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Can Weed Legalization Tame New York City’s Illicit Market?

The state is trying to legalize the biggest cannabis black market in the country — but that will only work if they can get the established industry players on board

People smoke a marijuana cigarette during 4/20 celebrations on April 20, 2021 in New York.

John Smith/VIEWpress/Corbis/Getty Images

At five-foot-six with a mess of curly hair and a boyish face, Mo, 29, is not how one might picture the American narco. He doesn’t wear jewelry, sports no designer clothing, and drives a mid-2000s Jeep Liberty. Mo (“just ‘Mo”), graduated from a city college in Brooklyn, and despite a run-in with the law (“I guess I sold to the wrong guy”), he went right back to dealing cannabis. “After [the arrest] I had years in the courtroom and no job, so I just started something up,” he says. “I was very, very small time; to the point I would buy an eighth and just sell it.”

Now, more than 10 years into his career, he says he makes upwards of $100,000 a year supplying lower-level dealers around Brooklyn and parts of Manhattan. In the grander scheme, Mo is a nobody, one of countless middle-men keeping small-time dealers in business. This industry has granted Mo — a first-generation immigrant of color — with real financial freedom and the means to help others. “One time a friend needed $2,000 to pay for emergency surgery, and not even his own mom would give him the money,” he tells Rolling Stone. “I paid for it then and there.” Eventually, Mo hopes to get into a more stable business. “I was about to quit,” he says. “My friends and I bought furniture for a store in Williamsburg; a soup shop and a food mart, but once Covid hit things just went left.” So he went back to “the trap” – NYC patois for the weed game.

The trap has been in New York for generations. But as the cogs of adult-use legalization in the state start to spin, this whole illicit world is about to be turned on its head. 

On March 31st, 2021, Governor Andrew Cuomo signed an ambitious new bill, dubbed MRTA, or the Marihuana Regulation and Taxation Act, into law. MRTA’s passage sets in motion a sweeping effort to legitimize the weed industry. It authorizes cannabis dispensaries to be set up across the state, selling weed with a nine percent state sales tax, plus an additional four percent county and local tax. It also promises acquittal of past offenders for minor crimes, and even sets aside a portion of licenses, low- or no-interest loans, fee reductions or waivers, and assistance in preparing applications to communities most affected by decades of prohibition enforcement. 

The impact is immediately evident; everyone from venture capitalists and institutional investors, to food and beverage companies, restaurateurs, and even corner bodegas are all jumping for a chance at this new market. But what happens to the growers, plugs, trap lords, and hustlers who got here first and gave the New York market it’s vitality? 

Supporters of the Marijuana Regulation and Taxation Act (MRTA) rally on the steps of New York City Hall on November 21, 2019. The law would legalize and regulate the use of marijuana in New York State, ending disproportionate policing and providing millions of dollars in tax revenue. (Photo by Gabriele Holtermann-Gorden/Sipa USA)(Sipa via AP Images)

Supporters of the Marijuana Regulation and Taxation Act (MRTA) rally on the steps of New York City Hall on November 21st, 2019.

Gabriele Holtermann-Gorden/Sipa USA/AP

One of the most significant contributions to the War on Drugs was made by New York’s former Governor Nelson D. Rockefeller, who first called for harsh sentencing for the possession of any amounts of marijuana back in 1973. The decades that followed have been grim for New Yorkers of color. The Marijuana Arrest Research Project found that, among many other measurements, between 1987 and 2016, about 85 percent of all people arrested in New York for low-level marijuana possession were Black or Latino. And while pro-legalization politicians like State Senator Liz Kreuger were doing battle in Albany in 2020, 94 percent of all marijuana-related arrests made in the city of New York were people of color. The year before, NYPD arrested 1,436 people for fifth-degree marijuana possession or fourth-degree sale from January to June. Of those, just 87 did not identify as Black or Hispanic. In its preamble, the MRTA bill cites that New York state is now the nation’s marijuana arrest capital, with upwards of 800,000 arrests since 2001. 

“The war on drugs has created an epidemic of mass incarceration in communities of color,” says Troy Smit, deputy director of Empire State NORML. “[It] also perpetuates a cycle of recidivism. You have people that are getting arrested for possessing marijuana, they end up with a record, they maybe go to jail, maybe they get a probation violation.” Decades of harsh penalties leaves people of color in New York skeptical about whether the goals of MRTA’s equity measures will ever be achieved.

