A side effect of legalization: unlicensed marijuana sales points open en masse in New York

An employee of Street Lawyer Services (a marijuana dispensary) in the Lower East Side was browsing the store's merchandise on a screen when a regular customer, Oliver, peeked in. Technically, he was in the "gift" store to purchase digital content. Like a videotape that accidentally turned into a cannabis gift of his choice, reports Gothamist

Oliver opted for a $40 "content package" that included edible snacks with tetrahydrocannabinol (THC). They looked like a popular brand of sour gum. He weighed various vape options and finally settled on one labeled as “Girl Scout Cookies” for $60. His total for these and other goodies was about $200. Also, the man decided to become a member of the store in order to receive discounts. And perks, including complimentary access to the colorfully painted lounge at the back of the premises.

Oliver asked not to be identified by his last name due to the stigma associated with cannabis. He said he prefers this retail experience to dealing with a dealer.

“This is a great thing,” he said. “I feel like it's more regulated and safer. I enjoy going into the store more than opening the door for some random guy who comes to my house.”

But as official as the branded storefront may seem, unlicensed marijuana outlets on the Lower East Side and elsewhere in New York City are as unregulated as any delivery service. The main difference is the visibility they work with. And the new era of the cannabis industry they represent.

New York is already known for being home to one of the most trusted underground cannabis markets in the world. There is no shortage of product variety, and convenient home delivery has become the norm since the advent of mobile phones.

Since New York City legalized marijuana for adult consumption last March and lowered penalties for illegal sale, it's become easier to buy a pre-rolled joint or bag of "chewing gum" from the store. This is despite the fact that the first licensed dispensaries should only open by the end of 2022. Some places of sale point to loopholes in the law to prove that they are operating legally.

On the subject: Marijuana licenses in New York will be issued to those who used cannabis illegally and were punished for it

Atmosphere for every consumer

In addition to being sold in Washington Square Park and some wineries and tobacconists, marijuana is now sold in specialty stores. About half a dozen of them have opened in the neighborhood with the services of street lawyers in the last few months alone. Another group of "relaxing" establishments appeared along the corridor on 7th Avenue near Times Square. Other shops and trucks are scattered across the five districts.

New storefronts give a glimpse of the potential diversity of the future cannabis market.

There is Weed World, which has its own factories in Midtown and the West Village, as well as branded trucks. Everything at the Wild World store in the city center is noisy, from the lively decor to the blaring music and the clerks shouting over it.

Anyone who is passionate about the world of cannabis can walk two blocks from here and catch a completely different vibe at Indoor Cannabis. It's a small venue where soft hip hop plays while the staff guides customers through a carefully curated range of products.

Empire Cannabis Clubs opened the city's first dispensary in Chelsea in September and are working to be ubiquitous. Empire opened a store on the Lower East Side next to Street Lawyer Services in January, according to Empire's attorney Steve Zissou. There are currently three more stores in operation in Williamsburg, Bushwick and the Upper East Side.

Some of the outlets that have opened are trying to exploit loopholes in the state marijuana regulation and taxation law to prove that they are operating legally.

The Street Lawyer Services gift giving model is popular in Washington DC. Owner Lonnie Bramson, a flamboyant Miami criminal defense attorney, runs another store with the same name. Several other stores in New York have also adopted this approach. According to the ruling, it is legal to give up to three ounces of cannabis to someone 21 years of age or older, as long as it does not require compensation.

Empire is modeled as a non-profit club that helps its members access cannabis products. It's a model that Zissou says is both legal and more "sustainable" than gift giving. Customers who don't want to pay for a long-term membership can pay $15 for a day pass at the entrance to one of the stores.

How long will it last?

No matter what scheme unlicensed dispensaries operate, state cannabis regulators are not bought into. But that hasn't stopped these stores from multiplying, and it's still unclear if there will be any real repercussions for running an unlicensed business as New York City's legal market begins to take off.

The state cannabis agency has attempted to take action, sending out 52 “stop and desist” letters so far.

“Failure to stop this activity puts your ability to obtain a license in the legal cannabis market at significant risk,” the sample letter from the state says. “The unlicensed sale of cannabis is illegal and carries significant fines and possible criminal penalties.”

But these punishments are weaker than before. Because part of the goal of regulating cannabis in New York was also to minimize criminalization. In the last three months of 2021, police made seven arrests for selling cannabis and issued eight summonses, according to city data.

Lauren Forsh, one of the recipients of the state's Cease and Desist letter, said she would stop selling cannabis products at her Manhattan store because she didn't want to jeopardize her chances of getting a license. The woman admitted that it was a difficult decision.

“I'm a very cautious person, but I'm also a business person,” said Forsh, owner of Popped.New York. “How can I watch other people do this and I can’t?”

Others say it's worth the risk to be able to get your brand in front of consumers before the competition. One cannabis industry veteran who opened an unlicensed marijuana shop in Manhattan in early March spoke anonymously to Gothamist.

“We felt like we were late to a West Coast party,” said the store owner, who also uses the gift model. “There’s just a lot of competition out there.”

California pioneered the legalization of cannabis in the US, establishing a medical program in the mid-1990s. But more than five years after cannabis was fully legalized for adults in 2016, the state has become a cautionary tale. The industry is still dominated by so-called “grey market” sales, which according to some experts account for between 80% and 90% of all sales.

“New York State is creating a legal, regulated cannabis market. This will ensure product testing and safety for consumers, providing opportunities for those most affected by the over-criminalization of cannabis prohibition, Aaron Gitelman, a spokesman for the Office of Cannabis Management, said in a statement to Gothamist. "Illegal operations undermine our ability to do so."

State Senator Diane Savino, a Democrat representing southern Brooklyn and Staten Island, introduced a bill in early March aimed at eliminating any potential loopholes in the law.

Work in the "gray" space

While government regulators are debating the issue, longtime dealers and consumers alike are trying to navigate the new gray market landscape.

Delivery operator Bo, who asked to be called only by his first name because he sells marijuana, said he's seen a "slight dip" in sales since the start of the year as customers explore the new options available to them.

He said that with stores like Empire open, he was under pressure. Which requires building a prominent brand, although due to the nature of his business, he has long shied away from the limelight. “The question is, how far do we have to stick our necks out so that everyone knows who we are?”

State regulators have indicated that they want to create a pathway for "legacy" operators who have been selling weed illegally. Now they need to purchase a license, but it's still unclear if they'll be less accommodating to those with an ongoing business.

Bo said he also sees an opportunity to supply cannabis to bodegas and other shops that have recently started selling it. “We have our own systems in place to keep the customer as safe as possible and ensure maximum consistency in product quality,” he said.

Whether it comes from a liquor store, dispensary, or dealer, any non-medical cannabis product sold in New York right now is still unregulated. Some legalization advocates say they are concerned that the availability of cannabis in brick-and-mortar stores will lend excessive legitimacy to products that are still unreliable.

About half a dozen cannabis users who spoke with Gothamist said they continue to rely on their dealers to some degree. Because they have at least established a certain level of trust.

“In a legal utopia, I would prefer retail/store,” Bill Jones, a Brooklyn resident, tweeted. “But so far it hasn’t been.”