All of the challenges facing NYC’s legal marijuana efforts

I am the founder of Gotham, a legal cannabis concept store. I emphasize the word legal because, despite what most New Yorkers probably think, there are currently only seven legal cannabis dispensaries in all of New York City. The thousands of other shops you see on almost every corner are unlicensed, unregulated, and illegal. 

New York State had good intentions when they rolled out the first opportunities to apply for a legal dispensary license last November. The first licenses were made available only to those formerly incarcerated for cannabis offenses and to nonprofit organizations that support and uplift this cohort. The idea was to create a cannabis industry that attempts to right the wrongs of the failed war on drugs. 

I applaud the state for these efforts. Bu that vision is far from reality. Hundreds of licenses have been issued, but few stores have actually open. It is not easy to get a lease due to stigma or insurance concerns, and adhering to rules and regulations is costly. 

The biggest issue for those who have opened, such as Gotham, is attempting to compete in an oversaturated illegal landscape. 

The latest estimates from Governor Hochul put the illegal cannabis market in New York at over 2,500 stores, many of which systematically evade crackdowns efforts due to baffling legal loopholes and shady landlords. And this harms everyone.

Over the next decade, the cannabis industry will generate thousands of jobs and billions in tax revenue. Cannabis is a $33 billion industry projected to grow to $150 billion by 2030. New York State is already losing billions of dollars annually by failing to take on my illegal competitors. We have no idea where the illegal stores are sourcing and purchasing their products. They are not following the rigorous safety and security protocols put in place by the Office of Cannabis Management and, more than likely, are not paying their fair share of taxes to either New York State or the Federal government. 

We’re competing against the thousands of illegal shops that are selling faster, cheaper, and with no oversight. That hurts our full-time employees who receive profit sharing and full health insurance, and it hurts our beneficiary partner STRIVE and its mission is to reduce prison recidivism. Couple that with the lack of consumer education on what’s legal and what’s not, and you have a near-impossible path to profitability (or accountability).

It is time to take action. We need more legal stores to open. They need to generate more local tax revenue. And we need local farmers to benefit from growing legal cannabis. We must assist small-sized cannabis businesses to flourish while benefiting worthy social causes. 

All this is doable, but it’s also costly. I’ve invested in over 150 companies, focusing on female, black, and brown founders. But setting up a legal shop in NYC has been exceptionally frustrating.

Assuming you can actually obtain a license, you need a deep understanding of the tax code — despite the lack of tax deductions afforded to any other small business. At the Federal level, a law called 280E forbids cannabis store operators from deducting ordinary business expenses since cannabis is still a Schedule I controlled substance.

Then comes the operation costs, including hundreds of security cameras that run tens of thousands of dollars to install and operate, plus a robust full-time security team, both required by law. Then you need inventory management software because each transaction must be meticulously reported per the Office of Cannabis Management, and that’s expensive. You can’t lose a single bud without repercussions. 

Now we’re on to pricing. Because there are no tax deductions allowed, the price of cannabis products are higher than those in the illegal market. If the government had taxed tech start-ups the same way they’re taxing cannabis startups, I guarantee we would not have Google.  

I’ve never been much of a rule follower, but when it comes to cannabis and taxes, I’m buttoned up – and beyond. Why are illegal dispensaries allowed to profit without following the rules? Why aren’t they required to secure a license and act responsibly? There is plenty of market share for everyone. Let’s support a new industry by empowering people who’ve done things the right way. 

The grass can certainly be greener. 

Joanne Wilson is the Founder of Gotham, Founder of Gotham Gal Ventures, Co-Chair of Gotham Gives and Co-Founder of the Women’s Entrepreneur Festival.