New York took longer than expected to give a thumbs up to legalized adult use, but when the state finally got its program off the ground in 2022, operators on the East coast were optimistic legalization in the Empire State would be a catalyst for dramatic growth in the region. It didn’t quite work out that way, partly due to licensing delays but mostly because a thriving illicit market put legal operators at a disadvantage from the start.
In 2024, New York is starting to fulfill its potential as one of the largest cannabis markets in the world. From January through August, the state’s licensed dispensaries reported $368.4 million in sales, according to the Office of Cannabis Management (OCM). That’s a dramatic jump from the $160 million reported for the whole of 2023. State agencies and independent analysts estimate this year’s sales will total between $700 million and $1 billion. Grand View Research projects the state will reach $3.22 billion in sales by 2030.
A dedicated crackdown on unlicensed operators helped New York rebound from its sluggish start. Since May 21, the statewide Cannabis Enforcement Task Force, in cooperation with other state and local agencies, has padlocked 345 unlicensed retailers and seized more than seven and one-half tons of illicit products with an estimated value of $28.9 million. As a result, licensed retailers reported an average increase in sales of 50 percent across the state and a 97-percent increase in New York City.
Patrick Rae is a veteran investor and a managing director at Poseidon Garden Ventures, which Rea estimates has invested in 200 different cannabis companies. Retail opportunities are of particular interest to the firm.
“New York is an exciting market, and the industry continues to grow,” he said. “I think there was a fair bit of worry and concern that New York City was going to become the new version of the Los Angeles market with a lot of illicit activity, and that would really have depressed the legal shops’ performance. But there has been an organized effort to crack down on the illicit market [in New York], and it seems like they’re getting it under control, which is great.”
Eleven states, excluding New York, are projected to top $1 billion in licensed sales this year; New York is expected to join them in 2024 or 2025. Based on average monthly sales of $149.7 million, neighboring Massachusetts, which launched an adult-use market in 2018, will rake in just shy of $1.8 billion in 2024. Rea said similarities between the two markets are part of the reason investors are watching New York.
“The two states seem to be the same, and there are patterns you expect consistently,” he said. “There are states that don’t make it easy to meet all their regulatory and compliance requirements.” In states like that, “You need experienced investors and key team members. This is a startup industry and there are a lot of entrepreneurs, and we know what’s important for them to focus on. We make sure they do [focus on what’s important] and bake that into our investments.
“What are our expectations for success with cannabis startups? Should they be different from startups in general?” Rea continued. “Let’s be intellectually honest about our expectations related to the success of these businesses and look high-level at a state like New York. People should be pleased with what appears to be a turnaround in the New York market, at least from the outside looking in. We think now is the time to hit the gas and find more stores and more businesses to support and invest in while everyone else is taking a pause. If you believe in the opportunity, you need to press forward.”
