The New York State of Cannabis Market in 2025

Three years hold extreme significance for the New York cannabis industry: 2014, 2016, 2021. The former marked the moment when Governor Andrew M. Cuomo signed the Compassionate Care Act into law, establishing a legal framework for the Medical Marijuana Program that approved non-smokable forms of cannabis for use by registered patients. In 2016, the Medical Marijuana Program authorized by the Compassionate Care Act officially began, expanding the list of products and qualifying conditions for permitted use. Then, on March 31st, 2021, the Marihuana Regulation & Taxation Act (MRTA) was signed into law, legalizing the possession, use, and sale of recreational or "adult-use" cannabis.

Besides making New York the 15th state to legalize adult-use cannabis, the MRTA marked a significant shift in the economic and social landscape.

This legislation established a regulated cannabis industry and brought new opportunities to enter a robust, competitive market, generate tax revenue, and promote social and economic justice.

In addition, legalization changed public perception of cannabis use, leading to reduced stigma and increased social acceptance, creating many more jobs, and positively contributing to the state's infrastructure development.

Today, the New York cannabis industry continues to evolve and grow. Such economic and social impacts suggest that 2025 has great potential to be another important year for this market!

Regulatory Updates

Since the legalization of cannabis in NY, this industry has been subject to significant regulatory changes. Some of the recent updates include the following:

• The Office of Cannabis Management (OCM), the body responsible for overseeing the NY cannabis industry, changed some regulations and restrictions on ownership of registered organizations, giving businesses more flexibility to adjust ownership structures, streamlining licensing, and accelerating the timeline for entering the adult-use market.
• The definitions of "True Parties of Interest" and "Passive Investors" were revised.
• More provisional licenses were created for most types of adult-use cannabis licenses.
• The Cannabis Growers Showcases (CGS) program was launched, authorizing New York's conditional licensees to partner on events to showcase and sell cannabis products designed for recreational use directly to customers.
• Retail dispensaries were allowed to create limited retail consumption areas within their spaces.
• New York has set a flat rate of 9% for taxation on the sale or transfer of adult-use cannabis between distributors and retailers.
• Distributors operating under a microbusiness or registered organization license and selling adult-use cannabis at the retail level are subject to a 9% tax on 75% of the amount charged for the transaction.
• Due to the New York State Budget Bill, the medical cannabis tax was reduced from 7% to 3.5%.
• In 2024, Governor Kathy Hochul announced the state's plans to step up efforts to crack down on unlicensed cannabis operations and protect the legal market. New investments encourage the OCM and localities to close down illicit storefronts that pose a threat to public health and safety and penalize landlords who knowingly allow illegal cannabis activity on their properties.
• Governor Hochul also mentioned the plan to expand the authority of the OCM, the Attorney General (AG), cities, counties, and any authorized local corporation counsel or government to regulate unlicensed cannabis businesses within their jurisdictions (prior service of a notice of violation is no longer necessary to require the immediate cessation of unlicensed cannabis-related activities). It also gives New York City immediate enforcement powers to identify and shut down illegal storefronts.
• Fines and penalties for unlicensed cannabis sales were increased to up to $10,000 per day of continued violation, up to five times the revenue from the illegal sales or three times the projected profits from unsold illegal products, up to $20,000 per day for continued violation after a cease and desist order, and between $20,000 and $40,000 for refusing inspections by authorities.
• Over 100 new adult-use licenses were issued by September 2024 to boost the cannabis industry and promote legal operations.
• During the last meeting of the Cannabis Control Board of 2024, 68 additional cannabis licenses were granted, bringing the total of licenses issued this year to 1,394.
• In November 2024, the OCM announced that a new seed-to-sale tracking system would be implemented to monitor cannabis throughout the supply chain and ensure transparency within the industry: the NY STS Tracking System (BioTrack).
• Beginning January 17th, 2025, all licensees will be required under Section 78 of New York's cannabis law to use a third-party electronic inventory tracking system that can integrate with BioTrack.

While these regulatory updates intensify efforts to curb unlicensed cannabis sales, they also make it easier for eligible businesses to obtain a cannabis license in NY.

As new regulations and changes come into effect, the OCM continues to develop public awareness campaigns and other initiatives to streamline the licensing process, protect the legal marketplace, and educate consumers about responsible cannabis use.

Licensing Challenges and Opportunities

Have you ever wondered: is cannabis legal in NY? The answer is YES! That means this state provides a platform for entrepreneurs eager to enter this competitive market.

But there are some challenges. Many business owners think that the government is making it hard to get a license to launch operations in the NY cannabis market.

