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It’s no secret that New York’s legal cannabis rollout has taken far longer than most expected.
It’s no secret that licensees – especially growers – have put millions of dollars into businesses that they are currently unable to fully operate.
And it’s barely a secret that some licensees who are struggling to generate revenue amid a court-ordered shutdown of new dispensaries are operating in the unlicensed market in New York and other states.
“There’s been a lot of talk about stuff going out the back door, or people having separate hustles,” said Brittany Carbone, co-founder of Adult-Use Conditional Cultivator Tricolla Farms, and a board member of the Cannabis Association of New York.
Nearly two years after New York’s Cannabis Control Board held its first meeting, the state’s efforts to design and launch a legal marijuana market have been, more or less, disastrous.
Licensed growers are sitting on thousands of pounds of unsold weed they grew in anticipation of a robust retail market. That’s partly because only 23 CAURD dispensaries are operational – roughly 170 fewer than Gov. Kathy Hochul pledged New Yorkers would see by now – while hundreds of others are blocked from opening by a court injunction.
To top it off, legal dispensaries are currently selling products containing extremely high levels of bacteria and mold.
According to weed industry stakeholders interviewed by NY Cannabis Insider, the cascading problems are creating space – and in many cases necessity – for illegal activity that could largely undermine state efforts to create a regulated industry, as the cannabis community loses faith in the Office of Cannabis Management.
“They’re painting things as, ‘everything’s OK and this is part of a plan,’” said Joshua Waterman, president of the Legacy Growers Association. “None of us are going to put faith in the OCM unless we see accountability come from them.”
Some of the alleged illegal sales are flowing downstream from OCM programs, Waterman said. For example, the OCM launched a Compliance Training & Mentorship program earlier this year for legacy growers looking to go legal. Part of this program aimed to partner legacy growers with AUCC companies, so that the former could learn about compliance from the latter.
But the program – which some participants complained seemed geared toward dissuading them from applying for a license – had an unintended effect in some cases, Waterman said.
The partnerships resulted in at least some legacy growers helping some AUCC farmers set up illegal operations, said Waterman, who said he hasn’t participated in such setups and declined to name people who are.
“Ironically, the intentions of the program have played out to be successful on the opposite side of the industry,” Waterman said. “I know people who were in the mentorship program who are helping out these farmers right now, and it’s a beneficial relationship for both of them – but none of that’s getting taxed.”
Additionally, some AUCC farmers already spent much of their money growing a harvest last year that they couldn’t sell, and are now selling out-of-state weed rather than growing it, Waterman said.
“Because they can’t grow and have a guarantee that they’re going to be able to sell that product … it’s better to buy a smaller amount from a different state, and sell it – but almost to order – than it is to bet your whole bill-fold,” Waterman said.
“I don’t blame them for thinking that way, that’s what’s proved to happen last time,” Waterman said.
Additionally, the Cannabis Growers Showcase events – which many in the industry consider a rare bright spot – are selling weed grown by in-state legacy operators and out-of-state brands, Waterman said.
“It’s a joke,” said Waterman, who added that he’s been approached by people trying to organize CGS events who were seeking legacy market products to sell at the showcases. “You’re essentially letting people legally sell weed without any kind of structure.”
Carbone of Tricolla Farms said she doesn’t know any specific licensees involved in selling out-of-state or legacy market weed, but that the dynamic has become a poorly kept secret, and that the line between legacy and legal is getting blurry in some cases.
“There definitely are certain licenses that also have people involved that have grows in other states that are notorious for oversupply and the influx of that oversupply into New York’s unregulated stores,” Carbone said.
Some of the blurred lines could create confusion among customers, Carbone said. Some California brands are being sold legally in New York-licensed dispensaries via white labeling agreements with AUCCs and/or Adult-Use Conditional Processors, and also illegally in unlicensed smoke shops.
Regulators should monitor this issue more closely, Carbone said, since it promotes the idea that unlicensed shops are legal and regulated like Conditional Adult-Use Retail Dispensaries.
“Look at these brands that are being sold all over the place, and then limit their ability to enter the legal market if they’re going to be operating like that,” Carbone said.
It’s not clear whether BioTrack – the seed-to-sale tracking system New York cannabis businesses must use by Nov. 1 – will do much to change these dynamics, Carbone said. Especially considering that California uses a tracking system and products from legal companies in that state are currently flooding the New York market.
The way OCM is rolling out the BioTrack system doesn’t inspire much confidence, either, said Joann Kudrewicz, CEO of cultivation company Ravens View Genetics and chair of CANY’s Cultivation Committee.
Kudrewicz’ company started using BioTrack about a year ago, in preparation for when they’d be required to use it. Ravens View uses a general version of the software that doesn’t allow the company to input all the information regulators want reported, Kudrewicz said.
“They have to create a template first before they roll it out, which it doesn’t seem as though they’ve done,” said Kudrewicz, who said she’s not aware of any backdoor selling among AUCCs. “Here we go, another debacle, which is not going to help if there is this backdoor stuff happening.”
There’s also apparently at least one example of alleged imposters selling illegal products via social media that are posing as legal dispensaries.
NY Cannabis Insider found a Telegram channel called Smacked World 420, which claims to be CAURD dispensary Smacked Village, that advertises sales for psilocybin mushrooms and California weed brands.
Smacked Village owner and CEO Roland Conner did not respond to multiple calls, texts and emails from NY Cannabis Insider inquiring about the Telegram account. After NY Cannabis Insider reached out to OCM – which declined to comment – Conner posted on LinkedIn that an imposter was posing as Smacked Village on social media.
“There is an account pretending to be us,” Conner wrote. “They are mirroring our posts and using it to sell unlicensed products, while pretending to be Smacked Village.”
Carbone said she’s seen an Instagram account that she suspects is an imposter posing as a licensed CAURD, but declined to say which one. The Instagram page included in its bio the CAURD’s business name and license number, and sold products like “Trips Ahoy,” which violates both copyright laws and New York rules that prohibit marketing to children.
“They can’t really be this careless,” Carbone said. “I wouldn’t be surprised to find out that’s an imposter account.”
Ultimately, Waterman said, the current situation doesn’t leave much room for optimism regarding New York’s legal market. A lot of licensees who wanted to participate in the legal weed industry are being pushed into illegal activity to make ends meet, leading to a loss of confidence in the regulated market, and a boon for the unregulated market.
“They’ve put the farmers in a corner where they have to sell on the traditional market to survive,” Waterman said.