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Dealer's Choice 

The Future of New York's Weed Market According to 4 Legacy Market Operators

Last Updated: 06/04/2021 12:36 pm
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The Great Recession of 2008-09 was hard on Olechka.

A personal trainer by trade, she saw her client base in New York City evaporate. She had sunk a lot of cash into a small shop in the Hudson Valley, but no one was buying. She found herself digging through dumpsters behind grocery stores to feed herself and her teenager.

A friend started giving her small amounts of weed, and Olechka would bake brownies and other cannabis desserts, selling them under-the-table at her shop, enough to pay some bills and keep the lights on. One day the friend asked if Olechka knew where to get an ounce. Oletchka made $150 in five minutes by buying the ounce for $300 and selling it to her friend for $450. She realized there was money to be made.

“It was all such a total coincidence,” Olechka, now in her fifties, says. “I did not smoke pot, I didn’t know there was money in pot, I didn’t know anything about weed.”

Olechka went from selling eighths and ounces in her small town to distributing upwards of 200 pounds of weed a month—with a street value of $1 million—in the Hudson Valley and New York City, selling duffle bags of weed to everyone from college dealers in Poughkeepsie to mafiosi in the South Bronx to gangs in Bushwick.

Olechka prospered off an unregulated black market now threatened by the legalization of marijuana in New York. With dispensary licensure beginning next year, Ispoke at length with Olechka and three other weed dealers on how their market will change, and how legal marijuana sales will fare in the state.

The Dealers in Your Neighboorhood

The dealers all believe the black market isn’t going anywhere, despite the passage of the Marijuana Regulation and Taxation Act on March 31. The law allows possession of up to five pounds of marijuana at one’s home and three ounces on the go and sets up a framework for growing marijuana for personal use and for sale at dispensaries.

The three dealers I spoke to who are currently active all say they have no plans to stop despite legalization—and they’re confident their trade will continue.

Noemi, who sold small amounts of weed to friends and acquaintances for years before stopping during the pandemic, says it mostly comes down to the price the black market can offer compared to dispensaries. “There’s a lot of overhead, and then the consumer has to pay for that overhead, so the product ends up being quite a bit more expensive,” she said.

Consumers will also face a 13 percent excise tax, plus an additional tax on the amount of THC in their purchase. A cultivation tax is applied before the product even reaches the point of sale.

Noemi sells eighths of weed for $40, which she compares to legal purchases she’s made across the border in Massachusetts, where eighth-ounces generally go for $66. The other dealers interviewed put the price of an eighth between $30 and $50 in the Hudson Valley.

Going to a neighborhood dealer is also more convenient, Noemi says—some of her customers live in her building, and she can generally make herself available day or night instead of adhering to opening and closing hours.

There’s also a different quality to black-market transactions, Noemi says. “If you have a connect, it’s someone who is your friend or its someone you’re close to,” she says. “They’ll work with you—‘If you don’t have the money this week, see you next week’—you don’t have those kinds of community-type connections at the dispensary, where it’s like—'Give me all your money right now’—after you stand in line for three hours.”

Dom, an artist who sells small amounts of weed in Ulster County, says he thinks legalization will only have a minor impact on his business. He has sold to some people for years, and they know his product is reliable.

It may improve sales, Dom says, as people will not “have the same fear of law enforcement while enjoying marijuana.”

Any increased sales of weed in New York will go straight to the black market for the time being—the first legal sales are not expected before 2022.

Black Market Persistence

Just as dealers say there will still be a demand for black-market weed on the consumer end, interest in selling black-market weed will not likely dissipate. The unregulated market allows people to enrich themselves who might otherwise not have the capital, credit or social connections to enter the traditional business world.

Mikey was living paycheck to paycheck in a small apartment outside Poughkeepsie before he began selling weed. He saved his profits, investing them in larger quantities of product until he was moving 40 pounds of weed a month. He always had a legitimate job and eventually bought the business where he worked in a deal that included $25,000 in cash from drug sales.

“I didn’t think that there was a clear path for me to have financial stability and/or upward mobility,” Mikey says. “It seemed like everyone who had a business either came from money or figured something else out that I couldn’t figure out. I just wanted to crack the code and get in there.”

The seed money for Mikey’s first weed trade was a few hundred dollars—about as low a bar that exists for starting a business.