Many growers are struggling to start up due to high costs and strict rules. For example, the Cannabis Farmers Alliance recently filed a lawsuit criticizing the OCM's licensing rollout and claiming that other licensees have an advantage over them due to current regulations, which could fuel the unlicensed market.

Market Growth and Trends

To gain valuable insights into the NY cannabis industry, let's delve into experts' growth projections and the key trends shaping the industry.

Projected Market Growth for Cannabis in NY

The NY cannabis market is still changing, but that hasn't slowed its growth –quite the opposite, actually. Industry experts project that it could surpass $4 billion in annual sales in the near future.

Citing Whitney Economics' latest figures on New York, the Green Market Report estimates that the state's cannabis market will reach a staggering $6 billion in the next two years, with sales exceeding $1.3 billion in 2025, $3.3 billion by 2027, and $4.5 billion annually by the end of the decade as more legal retail stores open.

Headset Data's projections are also very optimistic. The cannabis market data company anticipates over $2.8 billion in combined medical and adult-use cannabis sales in 2025, which would make New York the third-largest market.

According to 2023 estimates from cannabis intelligence firm BDSA, the state's legal cannabis sales may reach at least $2.5 billion by 2027 with a compound annual growth rate (CAGR) of 71%, leading the industry's growth nationwide alongside other new markets, such as New Jersey and Missouri.

Although more conservative, the OCM also has positive expectations, predicting that revenue from legal dispensaries will reach $800 million by the end of 2024.

These encouraging projections highlight the rapid growth anticipated for the NY cannabis industry in the coming years. Sales of cannabis-infused beverages, edibles, and wellness products are expected to increase. Also, more businesses will likely integrate e-commerce platforms for added convenience, which would attract a broader consumer base and drive market growth even further.

Key Trends

The NY cannabis market has been influenced by different key trends, but the following two are expected to play a major role in 2025:

• A shift toward edibles and beverages: More and more consumers –especially health-conscious individuals and those who want to experiment with innovative consumption methods– are choosing edibles and beverages over other cannabis products due to their discretion and convenience. BDSA found that although still a small segment, cannabis beverages saw an 8% increase in sales across tracked markets between the second quarter of 2023 and the same period in 2024.
• Focus on health and wellness: CBD-infused products are becoming more popular as well, as more consumers prioritize holistic health solutions and look for options that offer relaxation and stress relief without the psychoactive effects caused by THC. This article by The New Yorker describes how this trend can promote calmness and help improve well-being.

Impact of Cannabis Tourism in NY

Cannabis tourism is a thing. Many people travel to places where cannabis is legal for both recreational or medical use, which can bring economic growth and increased revenue.

Major urban centers in this state, such as New York City, are experiencing significant growth in cannabis tourism and leveraging all the benefits that come with this trend.

These destinations are now adding cannabis experiences into their travel plans and organizing more cannabis-friendly events. Leafly has listed the best cannabis-friendly experiences in NY, including shopping at innovative local dispensaries, classes for the focused-curious, exhibits, and more.

Social Equity and Inclusion

Social and Economic Equity (SEE) is a major factor in the NY cannabis industry. The OCM and the state have implemented several initiatives to address historical cannabis-related injustices and create opportunities for marginalized communities. These are the most important:

• Conditional Adult-Use Retail Dispensary (CAURD) Licenses: This license type has been specifically designed for individuals from communities that have been disproportionately impacted by the war on drugs or justice-involved persons, who are those who have been convicted of a marijuana-related offense in this state before March 31, 2021, or have a spouse, child, parent or legal guardian, or dependent who has been.
• Social Equity Cannabis Investment Fund: This fund was created to provide support to CAURD license holders who need financial assistance to secure a location for their retail dispensary or to launch their operations.
• Cannabis Hub & Incubator Program (CHIP): Through this program, SEE applicants can receive assistance and get equipped with the knowledge, information, and tools necessary to complete the application process, which is known to be highly technical and document-intensive.
• Retail Accelerator: Before awarding the first SEE licenses, the OCM partnered with "Our Academy" to provide immersive training and mentorship to holders, with a curriculum that covers several key aspects related to opening and operating a retail cannabis business.
• Cannabis Compliance Training and Mentorship (CCTM): Through this program, the OCM offers structured webinars on relevant cannabis-related topics, such as cultivation or processing, regulatory compliance, and agribusiness management. The content specifically targets people with advanced horticultural or manufacturing experience and has a strong focus on the adult-use market.

Investment Landscape

Thanks to its large population of people over 21 and its progressive laws, NY has become a substantial market for cannabis products. Paired with the state's SEE initiatives and strong regulatory environment, this presents a prime opportunity to thrive in this industry.

