On the same late December day that the first legal marijuana dispensary in New York state opened in SoHo, City Council investigators were checking out weed prices. They weren't shopping at the new, legal Housing Works Cannabis Co. (HWCC), but rather, at the 17 smoke shops located within a 10-block radius of HWCC, all selling some combination of cannabis products, cigarettes, and flavored vapes, and all operating without a license.
The investigators didn't really care that weed and cigarettes were going untaxed with each sale, or that these stores were selling illegal flavored vapes—they were more alarmed that the gray market was so clearly undercutting the new legal weed shop on prices. "Prices observed for purported THC products were $15 for a pre-roll, $35 for edibles, $35 for flower, and $40 for vapes," the investigators found; meanwhile, HWCC was charging 30 to 40 percent more, in addition to a hefty 13 percent sales tax. Their takeaway: The state's cannabis market, now legal, was clearly already facing stiff competition from the literally hundreds of weed shops that have been operating out in the open for months.
This exposes a central contradiction of the state's embrace of an equity-centered approach to weed legalization—that with pot now legal, many people from the very same communities that were most harmed by the drug war are now opening up these illicit shops. The state, wary of repeating past mistakes, doesn't want to criminalize or sour people on the legalization agenda. And the prospect of putting the owners of these new businesses into the criminal justice system is something that keeps the Office of Cannabis Management's chief equity officer up at night. All of this means that until the legal program is far more robust, the state will probably take a soft approach to enforcement.
At a City Council hearing on Wednesday morning, officials discussed the findings of the investigation by the council's Oversight and Investigations Division, as well as recent attempts by the City's sheriff and the NYPD to cut down on unlicensed shops. According to NYC Sheriff Anthony Miranda's testimony, there are currently over 1,200 unlicensed smoke shops, spread across the city, that are selling marijuana products.
"As you are aware, there has been a large increase in highly visible, illicit retail smoke shops," Miranda testified, but noted this phenomenon was separate from the pre-existing underground weed market, which the Marihuana Regulation and Taxation Act (yes, with an "h," that's the New York statutory spelling, dating back to LaGuardia), had aimed to help transition to legality.
Beginning in November, a task force consisting of the sheriff's office, NYPD, the state's Office of Cannabis Management, and other City agencies, began to hold raids of different smoke shops. Members of the task force cleared the shops of illicit products and levied some fines, but mostly avoided arrests of operators, even handing out literature about how to obtain a marijuana retail license. Miranda promised that these enforcement actions would continue as more legal businesses open up. Ultimately, he said, "the goal of enforcement is to protect the emerging market"—not to arrest operators of the unlicensed shops. "New York City has an opportunity to be a global hub for cannabis industry excellence, education, and excellence, and we must protect that opportunity," Miranda declared. (Heady and aspirational words from anyone, but especially for a top law enforcement officer whose fellow officers, only just five years ago, would have been arresting the very same people it's now gently urging to go legal.) But Manhattan Borough President Gale Brewer, who had accompanied the sheriff during some of the enforcement actions, found that many of the shops were back up and running within days, selling the same products as before.
Brewer said her staff visited shops on the Upper West Side, which, like the rest of the city, has seen a boom in the amount of unlicensed stores, and reported that a few even had more psychedelic offerings: "Some [shops] have the mushrooms."
If New York state is trying something different than the rest of the country's marijuana legalization efforts, and serious about moving away from criminalization and toward getting people into the legal market, then the unlicensed shops might just come with that territory, for now at least. While some councilmembers at the hearing pushed for further enforcement and arrests, the sheriff and NYPD stressed that they currently don't have many options beyond issuing fines, confiscating product, and beginning the years-long (and highly controversial) nuisance abatement process, which would aim to close each store individually. Ultimately, Miranda conceded, the weed shops might find themselves brought down the same way Al Capone was—by not being able to pay taxes on their illicit earnings.
If the state really wants to crack down quickly on the unlicensed gray market it helped create with decriminalization, that would have to be done up in Albany, where Assemblymember Liz Krueger, a co-sponsor of the MRTA, has already proposed legislation making it a misdemeanor to sell marijuana without a license. In other words, back to criminalization.
