Cannabis Professionals Discuss Struggles With Illicit Operations In New York

New York's budding marijuana market seems to be facing lots of 

challenges, the main one being the small number of licensed cannabis shops versus the numerous illicit operators. Another issue is a lawsuit against the Office of Cannabis Management (OCM), brought by the Coalition for Access to Regulated and Safe Cannabis (CARSC), for allegedly violating the Marijuana Regulation and Taxation Act (MRTA), by reserving the first 150 adult-use retail licenses for social equity applicants.

The group involved in the lawsuit includes at least four large marijuana companies, Acreage Holdings ACRHF, Curaleaf Holdings CURLF, Green Thumb Industries GTBIF, and PharmaCann. Taking this information into account the following question arises – is there room for both large multi-state operators and small mom-and-pop shops in the Empire State’s marijuana market?

To find out more, Benzinga reached out to Housing Works Cannabis Co. – a nonprofit that provides services to people living with HIV/AIDS, which is now running the first legal weed shop in NYC and Nabis, a 

California-based cannabis wholesale platform. We discussed the 

marijuana scene with Sasha Nutgent budmaster/retail manager at Housing Works and Vince Ning, Nabis’ co-CEO & co-founder.

Biggest Challenges

What New York’s nascent cannabis industry is lacking are options for loyalty programs with perks like discounts. “This would really allow legal dispensaries to build a comprehensive opt-in customer relationship management (CRM) database and cater to the needs and shopping trends of our customers,” Nutgent told Benzinga. “This would also help generate more sales and give us more of an edge against the illicit market.”

Courtesy photo of Sasha Nutgent

Ning referred to one of the major issues in the state’s emerging market 

as “the slow rollout of legal operators due to licensing bottlenecks and a slow regulatory process to stand up the cannabis program. While hundreds of applicants have been 'awarded' conditional retail (CAURD) licenses, very few of those licenses are fully operational, leaving New York’s current legal market spread thin geographically and undersupplied relative to demand.”

Regarding the lawsuit against OCM, both Nutgent and Ning support 

efforts to prioritize equity entrepreneurs.

“I support New York State’s decision to reserve the first 150 licenses for social equity applicants,” Nutgent said. “There needs to be some balance and this was one way to give a leg up to those who were impacted by the war on drugs and to ensure a level playing field for social equity applicants who may not have had access to resources for a fair shot.”

Courtesy photo of Vince Ning

David Vs Goliath

According to Nutgent, New York definitely has room for both multi-state operators and independent shops. The reason she believes it is necessary to give small equity applicants a chance to open first is to give them a shot at establishing themselves in the market and create

connections, which they would otherwise be unable to do.

“At the same time, New York is a melting pot with a rich history of diversity—whether it be people or business, for example,” Nutgent adds. “We’re home to both mom-and-pop shops as well as the Guccis of the world, so I think New York’s cannabis market is unique in that way compared to other states.”

Ning says it's not even a question of whether there's room for both but rather “how the balance is struck.” He says if we want to normalize the industry and make it accessible for all, a market that serves both large and small operators is inevitable. This can be achieved, in Ning’s opinion, with a regulatory structure that does not give large businesses the ability to overtake the market from the very start. “Craft brands and small businesses need the assurance that their products will be on the same shelves as some of the most recognized players in cannabis,” he told Benzinga.

Illicit Troubles

The OCM recently posted new emergency regulations on unlicensed activities in its latest move to deal with illegal operations. Benzinga wondered what the industry professionals thought about the progress they've made thus far.

Nutgent says there is still a lot of work to be done. “It seems like when one illegal shop closes, another one opens,” she said. “I think the city and state need to be a bit more strict with landlords who allow illegal operators to open. If the legal market’s goal is to thrive, we will need more solid support from local government.”

Ning suggested another way to deal with the problem. Instead of focusing on a “crackdown,” the state should accelerate the issuance of legal retail licenses. “In the vacuum of legal access, unlicensed operators fill the gap. We’ve learned from decades of failed War on Drugs policy—and other legal states—that lawmakers can’t simply rely on enforcement to solve the issue,” he says. 

To stay afloat in the challenging environment, Ning advises cannabis businesses, no matter the size, to explore various ways to generate revenue such as diversifying offerings or reaching out to new markets to strengthen cash flow. 

Feature photo: Courtesy of Jess Loiterton via Pexels