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December 28, 2022

Jason Klimek Featured in CNBC Article on Effects on Illicit Cannabis Market on Legal Cannabis Businesses Nationwide

Jason Klimek, Cannabis Team co-leader, was featured in the CNBC article “Marijuana’s Black Market Is Undercutting Legal Businesses” about how nontaxed, illicit cannabis businesses are negatively affecting legal cannabis markets across the country. 

Even though cannabis has been legal in New York State since March 2021, the first round of dispensary licenses were granted in November 2022 and no licensed sales are happening yet. As a result, the illicit cannabis market continues to operate in full force throughout New York State—but especially in New York City. 

Illicit cannabis operations are not without risks, though. Unregulated cannabis can contain harmful contaminants, illicit cannabis businesses have received cease and desist letters, and illicit cannabis products have been seized by law enforcement.

Progress for the cannabis industry has been thwarted by holdups in Congress. Because cannabis is still federally illegal, banks and credit unions have to abide by federal laws pertaining to serving cannabis businesses. Thus, legal cannabis businesses have to operate entirely on a cash-only model.

In order to maximize their investment, many cannabis customers turn to illicit businesses because they get a better deal. The study Jason co-authored, which you can read more about here, predicts that legal cannabis prices in New York State will be incredibly high due to high federal and state taxes, which will “cause legal adult use of cannabis to be that much more expensive than the illicit market,” Jason said. 

Jason cited how California’s legal cannabis market has been seriously impacted by its illicit cannabis market “because legal products are more expensive, more regulated, and have more taxes,” he said. “They just couldn’t compete.”

New York State’s tax structure may need to be reworked in order to successfully transition cannabis businesses away from the illicit market and integrate them into the legal cannabis market.

Read the full article here.
 

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