As of early May, more than three years after New York legalized recreational marijuana, there were only 119 licensed dispensaries across the state serving the market. According to statistics, the ratio of unauthorized cannabis stores to legal cannabis stores is 20 to 1 New York Times, there are more than 2,000 operators in New York City alone. The state has less than one licensed marijuana dispensary per 100,000 residents, compared with about six in Massachusetts, 10 in Maine, 11 in Colorado, 19 in Oregon and 48 in New Mexico.
If lawmakers and regulators had learned from the mistakes of other states trying to displace the black market, they could have avoided what New York Gov. Kathy Hochul recently called a “disaster.” However, New York politicians didn’t anticipate what would happen when people could legally use marijuana but couldn’t get it from legal sources.
Lawmakers did not allow home cultivation and initially did not allow medical dispensaries to serve recreational consumers. New York has instituted a complex, expensive and slow permitting process that prioritizes “equity” and “diversity” over efficiency. The state has imposed onerous fees, taxes and regulations, making it difficult for legal dispensaries to compete with the unlicensed shops that have sprung up to fill supply gaps.
New York did not allow medical pharmacies to enter the market until last December. Even so, it charged the company $20 million for the privilege of operating up to three locations.
New businesses face fees of up to $300,000, with regulators prioritizing retail applicants deemed vulnerable, including people with cannabis convictions and their relatives. These offers have prompted litigation, further delaying the licensing process and deterring applicants who might be better equipped to run successful businesses.
Despite these problems, Hochul remains proud of New York’s “social equity” initiatives. But she ordered bureaucratic changes to speed up the approval of retail licenses and expressed support for cutting the state’s high marijuana taxes, which currently include a three-tier wholesale tax based on THC content and a 13% retail tax.
Lawmakers should remember that franchise stores are competing with the black market, which is taxed at zero. New York should also revisit burdensome regulations that make legal marijuana more expensive and difficult to obtain.
Despite Hochul’s pledge to “shut down illegal operators,” any such crackdown could inflict the harm that legalization is supposed to mitigate, punishing entrepreneurs who fill the gaping void left by misguided state policies and administrative incompetence. Enforcement is also unlikely to succeed, given the poor record of the war on marijuana — a fight lawmakers allegedly ended three years ago.
This article originally appeared in the print edition under the headline “New York’s Foreseeable Legal ‘Disaster’.”
