How New York’s legal cannabis market became a $1bn buzzkill

Angelo La Roche was supposed to be a success story. He had worked hard to get out of his deprived Brooklyn neighbourhood and into an Ivy League university; he had overcome the death of his father and the murder of his mother. He’d done everything right.

So when New York state regulators offering licences to run cannabis dispensaries said they would favour people with backgrounds like his — poor, black, from a community that had been disproportionally affected by the war on drugs — he thought things were finally going his way.

He invested more than he had on Green Klub, his cannabis start-up, convinced community boards that the business wouldn’t hurt the area, recruited staff and found cannabis products to sell.

Now, four years after the state legalised cannabis, La Roche, 37, fears he will lose it all. The legal marijuana market in New York hit an estimated $1 billion in retail sales last year — and visitorsare often struck by how regularly they smell cannabis on the city’s streets — but La Roche’s Manhattan shopfront is empty, his provisional licence is held up by red tape and his landlord is growing impatient.

Paying lip service to diversity without solving the problems of legalisation is not enough, he said outside a board meeting of the state’s Office of Cannabis Management (OCM) in Manhattan. “They’re able to [say] that they’ve supported us, opened it up for us, [but] the reality is, they’ve actually made it impossible for many of us.”

It all looked so different in 2021. When cannabis was first legalised, there was optimism that the tide was turning, after decades of social ills caused by the illegal marijuana trade — and accusations of discriminatory policing by the New York Police Department. Between 1997 and 2007, more than 350,000 people were arrested for possessing small amounts of marijuana in New York — 327,000 of them black or Latino, according to a 2008 study.

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Now, rather than lock people up in vast numbers, a new class of entrepreneurs would rise from the communities most affected by the war on drugs, first declared by President Richard Nixon in 1971. Their product would be safe, regulated, and sold only to adults through dispensaries that would advise on the strength and type of high they were looking for — like a knowledgeable sommelier at a wine shop.

The market was, and remains, enormous. Today, recreational marijuana is legal in half of US states, though it is still illegal federally, where it is classified on the same level as cocaine and heroin.

According to data from the National Survey on Drug Use and Health, published last summer in the medical journal Addiction, nearly a fifth of the US population aged 12 and older had used marijuana within the last year. Nearly 18 million Americans reported using marijuana every day or almost every day, 3 million more than said they drank alcohol every day.

Politicians promised that marijuana taxes would be a lucrative source of income and that crime and social ills associated with illegal drug dealing would fall.

Some of that happened. Over the past two years, the OCM has approved or conditionally approved more than 5,000 licences to grow or sell marijuana. At least 270 dispensaries are now open for business. Retail sales topped $1 billion by the end of 2024 — raising more than $80 million in tax, fee and fine revenue. The demand, it estimates, is between $6 billion and $7 billion annually.

“In comparison to other markets, I think we’ve actually done a phenomenal job in moving quickly to get these licences out,” said John Kagia, the office’s director of policy. Over the past few months staffing has been increased significantly to help them handle the flow of applicants.

But the OCM was not given enough support from the beginning to run a smooth licensing programme and shut down illegal cannabis-selling operations that threatened legal stores, he added. “What we needed was more resources, because of the scale and the speed with which the unregulated market had grown.”

Kathy Hochul, the New York governor, put it more starkly. She said that the introduction of the legal marijuana programme had been a “disaster”.

At an OCM board meeting last week, frustrations and concerns bubbled over into accusations of discrimination and incompetence. One group of legal dispensary owners called for a large chain retailing marijuana to be blocked from opening in their area. Others begged for their applications to be approved, claiming they had been waiting for months and were on the edge of losing their life savings.

Officials said that their work had been stymied by injunctions which prevented them from doing their work. Some cannabis entrepreneurs have already given up. Many of those who remain are struggling.

According to one report, the median monthly revenue of legal cannabis businesses in New York was $333,000. Factor in an effective tax rate of over 70 per cent, plus high property rental costs and struggles with banking and investment (banks will not lend to cannabis sellers because the practice is federally illegal, and sellers can’t write off business expenses), it’s clear that many of these businesses are unlikely to survive.

“They don’t have the infrastructure to support us,” Coss Marte, who runs Conbud, a legal cannabis company, said of the OCM. “They started off with like ten people. It’s just so much regulation.”

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Illegal marijuana shops, which sprang up in their thousands after the drug itself was legalised in New York, have also damaged legitimate businesses. For at least the first year and a half the New York authorities struggled to hold back the tide of illegal stores.

Since last summer, regulators and police have padlocked more than 1,500 locations suspected of selling illegal cannabis. More than 7½ tonnes of unlicensed products have been seized, with a street value of nearly $70 million.

But Aiden Coffey, a former cannabis labour union organiser who worked in New York state, said that by the time the crackdown began “the battle had already been lost”. “Once they were established like that it wasn’t so easy to get rid of them,” he said.

Legal dispensaries are restricted from heavily advertising on their storefronts, which gives many of them the appearance of being high-end graphic design studios. But illegal shops cover their windows in huge neon flashing green marijuana leaves, and signs promising BIG BUDS and WEED WORLD.

“I had two sandwich boards saying I was the first legal dispensary in the Lower East Side, and the OCM came and took it down,” said Marte, who spent four years in prison for selling drugs, and now employs about 70 people at Conbud.

I walked into one illegal store in Manhattan last week, which had two police cars parked outside it, and was offered a range of packages of pre-rolled joints, some of them spiked with “crystals” claiming to contain extra THC, the psychoactive compound in cannabis.

Several studies have shown that illegal cannabis products can have wildly varying levels of THC, and can contain dangerous chemicals and contaminants, including E. coli and salmonella. Some illegal shops sell synthetic cannabinoids, also known as K2 and in the UK as spice, which can be incredibly strong and cause powerful hallucinations and seizures.

According to the Centers for Disease Control and Prevention, about 30 per cent of users have “cannabis use disorder”. Studies have shown that regular cannabis use by teenagers can increase the risk of schizophrenia.

Even so some success stories are emerging. In The Travel Agency, a minimalist, softly lit legal dispensary in Manhattan, Arana Hankin-Biggers, the president and co-founder, talked me through a range of cannabis products they had for sale, from California buds to dark chocolate.

“Most people think, you know, it kind of puts you to sleep and makes you lazy. But it’s not the case at all,” she said. “There are lots of people who consume on a daily basis who are some of the most productive people in the world.”

A mother of two, she said she used cannabis to get through household tasks when her children had gone to bed. Unlike alcohol, it doesn’t leave her with a hangover. Many of their customers, she said, were older people who took cannabis to ease chronic pain, veterans who used it for post-traumatic stress disorder, or busy professionals who were “Cali sober” (they don’t drink alcohol, but use cannabis).

“We really try to encourage purposeful consumption,” she said. “It’s not just about getting high … it’s about using cannabis as a tool to add value to your life.”

Yet she warned people to stay away from illegal retailers. “They’re criminals,” she said. “There’s criminal behaviour that surrounds them, and it’s just bringing down the entire community.”