Polls Show Why New York’s Illicit Cannabis Market Still Thrives

Nearly three years after legalizing recreational cannabis in New York State, the market is still struggling to develop and nobody is happy about it.

Well-meaning entrepreneurs can’t open stores quickly. Community boards, which are major stakeholders in the policy, are angry that unlicensed stores linger in neighborhoods. And those who use cannabis don’t have easy access to the high-quality, regulated product that legalization advocates envisioned.

Consequently, the illicit market is still booming. This is certainly an issue in Flatbush, the Brooklyn neighborhood I’ve called home for seven years, where there are nine illicit cannabis shops I can walk to when I get off the Q train.

In a recent interview with New York Magazine, Chris Alexander, executive director of New York State’s Office of Cannabis Controls, had some revealing things to say about why New York’s illicit cannabis market is so resilient, and what he believes can be done to suppress it.

"Coming into this, one of the key things that I would always talk about in terms of transitioning consumers from the illicit to the legal was pricing. But because of the other market controls we have put in place, our pricing has been competitive with the illicit market. Really, the illicit shops are overcharging for trash," he said.

For anyone who uses cannabis to unwind or to treat medical conditions, Anderson’s remarks are a welcome bit of no-nonsense realism. And his quote about the quality of cannabis sold in illicit shops is right on the money.

I won’t pretend to have experience with the many intertwined, and oftentimes conflicting, regulatory priorities when a substance that has been unfairly demonized and vilified for more than a century suddenly becomes legal. Regulating anything is difficult; I imagine that regulating cannabis is uniquely and especially so. But I can speak authoritatively about how people who use cannabis behave as consumers.

In my capacity as head of communications for NuggMD, a telehealth platform for cannabis, I work with colleagues to use our first-party data to conduct opinion polls that establish how cannabis consumers act in state-legal markets. Because of this unique capability, we have strong, reliable evidence as to why New York’s illicit cannabis market continues to thrive despite the existence of legitimate retailers.

It isn’t because of a lack of enforcement. As Anderson noted in his interview, enforcement actions, including raids and seizures of product, are commonplace, and the governor’s office is not exactly shy about publicizing them.

The reason why the illicit market in New York continues to thrive is because people who use cannabis frequently—an estimated 2.5M New York residents, according to federal data—have an alarming amount of misplaced trust in the quality of the product they’re getting from illicit retailers. They think the weed they buy in the unregulated market is the same as the good, legal stuff.

According to our polling, 61% of New York residents who buy cannabis at unlicensed retail locations trust that it has been tested for contaminants, while 22% of these respondents indicated they do not trust the safety of those products, but that they purchase and use them anyway out of convenience or necessity. That leaves just 17% who make it a priority to shop in the regulated market.

Unregulated product, as one might imagine, is not safe. In a separate investigation, we purchased black-market cannabis products in California and had it lab tested, which proved most of those products advertise drastically inaccurate potencies and contain elevated levels of pesticides and other contaminants. Unregulated weed isn’t just bad product. It’s a public health hazard.

Why California? Well, many illicit cannabis retailers in New York sell cannabis product with California stamps on it. As I recently explained to Politico, either cannabis that fails testing in California is being trafficked into New York in order to be sold in these unregulated shops, where demand and trust are high, or it is one hell of a coincidence—and I don’t believe in coincidences.

Finally, cannabis consumers do not seem to yet make purchasing decisions based on price to the extent one may expect. Polling we conducted in Ohio ahead of last year’s referendum to legalize recreational cannabis, which passed, shows that cannabis consumers there have low price elasticity. In other words, they will not revert to the black market in large numbers if or when the excise taxes applied to legal recreational weed makes the prices at the dispensary counter go up a little bit.

My instinct is that consumers in New York have a similar tolerance for any price increases that compliance and regulatory costs might cause, to an extent. And, of course, above-board cannabis retailers can grow and scale in ways that illegal ones can’t, which should lower costs for the consumer over time.

Enforcement actions actually reinforce the trust that New Yorkers have in illicit cannabis retailers, which is why enforcement is not doing what elected officials want it to do. The headlines and news segments about raids of unlicensed cannabis create a false equivalency between the illicit market and the regulated one in the minds of consumers. Enforcement gives the illicit market legitimacy and publicity, and the more the Hochul administration frames enforcement as a solution to this problem, the more difficult that false equivalency will be to correct later on.

The most obvious fix is more legal storefronts. I think this is the consensus among everybody involved, including regulators and policymakers, which is a positive place to start.

An additional action that would help, perhaps in parallel with enforcement that is not publicized as breathlessly, is a public information campaign that highlights the difference between illicit pot and regulated cannabis. Anderson said it himself: The unregulated product is trash, and elected officials can and should build an entire campaign around that fact.