’t just some guy bringing in a package and bringing in one brand,” he said. “They’ve got to have a very serious supply chain and distribution network.”
New York has delayed for months the implementation of a computerized system for tracking cannabis as it moves from cultivators and processors to retailers and consumers. The state currently relies on compliance inspections and vendors’ own records. Mr. Kagia said that regulators were working “feverishly” to get the tracking system in place.
Matthew Krupp, the owner of Canterra, a dispensary in the Buffalo area, said a customer who recently purchased a Rove brand vape pen peeled back a sticker tagging the item as a New York product and found a California label.
“He said, ‘Did you sell me California weed?’” Mr. Krupp recalled.
All the weed 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 vape came from his facility — and not an unlicensed seller — then it was “100 percent compliant” with state rules.
The Office of Cannabis Management said that 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 any of it is New York product?” he said.
