NY can support at least 1,000 more legal pot shops if state can crush illicit vendors: study

New York can support at least 1,000 more licensed marijuana retail stores if the state can crack down on illicit shops and roll out a “measured” approach to legal expansion, a new industry-backed analysis claims.

There are currently 222 licensed cannabis shops open in New York, but the Empire State could maintain 1,250 to 1,350 if 85% of doobie customer sales are made legally, according to the analysis by Whitney Economics.

As it stands, only 15% of New York’s pot sales are in the legal market because of the large number of illegal storefronts and dealers, the study states.

Last year, less than 5% of weed transactions were in the legal market.

“Competition from an entrenched illicit pop-up market is competing head-to-head with legal cannabis retailers. This is making it difficult to grow revenues and convert consumers into the legal market,” the report obtained by The Post says.

Stamping out the black market suffered a blow Tuesday when a Supreme Court judge in Queens issued a bombshell ruling that a state law that has allowed New York City to padlock hundreds of suspected illegal cannabis shops is unconstitutional. 

The city is appealing the ruling, which determined the Sheriff’s Office authority to keep illicit cannabis sellers shuttered after they’ve been raided violates the store owners’ rights to due process.

“Currently, there is more access to illicit cannabis retailers than there is to legal ones, so it is critically important for regulators and law enforcement to address illicit competition,” the study said.

“Otherwise, the legal retail sector with continue to struggle and not generate sufficient revenues to be sustainable.”

Conversely, the researchers cautioned that ramping up the number of licensed pot stores too quickly could “saturate” the market and put existing cannabis retail operators in the red or out of business, which is what occurred in California and Oregon.

“Oregon is over saturated in terms of both supply and retailers relative to the Oregon market. This is creating economic stress in the market and business failures,” the Whitney researchers said.

“This is also creating other problems for the Oregon market. Very few lenders are interested in providing funding in Oregon due to the elevated risks and low potential for return.”

The report said a “measured” approach to approving and opening licensed shops will have a better chance of sustaining a robust market.

“The key to the successful deployment of the licenses, however, depends upon how quickly the robust illicit suppliers can be displaced and whether or not rules are deployed that help facilitate their market entry rather than hinder,” the Whitney economists said.

Cannabis operators applauded the report.

“The future of New York’s cannabis market hinges on a delicate balance between regulation, enforcement, and market dynamics,” said Osbert Orduña, CEO of The Cannabis Place Dispensary in Queens and co-chairman of the Service Disabled Veterans in Cannabis Association..

“While the potential for significant growth is evident, our regulators must learn from the mistakes of other states and implement effective strategies to address the challenges of illicit competition and over-licensing.”

Fredericka Eastly, president of the Minority Cannabis Association said, “This deep dive into New York, even with its complexities,  shines a light on several points that are universally true.  Small business retail owners are in crisis trying to survive over taxation and competition with unregulated markets.”

The report noted New York’s slow, rocky rollout delayed licensing by 18 to 24 months, “creating harm to small businesses.”

Gov. Kathy Hochul ordered an overhaul of the state Office of Cannabis Management to streamline operations and accelerate licensing of pot shops.