NY’s first legal weed store opens Thursday and it faces lots of competition

New York City’s first licensed, recreational marijuana dispensary is slated to open in the East Village Thursday afternoon, and other legal shops will follow in the coming weeks and months.

Nobody is pretending the ability to buy weed at NYC stores is exactly new.

Mayor Eric Adams recently announced a crackdown on the multitude of bodegas and smoke shops selling unregulated marijuana products without a license, often with help from sandwich boards listing products and prices.

Yet there was little evidence of the promised crackdown just ahead of the scheduled 4:20 p.m. start of the legal weed sales in New York City. Business appeared to be thriving at several black market dispensaries this week, suggesting that the legal recreational weed enterprises will face continuing and unregulated competition.

An employee working at an East Village convenience store that sells weed said he didn’t think the arrival of licensed dispensaries would have a big impact on the illegal trade.

“Either way you can get marijuana on each block you go on, so it’s going to be the same,” said the employee, who asked to only be identified by his first name, Ron, because the shop is unlicensed. “You can access it everywhere. It’s just about quality.”

In other U.S. states that have legalized marijuana for adult use such as California and Colorado, underground industries have continued to operate despite the arrival of a regulated market. But New York city and state officials and those who have won licenses here say they want to make sure the illegal storefronts don’t prevent the success of law-abiding, tax-dollar-generating dispensaries.

Charles King, CEO of Housing Works, the nonprofit that will open the first legal dispensary on East 8th Street and Broadway, said he is particularly concerned about being able to compete on pricing.

“Because we have to pay taxes in three different jurisdictions, we also have to charge more for our product than the illegal market does,” King said.

So far prices at the Housing Works store appear to be on par with shops in the area, with an eighth of an ounce of weed going for $20 to $35, which is on the cheaper end of what’s available at the illegal shops, and pre-rolled joints selling for $16 to $25. But unlike at the illegal shops, these products will come with a 13% sales tax.

High expectations

A lot is riding on stores like the Housing Works dispensary succeeding. The state has estimated that taxes from legal marijuana sales will generate $1.25 billion over the next six years. The tax dollars are supposed to go toward education, drug treatment, and a range of community services.

It’s unclear how the Housing Works shop will compete on quality, but prices in the underground market can vary widely. At one recently opened store in the East Village, where containers of green buds are stacked high behind the counter for customers to see, an eighth of an ounce of weed ranges from $25 on the lower end to $50 on the higher end – similar to nearby smoke shops. One shop in the area sells pre-rolled joints for $15 or $20, while another marks them up to $25.

These shops are also able to draw customers in with eye-catching decorations and colorfully labeled products that resemble candy, while the legal shops will have to adhere to state rules that ban marketing that could appeal to children.

On a recent afternoon, one East Village bodega festooned with inflatable blunts was selling pre-rolled joints for $10, as well as eighths starting at $30, along with an array of chips and other snacks. Inside, Ahmed Zrayr, 25, said he would continue to patronize the shop for a daily pre-roll, even after officially licensed options open nearby.

“I prefer the local store to the dispensaries and all that,” said Zrayr, who works at a phone repair shop in the neighborhood and lives in Bensonhurst. “They give me discounts. I’m sticking with them.”

Other New Yorkers shared similar allegiance to their black market weed purveyors – even if they hadn’t been visiting them for very long. Outside a nondescript deli in SoHo, a man who gave his name as Andy purchased a $10 pre-roll, along with a pack of cigarettes.

“I’ll go wherever they’ll sell the weed the cheapest,” he said, adding that he’d been coming to this shop for the last few months. “I have no complaints at all.”

Many of the unlicensed shops that now line the city’s sidewalks popped up just in the past year and a half or so, after recreational marijuana use was legalized in March 2021. Seeing an opportunity, some bodegas and smoke shops that previously only sold paraphernalia started selling weed, too.

Before that the underground market was largely delivery-based and out of sight.

Some purveyors say they are prepared for this so-called “gray market” stage of New York’s marijuana industry to be short-lived.

“Everybody that’s doing this knows that you gotta take advantage while it’s there and then shut it down when it’s time to shut it down,” said an employee of an East Village head shop who asked Gothamist not to use his name.

They said the store has been around for many years, but only recently started selling marijuana, following the lead of other shops in the area.

The employee said the shop’s relationship with the police has been “pretty chill” thus far.

“They only have come to try to warn us about robberies and people stealing stuff from smoke shops,” the employee said. “I feel like they respect us as a regular business.”

Adams said earlier this month that he intends to advocate for legislative changes in Albany that will make it easier to stop unlicensed sales. The NYPD has complained that it’s difficult to stop the illegal stores because under state law officers must observe an actual sale to make an arrest.

But the mayor has also said he doesn’t want to incarcerate people over marijuana. When the crackdown was announced in mid-December, the mayor’s task force targeting illegal weed shops had inspected 53 stores, confiscated about $4 million worth of products, and issued 566 civil violations and criminal summonses.

Councilmember Gale Brewer, who represents the Upper West Side, said she wants more to be done.

“I have parents complaining like crazy because either their kids are in there, which I know is true, or they’re concerned about other kids being in there,” Brewer said.

She said that the city sheriff’s office, which is leading the mayor’s task force targeting illegal weed, had inspected shops that her office identified as selling marijuana on the Upper West Side. The sheriff’s office did not respond to a request for comment on whether they are just following tips or if they are also proactively targeting unlicensed shops.

Brewer said she is also concerned about the competition that unregulated stores represent for licensed dispensaries.

The legal shops that are intended to replace the illegal ones may be slow to arrive. A handful of additional licenses have been awarded to nonprofits in the five boroughs, including at least one that is also planning to open a store in the East Village in the coming weeks.

Another 13 dispensary licenses are going to individuals in New York City, with no update from the state on when exactly their stores are slated to open. Another round of licensing for dispensaries will open in early 2023.

In the meantime, city officials are figuring out what to do about the growth of the barely underground market, with a City Council hearing on the shops scheduled for mid-January.

“I think I’ve seen everything,” Brewer said. But when it comes to the proliferation of unlicensed smoke shops, she said, “I never saw anything open so fast in my life. I think I saw a new one just the other day.”