The bill promises that half of all licenses issued will be earmarked for “social equity applicants,” including minorities, women, disadvantaged farmers, and individuals from communities disproportionately impacted by previous cannabis prohibition. Forty percent of all tax revenue will go towards a community investment fund that will support education, similar to the one piloted by Illinois in 2020.

The real cost of starting up a legal business can be problematic for small-timers. Zeta Seti, CEO and founder of Green Rush Consulting, an organization that helps cannabis entrepreneurs enter the legal market in states across the U.S., says that those who’d pursue opening a recreational dispensary need deep pockets. Medical marijuana dispensaries are currently required to pay $210,000 in application fees alone. Seti forecasts recreational applicants should “expect anywhere from $400,000 to $700,000 to open up, including application fees, and then cultivators are probably looking at somewhere between 1 and 2 million.” 

For Mo, life as a dealer is taxing. And though the economics aren’t feasible, Mo wants to open a dispensary. “I used to be on-call 24 seven, like when I was really, really grinding,” he says. “You can’t miss a delivery. I’m always checking my phone, because once you miss the customer, they could be gone forever.” For people like Mo, a stable income is what they’re really after. 

The momentum of the legalization wave has even attracted former dealers who’ve left the traditional market. Todd, who now works in New York as the creative lead for a media tech company, grew up selling cannabis flower on Chicago’s South Side, and later while attending Howard University in Washington, D.C. Now, after living in Brooklyn for 20 years, he’s looking to get back into the cannabis industry here in New York City. Like many people of color, he’s hoping that legalization will open a door for him and his family to create a legacy business, providing generational wealth previously unavailable to all but a lucky few. (His sister already owns a dispensary in Toronto, and Todd and his father are already actively pursuing a legal license in Chicago.) In Illinois, Todd and other entrepreneurs of color were told there was a $31 million restorative justice fund, some of which would be made available to entrepreneurs from heavily impacted communities, but there is a consensus that those efforts have fallen short thus far. “I just hope we’re not repeating the same mistakes here in New York,” Todd adds, “especially for the size and the opportunity here in comparison.”

Another major concern is vertical integration. “As of right now,” says Todd, “the medical dispensaries that are in place in the New York City area all have the ability to not only distribute, but also to grow, so they’ll be starting on third base where [entrepreneurs of color entering the recreational industry] are still just getting into the stadium.” Again, his concerns are well-founded. Publicly traded companies already rule medical cannabis in New York, and the 10 licensed medical marijuana businesses will be able to establish up to three recreational facilities just by paying a one-time fee. “if you point to the water, I can certainly fish,” says Todd, “but if you don’t give me the tools I need, then there’s no way I can actually be successful.”

Customers of MedMen listen to an employees describe products in the new store on New York's Fifth Avenue, Friday, April 20, 2018. MedMen owns and operates licensed cannabis facilities in cultivation, manufacturing and retail.(AP Photo/Richard Drew)

MedMen, one of the country’s largest cannabis multi-state operators, opened on Fifth Avenue in 2018.

Richard Drew/AP

Despite the wave of entrepreneurs itching to break into the legal market, there are some dealers and plugs — a term for dealers who supply other dealers — who are well prepared to continue to skirt the edges of the law. One such dealer, who goes by Jules, runs a delivery service that operates in parts of Brooklyn, Queens, and Manhattan. A lanky, soft-spoken white man in his late twenties, Jules has set up a system where customers can place orders for a few hours each day on an encrypted messaging app, to be delivered that evening. The menu he sends his small circle of clients is constantly updated, and aesthetically pleasing: its five pages are full of colorful illustrations and detailed profiles on each of the products available that day — like “Strawnana”; an indica from California, “that smells like a strawberry banana milkshake and hits like a pile of bricks.” 

With a team of just half a dozen people, Jules manages dozens of orders ranging from a few pre-rolled joints to several ounces. “We get potential clients that reach out to us all the time,” Jules says. “We can be selective about who we serve.” Many of his competitors have been robbed or shut down by police for being too loose with their advertising on social media, so Jules welcomes only customers who receive a referral from existing clients.   

Business has been very good for him since the start of the Covid-19 pandemic. “A few years ago, I quit an industrial design job I’d gone to college for and started doing deliveries for someone else on my bike,” he says. “I’d work in their office sometimes as a dispatcher, and usually went home with about $1,500 every week.” Now, he oversees a team of half a dozen runners and a small office crew. He declined to say how much he currently makes.

