NYC harbors the most sophisticated illegal import and distribution system of cannabis in the world. And as the industry grows, so do the underground’s seed-to-sale operations and product offerings that include non-smoking products like edibles, vapes, and tinctures.

NY State is losing precious tax revenue as they continue to fumble the yet-to-launch legal industry while the underground races ahead to build a rival economy that will be nearly impossible to dismantle.

Opportunists, Entrepreneurs, and Legacy Operators Are Creating A New Economy

Cannabis prohibition is over, and entrepreneurs are not waiting for the government to set the framework for a new industry. All types of entrepreneurs are clamoring for a piece of the action, and the competition is fierce as the legal vs. illegal markets battle it out.

Opportunists are flouting the law and operating illegal bodega-style pot shops on every corner of NYC. They exist for personal gain and a quick buck. They have no concern for the law, the industry’s reputation, destigmatizing the plant, educating the public, or selling untested and potentially tainted cannabis products.

Legacy entrepreneurs have made a living on the plant, have a passion for the benefits of the plant, and may have served time for possession of the plant. They are likely tired of the underground hustle and would welcome the chance to operate legally and in the open, but the bar to enter is too high between startup costs, taxes, fees, and regulations imposed on the industry.

The local dime-bag dealer on the corner probably isn’t going anywhere soon because it’s cheaper to buy pot on the streets than in a dispensary, given the high overhead costs.

Entrepreneurs who have established CPG brands in other states are looking for ways to get their products into the lucrative NYC marketplace. One way is to look the other way when their product “falls off the truck” and finds its way onto the shelves of illegal storefronts.

The state is making it cost-prohibitive for the regular Joe to participate in the economy. New entrepreneurs are finding it challenging to enter the industry because they are bootstrapping their businesses and, again, can’t afford the cost of a license, fees, and taxes associated with the cannabis industry.

The Lure Of The Underground Economy

I recently attended a cannabis-themed holiday market in NYC and met entrepreneurs selling edible-type products that blatantly break trademark laws, state marketing rules, and THC limits. And when I asked how they planned to participate in the legal marketplace when breaking multiple laws -they shrugged because they have no intention of participating in the legal market. And why should they when they are thriving in the underground cannabis economy?

5 Ways The Underground Is Winning

1. Right now, it’s a game of hot potato on who has the legal right to shut down unlicensed pot shops. The Office of Cannabis Management (OCM) claims it has jurisdiction over licensed operators, not those flouting the law. The police have been instructed not to make arrests for marijuana possession. NYC Mayor Eric Adams created a task force to target unlawful behavior, but it seems like a feeble attempt that will have the illegal operators laughing all the way to the bank.
2. It is an insignificant loss if an illegal storefront is busted and its money and weed confiscated because it still costs more to operate legally.
3. Illegal shops can undercut the cost of cannabis products in the legal market because their operating costs are considerably less. Consumers will continue to buy from their local dealers or shops to get better deals like they always do.
4. NY farmers and manufacturers need more time to hone their craft and supply dispensaries with quality products. They are not ready to compete with the quality of products imported from an established market like California.
5. Illegal pot shops continue to grab market share and build customer loyalty while the government struggles to issue licenses.

As the government continues to create a path for the NY underground, a new and thriving illegal cannabis economy is taking hold.