Mikey’s weed trade supports his legitimate business with cash infusions. In several years, he plans to buy the building housing his business with the proceeds of his pot sales. Drug cash, from weed or other substances, underlie a chunk of the local economy, Mikey says, counting four businesses in the immediate area around his storefront partially supported by drug sales.

Olechka says the black-market weed industry will never disappear because of the “red tape” that exists in legal markets. “To jump through all the hoops to get fully legal—for most people in the industry, it is too much,” she says. “There is no way that Bushwick guys will go all legal, and there’s no way they’ll stop their delivery services. They will not be selling legal weed.”

There is little incentive for dealers to stop. None of the four interviewed in this article has ever been arrested for anything to do with the weed trade, and they figure police will be even less incentivized to arrest them now—Dom compares it to a home brewer selling beer to friends without paying taxes.

Imported from California

Olechka’s weed, like most of the weed smoked in the Hudson Valley, comes from California, she says, and this isn’t about to change.

New Yorkers will be able to cultivate their own weed under the new law, which could incentivize cultivators to sell their product on the black market, but with a limit of six plants per person, they’re unlikely to attract the eye of distributors like Olechka.

With legalization, New Yorkers might more readily break existing laws and grow more than six plants, but Olechka says New York’s climate will produce an inferior, outdoor product high-level distributors will be uninterested in.

Marijuana can also be cultivated indoors, where environmental conditions can be controlled, but Mikey says this would also result in an inferior product. “The people from California are professionals,” he says, and the weed he’s seen produced in New York is laughable in comparison.

Though there is certainly incentive for professional, licensed growers to sell some of their crop to the black market, Olechka believes New York’s cultivation regulations will look more like Washington or Oregon’s, where each plant is tracked and there is little wiggle room for illegal sales.

The details of legalized cultivation will be worked out by the Office of Cannabis Management, a state agency governed by a five-member board appointed by the governor and the legislature.

Marijuana prices in California dropped significantly after the state legalized the plant and some legal grow operations diverted their product into the black market, Olechka says—the price she paid for a pound fell by more than 25 percent.

However, dealers do not see a similar drop in price forthcoming for illicit marijuana because the source of the black market weed will be the same: California.

Create a Path to Legal Trade

None of the dealers I spoke to are interested in joining the legal market. Dom is primarily interested in advancing his artistic career—he views his side-business as a way to smoke for free and to make ends meet instead of a profession. Mikey is focused on making enough to buy his building.

The nonprofit HEART Program (Healing, Education, Assistance, Reinvestment & Re-entry Training) will introduce a pilot program in New York this summer to try to transition black-market dealers into the legitimate marijuana trade and invest in communities disproportionally hurt by the War on Drugs.

The program will be “a legal certification workshop so that legacy operators can come through our education program and get fully brought up to speed on all the compliance tools and measures they would need to go legal depending on what sort of area they would be interested in pursuing licensure for,” says Colleen Mairead Hughes, the program’s founder, who lives in Newburgh.

Legacy operators are interested in participating in the legal marijuana market, Hughes says, but are distrustful of the government, and the HEART program seeks to point out incentives for going legal, such as 40 percent of tax receipts going to community reinvestment grants, which in part can be used to provide low- or no-interest loans or grants to legacy operators trying to start legal marijuana businesses.

The HEART program seeks to give legacy dealers and cultivators the tools necessary to build a business, so they do not fail out of the gate when given loans or grants by the state—a problem that has beset other states when legalizing marijuana, Hughes says.

Much is unknown about how the state will help black-market dealers transition to the legal market. The details will be hashed out by the board of regulators at the Office of Cannabis Management, and Hughes fears the state will appoint serial regulators who don’t understand the legacy market. The black market dealers I spoke to were not yet aware of this program but seemed set on continuing to sell illegally.

The black market will also continue in New York for less tangible reasons. Olechka says part of the reason she likes selling weed is “the game.” “It’s this odd underground world that I would have never stepped into, and it’s by invitation only,” she says. “I would never have met people on the Lower East Side, I would have never met Bushwick people, people who then I started seeing in a totally different light—their lifestyle, what they did, why they did it.”

Part of it is the anarchic thrill of breaking the law and getting away with it. Olechka recalls meeting a police officer socially a few years back. Instead of keeping her distance, she befriended the man.

“I made myself this total dumb blonde who just idolized police and their work,” she says with a laugh. “I’ve never been very rule-abiding or conventional a person,” she continues. “I might look like it, but no.”

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