Is it a case of two wrong making a right for consumers? Is New York propping up the California marijuana market?
The marijuana has been in a world of hurt. The Golden State continues to step all over itself to deplete a thriving industry. Commercial cannabis sales fell by 8% last year to $5.3 billion, the first decline since it became legal in 2018. And state tax revenue dropped from $251.3 million in the third quarter of 2022 to $221.6 million in the fourth quarter. Part of the reason is indoor grow costs more and is over produced and it is competing with illegal grows.
The other major reason is the intense taxing system on the cannabis industry without any policing of the black market. Colorado has been a model for their system of legalized weed and has seen their black market almost vanish. Executives for once thriving companies have asked Governor Newsom for help. But it has been slow coming and Newsom wants federal legalization so they can export to save the industry without the state having to change.
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Meanwhile, New York had a fiasco of a recreational rollout and now is embroiled in lawsuits and recriminations. The plus side for consumers is over 1,600 unlicensed dispensaries have opened in New York City selling a wide variety of products. The state works diligently to shut a few down every week and they even manage to keep them closed for up to 72 hours.
In the spirit of being neighborly, the illegal dispensaries in NYC are using California black market products and also legal products which somehow pop up in retailers. The made in California seal of approval seems to be popular for consumers in the Big Apple.
The negative for east coast consumers is they are paying a premium for products with some things selling for 50+% more than on the west coast. And items are quickly building a very robust black market customer base in the Empire State.
“California products are getting to New York in several ways. Some are traditional market products put in fake packaging, but there are also real brands that are being shipped to New York. Sometimes this is done through “burner distros” buying legal products and moving them out of state, and other times I’ve seen things disappear out the backdoor and end up in bodegas in New York” says Jesse Redmond, Head of Cannabis at Water Tower Research.
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Newson’s lack of urgency in addressing the black market (and establishing a healthier system with a steady tax revenue stream) is fueling a boon in New York, but also hampering the slow bureaucrats of New York in fixing the colossal mishandling of licenses.
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