Moreover, cannabis sales are set to skyrocket through 2024. Cannabis retailers reported nearly $430 million in revenue in the first eight months. In August, weekly sales hit an all-time high after surpassing $20 million.

Based on these figures, industry experts predict that regulated cannabis sales could reach $1 billion or be very close to that goal.

This state has also placed a strong emphasis on sustainability. Aiming to create a cannabis industry that is environmentally responsible and socially conscious, the OCM has launched several initiatives to promote sustainable practices, including the following:

• Energy use standards and emissions management
• Waste minimization
• Sustainable packaging
• Protection of air, water, and land
• Water conservation
• Resource tracking and reporting (via PowerScore)

Such a favorable environment and the promising growth projections mentioned above continue to attract many investors to NY. However, it's important to understand its unique and complex regulatory framework.

Vertical integration is a common strategy among businesses across other states. Many cannabis operators choose to participate in the entire supply chain and engage in multiple activities at the same time –such as cultivation, processing, and retail– to streamline processes, reduce costs, and maximize efficiencies.

In NY, cannabis regulations prohibit vertical integration for most licenses, as the state seeks to prevent market monopolization and promote a diverse landscape.

Challenges and Opportunities

Although the market is promising, operating a cannabis business in NY comes with several challenges, including:

• The regulatory landscape is complex, which can potentially hinder business operations and increase compliance costs.
• Despite recent changes, NY still imposes high taxes on cannabis products, which can impact profitability.
• The state's black market is still strong and offers lower prices and constant availability, which can erode the competitiveness of the legal market.
• Due to federal restrictions, NY cannabis businesses have limited access to traditional banking and financial services.

Despite these challenges, the NY cannabis market still offers many opportunities for innovation and growth, such as:

• Businesses can produce and sell a variety of cannabis products (edibles, beverages, topicals, etc.) to attract customers looking for new experiences.
• With well-thought-out and effective marketing strategies, cannabis operators can differentiate themselves in the competitive marketplace. By leveraging the latest technological solutions, such as Artificial Intelligence (AI) and automation, cannabis businesses can improve tracking and traceability, ensure accurate reporting, and streamline operations.
• Through SEE programs, designed to address historical disparities, marginalized communities and individuals can gain new opportunities to enter and succeed in this market.

Consumer Insights: NY Cannabis Market

To better understand the NY cannabis market, let's explore the following consumer insights:

Consumer Demographics and Behavior

According to the Behavioral Risk Factor Surveillance System (BRFSS) Cannabis Use Report (2024-05) issued by the New York State Department of Health, 12.6% of adults report having used cannabis in the past 30 days. Nearly half of these individuals use it daily or at least 20 days per month.

Cannabis consumption prevalence differs significantly between counties, with estimates ranging from a low of 1.7% to a high of 25.1%.

The majority of adults aged 18 or older, exactly 49%, use cannabis for non-medical reasons only, while 13% use it for medical purposes. Smoking, eating, and vaporizing are the preferred methods of consumption in this group.

Marketing Strategies

Consumer preferences are changing, and so are marketing strategies. Cannabis businesses are adapting their campaigns to the latest trends to appeal to different segments.

For instance, people are now more interested in health and wellness products. In response, cannabis businesses are focusing on the benefits that CBD and other non-psychoactive compounds offer.

Educational marketing is also changing the way businesses promote cannabis products. Today's consumers are more interested in what they're consuming, so they seek information about its ingredients or effects.

Businesses that provide transparent, accurate information about cannabis products and adapt to consumer trends can build trust and loyalty, drive more sales, and succeed in this industry.

Final Thoughts: Future Outlook

The NY cannabis industry has experienced major growth, already hitting "critical mass" of nearly $1 billion in annual sales, as reported by Whitney Economics. Furthermore, forecasts suggest that this trend will continue and be even better in 2025.

According to Headset Data, new sales and revenue projections exceed previous estimates by over $20 billion, with at least $2.8 billion coming from New York alone.

The potential for federal legalization and expansion into new markets remains a significant driver for future growth. While adult-use cannabis is legal statewide, there's room for increased availability, innovation, and product diversity. Plus, local regulations may continue to evolve, impacting other essential aspects, such as dispensary locations and operating hours, prices, tax rates, and more.

Additionally, New York's robust tourism industry may further stimulate demand for cannabis products, particularly in popular destinations, driving more investment and increased market growth.

In the meantime, it's important for cannabis operators to stay updated on the latest developments and regulatory changes. So, be sure to follow industry news, educate yourself on changing regulations, and consult with experts when necessary.

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