How NY State Has Created a New Marijuana Gray Market


When government leaders rush things through just to be on the right side of a popular issue, they create problems. That is exactly what has happened in NY State, where lawmakers legalized recreational cannabis but then didn’t. Their unwise actions have led to the creation of what the Gothamist refers to as a new gray market’.

What is this gray market? It is a market of ostensibly legal recreational marijuana being dispensed to customers by a legal dispensary but in a way that is illegal. In essence, it is the result of the state wanting to have it both ways. It appears that state officials are also trying to cover their tracks by promising to penalize gray market operators. But to date, they appear to have taken very little action.

Why It Exists

State lawmakers legalized recreational cannabis in 2021. Unfortunately, they also decided to not lift the ban on recreational sales until they figured out how they would regulate the market. They pretty much said to consumers, “Go ahead and use recreational marijuana to your heart’s content. Oh, and by the way, feel free to buy it on the street illegally.”

Meanwhile, there was no shortage of dispensary owners who were unwilling to wait while lawmakers dragged their feet. They were ready to start doing business. They had to figure out a way to get product into the hands of consumers without selling it illegally. They did just that. They have found a way to sell recreational marijuana without technically selling it, thereby creating the gray market.

How It Works

So, how does this gray market work? Dispensaries do not technically sell marijuana. They offer it as a ‘thank you’ gift for buying something else. A consumer might buy an instructional video explaining how to use recreational marijuana safely. The dispensary gives a gift of marijuana to show its appreciation. Problem solved.

Your typical consumer ends up with a video that will never be watched. As soon as they get home, the DVD is tossed in the trash and forgotten about. That’s okay because the point wasn’t to buy a video. That customer went to the dispensary to get marijuana.

Too Far Ahead of Themselves

New York’s decision to legalize recreational marijuana consumption without legalizing sales was both shortsighted and misguided. Lawmakers got ahead of themselves. In so doing, they created a gray area rife with legal confusion. Even if they did decide to bring the hammer down on gray market operators, it is not clear they could win a case in court. They have conflicting laws that could very well be unresolvable.

Meanwhile, Utah is an example of a state that has shown a lot more wisdom in crafting its medical cannabis program. In the Beehive State, there are slightly more than a dozen licensed pharmacies. Beehive Farmacy in Brigham City is one of them. Any and all cannabis consumed in the state must be purchased at one of these pharmacies.

There is no gray market in Utah; the law is cut-and-dried. If you don’t have a license to operate a medical cannabis pharmacy, you cannot sell cannabis legally. It is that simple. You cannot even give cannabis away as a gift. And just to make the rules abundantly clear to consumers, Utah legislators built a provision into the law requiring consumers to hold a valid medical cannabis card in order to possess or use.

New York has created a whole new gray market for cannabis. They did so by rushing into something they should have thought more about. Yay for them.

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