Elected officials in New York are once again threatening unlicensed cannabis dispensaries, vowing to shut them down. This comes as the state continues its slow rollout of legal cannabis dispensaries.
On July 19, the New York Cannabis Control Board voted to approve 212 new adult-use cannabis dispensary licenses, bringing the total issued to 463 statewide, as Spectrum News 1 reports.
But to date, just 16 legal adult-use dispensaries are open in the country’s fourth-largest state, with 20 million residents and the nation’s biggest city. Most of the licences awarded are “conditional”—meaning the license holder has to complete additional steps before they can get a “final” license and open their doors. So far, licenses have been reserved for people with some history of marijuana-related arrests or convictions.
Meanwhile, at least hundreds of stores selling cannabis without a license reportedly operate throughout the state. And on July 17, state Senator Brad Hoylman-Sigal (D), representing parts of upper Manhattan, wrote an open letter to state cannabis officials. Addressing Christopher Alexander, executive director of the Office of Cannabis Management, and Tremaine Wright, chair of the Cannabis Control Board, he blasted what he portrayed as widespread illicit stores in his local neighborhood.
“Given the serious issues caused by these stores, I urge OCM and [the Department of Taxation and Finance] to continue to act quickly and aggressively to shut down these unlicensed stores,” he wrote. “The scale of these unlicensed stores is staggering, with over 100 stores identified in Hell’s Kitchen alone. As I have expressed previously, these stores are deceptive to consumers, hazardous to public health, cheating on their taxes, undermining the State’s equity-based and legal cannabis rollout, and have little incentive to inspect IDs to ensure they are not selling to minors.”
Hoylman-Sigal cited two incidents at separate stores—an armed robbery and shooting, and a fire—in arguing that the businesses are endangering residents. He attached a list of stores compiled by him and other Hell’s Kitchen residents.
In many ways, it’s a strange scenario to be describing, when New York legalized in 2021.
As he noted, New York lawmakers have already given more authority—and funding—to state agencies to go after illicit dispensaries. The fiscal year 2024 budget approved by Governor Kathy Hochul (D) gives the cannabis office and tax departments more powers to inspect such stores, fine them and shut them down through court orders.
In the breakdown of these rules, state cannabis and tax officials can charge civil penalties to unlicensed businesses—up to $20,000 daily in fines if they don’t stop selling cannabis—and fine them for unpaid taxes. They can also seize cannabis products, and seek to evict commercial renters. The bill makes it a crime to sell cannabis without a license, and a tax-fraud crime to sell cannabis without paying taxes. Lawmakers provided $5 million in funds to hire 37 new cannabis office staff, to assist with enforcement.
In many ways, it’s a strange scenario to be describing, when New York legalized in 2021.
And officials have already been cracking down. In June, Governor Hochul announced that state agencies had inspected 33 businesses in New York City, Ithaca and Binghamton, with 31 receiving violation notices. Officials ultimately seized over $11 million worth of cannabis products. Then on July 18, Manhattan District Attorney Alvin Bragg announced his office had struck an agreement with business owner Rami Alzandani, who allegedly owns a dozen illicit dispensaries in the city, for Alzandani to pay back over $400,000 in taxes and illicit profits.
OCM Director Alexander supported these changes. “Today, the State took a necessary step to protect the public health of New Yorkers and to support our state’s growing cannabis industry,” he said when the new measures were introduced. “Today’s legislation will further those goals by giving the Office of Cannabis Management real power to shut down businesses trying to flout our laws and ensure that communities who were promised reinvestment dollars are not shortchanged.”
But what explains the thriving illicit cannabis market in New York? There’s certainly money to be made during the slow legal rollout, when many consumer still don’t, in practice, have access to legal cannabis. Why wouldn’t smoke shops—which by one estimate, can make up to $3,000 a day—keep selling unregulated cannabis when this demand exists? You could argue it’s the city and state’s responsibility to shut down businesses that may sell contaminated products or sell to minors. But it’s also their responsibility to make sure New Yorkers can access cannabis, wherever they live, as easily—and as soon—as possible.
“This is not the right way and you’re getting in the way of us who waited our turn.”
Sohan Bashar is a Bengali-American immigrant who has lived in Jamaica, Queens since he was five. He told Filter that he has been involved in the cannabis business for over 20 years, in a “plant touching” role, and was previously prosecuted on a felony charge in Queens.
With this background, he was part of the second round of dispensary licenses awarded—which so far have been reserved only for people with a past cannabis arrest or conviction, under New York’s cannabis social equity program. He now holds a conditional license for his business, So Vapes & Accessories. But he said that the path to opening a legal store has been continually challenging.
As once of the resources provided to applicants, the state Dormitory Authority initially found Bashar a commercial location on Jamaica Ave and 162nd Street. But he felt it wasn’t the right spot: There was no parking, and rent and buildout costs were too high. The premises ended up going to Good Grades LLC, the first licensed dispensary to open in Queens.
In June, after a long delay, Bashar found his own location on Queens Boulevard—across the street from the courthouse where he was charged years ago.
Despite a combative meeting with a local community board that Bashar said raised unfair objections, the Office of Cannabis Management has the final say here, and he is still expecting to open a storefront, having secured a lease and contractors.
But near his building, Bashar said, is a smokeshop that sells unlicensed cannabis products. And he is not sympathetic to these businesses.
“This is not the right way and you’re getting in the way of us who waited our turn,” he said of the owners of such stores. “We did the crime and did the time, and we applied for the license and got it. Every regulation that’s passed we’re following. It takes time to do these things right—we’re choosing to do it the hard way.”
Bashar dismissed concerns that a further state crackdown on these shops will risk more police violence and discrimination, arguing that it’s a financial issue, not a criminal one.
Nonetheless, he believes that of the hundreds of people who received a conditional dispensary license under the equity program, most will find it nearly impossible to actually open a store.
“I’m having to pay my own lawyers and research out of pocket,” he said. “The 90 percent of other license holders who don’t have these resources and money saved, don’t have another business to borrow from, they’re left with nothing but a piece of paper that says they got a license. Now you got people who are predatory lenders out here, trying to get 49 percent of their license, for pennies on the dollar.”
New York State has “one of the best” legalization rollouts anywhere in the country, he still believes. But even with the strongest protections for disadvantaged entrepreneurs, he said, the deciding factor will always be money.
Success—and, potentially, the future of the illicit market—will depend on how many conditional license-holders can get over the finish line, and how soon.
New York lawmakers have created a “Cannabis Social Equity Investment Fund” worth $200 million, which is supposed to support dispensary licensees and get their properties leased and equipped so they can open doors. A quarter of that, $50 million, is allocated by the state out of cannabis licensing fees and taxes; the rest, $150 million, will come through a public-private partnership with a Chicago-based private investment firm, Governor Hochul announced on June 30.
The state has promised it will provide grants and low-interest loans to dispensary license holders, to help allay the high costs of opening a store. But Bashar and other license holders are concerned about the loan terms being offered. A group of them wrote a May 9 open letter to state officials, criticizing a lack of transparency over how dispensary locations are being approved and awarded. They also demanded immediate access to financial support to start up their businesses.
The Cannabis Control Board will approve one more batch of conditional dispensary licenses in the next few months, and later this year will consider approving licenses for general applicants. Success—and, potentially, the future of the illicit market—will depend on how many of the conditional license-holders can get over the finish line, and how soon.
Photograph via Pxfuel