Jules seems unmoved by the impending changes. He confirms that he and his associates are hopeful for the prospects of legalization, even going so far as to consult a lawyer about exploring their options, though he is still unsure of what role he’ll play. “[A recreational marijuana license and startup costs] is going to be so expensive that I see myself joining someone else’s operation way before taking our service into the legal market ourselves,” he says.  

What’s more, Jules is convinced that illegal dealers shouldn’t be in a rush; the first recreational dispensaries aren’t expected to open until 2022, and even then, it will take time for customers to transition. “I don’t think [full legalization] is going to affect the business we do now,” Jules says. “Our customers appreciate the personal relationship with us.” And though there will be plenty of other delivery services, smokers aren’t always big on change.

But change is necessary. The illicit marketplace for flower is rife with products that contain pesticides, mold, or worse. Dealers have an easier time selling buds that are denser, have a more defined shape, fewer leaves, and covered in potent trichomes. Sometimes this can be a sign of quality; other times it can indicate the presence of plant growth regulators, or PGRs, which are used to change genetic traits in the cannabis plant. That would be fine, except that synthetic PGRs can come with health risks. “I’ve had people come back to me and complain that the bud made them sick or made them freak out, that’s usually when I know I’ve got PGR bud,” Mo says “At that point I’ll just throw out that batch and take the loss.”

Much of the lower-quality cannabis — often called “lows” or “mids” — comes from nearby illegal grows, some in New York City itself. “I recently bought a pack from this underground spot in Bushwick, and it’s really terrible,” Mo says. The best stuff, on the other hand, is shipped in from states where cultivation is legal. A woman we’ll call Tracy, a prominent legal cannabis grower and property manager from northern California, is happy to provide. She’s been selling bud since she was 12, when a couple she was babysitting for didn’t have any cash and they paid her in weed, which she immediately turned around and sold to a neighbor. “I realized I could just do this instead of school, so I dropped out when I was 14.”  

In the 20-plus years since, Tracy has been a pioneer for weed in her community, leading local agro-coalitions and helping farmers in the Emerald Triangle region bring their crop to consumers around the country, even before Proposition 64 legalized recreational cannabis there in 2016. Over FaceTime, Tracy holds up a few glass jars of her favorite strains, all grown within a few miles of her living room and ready for sale. She proudly notes that all of her products are grown legally, by family farms, with zero pesticides and are certified organic. If consumers wanted to buy high quality cannabis products like Tracy’s legally, the cost depends largely on where you are.

As long as there are standing bans on interstate transport of cannabis — because of it’s federal legal status, weed must be grown in the same state in which its sold — dealers will rely on this illicit transport to smuggle weed into New York City in order to get the quality their customers expect. For many of these dealers, the U.S. Postal Service is the best option. “It’s a joke among growers that no one has done more for illegal weed in America than the United States Postal Service,” says Tracy. (Since USPS requires a warrant in order to search your mail, it’s considered the superior option over FedEx and UPS.)

For Tracy and her peers, operating in the illegal cannabis market is just a part of life. “Up until January 2020 [when Track and Trace was introduced in California], all of the tracking of our product was voluntary,” Tracy says. Now cannabis farmers either skip reporting their actual total yield volume or count some as waste and ship out the leftovers all over the country. 

“Just this past week, I hosted several groups from out of town, all interested in sourcing and shipping several hundred thousand pounds to the east coast,” Tracy says. “The only way we can do that is with trucks: fill an 18-wheeler trailer with four-foot-by-four-foot canvas agriculture bags, and you can fit 100,000 pounds in a single truck. And the truckers know this, so they charge anywhere from a $1.50 to $2.00 per bag. They’re the ones out here making real money!”  

There is no solid estimate on just how much cannabis is being sent to New York City in a single month — or how much someone moving that weight is making annually, tax-free. Some doubt that the new law can realistically subdue a supply chain this sophisticated. Yet legalization advocates like Smit, the head of New York’s NORML, think the above-board cannabis market will eventually overtake illegal businesses. “Consumers are eventually going to go towards the regulated market, both for convenience, overall quality, and selection.” He says, “Eventually, the regulated market is going to be huge, all the best [producers] are going to want to go there because that’s where the consumers are.” 

Mo is unconvinced there’s any near-term threat to his work. “Only because I’m going to find a way to compete. Whatever prices they have in [legal dispensaries], they’re not running rent free,” he says. “They’re paying a shitload on rent, workers, product testing, licensing, and all that other stuff. So whatever prices they have, I’m just going to give that same quality for a better price.”

From Rolling Stone US