The Bumpy Progress of the Hudson Valley Cannabis Industry

No one expected the rollout of cannabis legalization in New York to be without incident. After all, not only is it a brand-new industry that affects multiple existing industries, from agriculture to real estate, it’s also one that’s illegal at the federal level—a challenge that tends to snarl the nationwide green revolution with red tape. 

While the journey to establishing an adult-use cannabis market in the Hudson Valley has been more of an obstacle course than an open road, it’s undeniable that progress has been made in the key areas of public awareness and economic development. In January, the NYS Office of Cannabis Management (OCM) announced that the state surpassed $1 billion in sales since the first dispensary officially opened in December 2022. (As of February 18, there were 307 dispensaries open.) This aligns with initial estimates from the state’s 2018 Legalization Impact Assessment that put the state’s pre-existing illicit marijuana market sales at a range of $1.74 billion to $3.5 billion. 

However, this full-throttle market is still working through growing pains while facing the daunting task of maintaining a balance that’s fair to existing growers, processors, and retailers, as well as those still waiting in line for a license.

High Interest

“Those of us who launched the industry are actually at a disadvantage to those coming in next,” says Gail Hepworth, co-owner of Hepworth Farms in Milton. In operation since 1818, Hepworth Farms had long been known for its organic produce before obtaining licensing to grow about 300 acres of hemp for CBD and one acre, per state law limitations, of THC-containing marijuana. They also have licenses for extraction and distribution, allowing them to be a seed-to-sale, outdoor-grown cannabis producer. “We were initially told that when we started growing in 2021, the state would have 200 stores by the end of the following year. Instead, there was one, and it opened in December 2022—so we had invested a lot of capital expense up front and had a lot of product, but nowhere to sell it.”

Plus, because sales are not federally legal it’s difficult for cannabis growers to obtain loans. There are few lenders willing to work with Ythe industry and those who do often have exceptionally high interest rates. “Our business model is radical transparency and we intended to be employee-owned, but there are unexpected consequences to being employed in cannabis,” Hepworth explains. “Farmers don’t get paid until the broccoli is on the plate, so it’s common practice that farms have to borrow money, but banks don’t want to lend to cultivators of cannabis. Our cannabis serves our farm; we’re in cannabis to stay in business in agriculture, and serve our agricultural workers who need to have access to banking, credit, cars—so the slow rollout of the market was harmful for us, especially without the bank support.” 

Losing CAURD

Although dispensaries began to spring up in 2023, by mid-summer the pace was still slower than growers anticipated with fewer than 25 retail outlets in operation, none in the Hudson Valley, and another harvest season looming. In mid-July, recognizing the potential blow to growers’ bottom lines for the second year, the OCM approved the Cannabis Growers Showcase—regulated vendor markets hosted by municipalities that could run from August through December 31. Even with the short notice, the first market opened early August in the Village of New Paltz with a few canopy-covered vendor tables outside of the former village hall.

Around the same time, the OCM was hit with a lawsuit challenging their CAURD license distribution process. CAURD (Conditional Adult-Use Retail Dispensary) licenses are typically given to individuals with prior marijuana-related offenses, which a group of military veterans contended was a violation of the law, alleging the system was unfavorably designed to favor a small group. Because of the suit, in August 2023 the state Supreme Court blocked more than 400 CAURD licensees from opening their dispensaries until a settlement was reached in November. For those three months, retailers who had already started making payments on storefronts and stocked up on products were incurring financial losses without the ability to sell. The growers showcases became a lifeboat for cultivators, processors, and retailers. And consumers showed up. 

By December, $4.8 million in sales was reported from the 60 showcases. That initial New Paltz market alone, which had grown and moved indoors, surpassed $1 million in pretax sales. According to Mayor Tim Rogers, that amount generated $30,000 in sales tax for both the Town and Village of New Paltz.

Dispensary Density

Beyond sales opportunities, the markets also became key for brand awareness. “We weren’t a part of the showcases, but we went to them to meet cultivators and get an idea of the market,” says Rudy Huston, co-owner of Riverbend Dispensary in Hudson, the first dispensary to open in Columbia County. “We received our license in February 2024 and already had an active retail store that we transformed into a dispensary. At the time, there was a real estate race because of distance requirements in certain towns, such as you can’t be within 2,000 feet of another dispensary, so we had an advantage by already having the building and opening quickly on July 1.”

Since their opening, several dispensaries have popped up nearby, one just a few blocks away. “Many have opened around us but each has a different way of doing business, so it’s not like what happened in Great Barrington, where they had one dispensary do well, and then suddenly 10 more dispensaries all opened in one medium-sized town,” Huston explains. “Despite the setbacks and the lawsuit delay, right now the state seems to be managing dispensary rollout in a way that allows us to meet demand. But there has to be a continued correlation between volume that can be grown, what the average dispensary can sell, and the number of stores in a town to avoid either oversaturating the market or not meeting demand.”

Finding the Right Balance

Out of the current 307 dispensaries, nearly 40 are within the Hudson Valley and Albany. Because of that growing number, and the fact that 2024 was a banner year for harvests, some farmers are challenging the viability of the one-acre limit for growing THC, which allows an average of 1,500 to 3,000 plants. Hepworth says that there’s a movement to encourage the OCM to allow up to five acres of crops. “For many farmers, one acre of cannabis is very hard to earn a living off, unless it’s incorporated into an existing food farm,” she says. “There’s a lot of lobbying to increase acreage because it’s otherwise not viable for making a living, especially if there’s a wet season, which is not good for the plants.”

Although some cultivators are eager to grow more, the OCM’s calculated approach aims to meet the fluctuating needs of the entire supply chain. “Right now, the scales are balanced in a way to ensure there’s opportunity for all areas of the New York State cannabis industry,” says Felicia A. B. Reid, acting executive director at the OCM. “Twenty twenty-four was an incredible harvest year, and folks are getting more innovative, but we want to make sure we continue to grow the industry responsibly. We’ve seen other places not manage rapid growth well and experience a devaluing of licenses, or of land, so we need to consider the whole supply chain to maintain a balance of opportunities.” 

Reid has been with the agency since June 2024 and set her focus on accelerating licensing, maintaining communication opportunities with cultivators, and developing socio-economic equity opportunities, like a CAURD Grant Accelerator to fund operation costs, security needs, and increasing access to financial services for new businesses. Reid says she expects demand to continue growing across the state, and that it’s crucial to figure out how to develop the industry in a way that’s in line with equity initiatives.

“There aren’t many examples of industries that go from the black/gray market to fully regulated—except maybe alcohol in the 1920s,” she says. “Not only is it a rapidly developing industry, but it’s centered around a plant that needs a lot of attention to grow, and is still dealing with stigma. When I was in school we had DARE, which put marijuana in the same category as crack, and historically there’s been a lot of propaganda about what cannabis is and who does it, often based in classism, racism, and marginalization. But acceptance is growing.”

While social stigmas may be easing, the issues around federal illegality persist. For instance, Hepworth Farms’ lead grower has been working at the farm for years but was recently denied citizenship directly because he works in the cannabis industry. “Even with a legitimate green card and executive job—he’s worked his way up to being our VP of Cultivation—he was denied,” Hepworth explains. “Yet, another employee who had more experience on the produce side of the farm was able to get her passport. Agriculture is a job we take great pride in; everything we grow ends up in someone’s body, so all of us here take great care of what we do. Our tomatoes have to have great flavor, high quality, and be healthy for you. So does our weed. But we need to be able to protect our employees, provide livable wages, and continue to grow the industry in a way that is fair to all.”

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This article appears in March 2025.