Five years after New York legalized adult-use cannabis, I find myself thinking less about whether the market has succeeded and more about what we need to do to make sure it keeps succeeding.
There is plenty of evidence that New York cannabis is working. Since adult-use sales launched, the legal market has generated more than $3.3 billion in retail sales and grown to more than 600 licensed dispensaries across the state. Recently, New York also collected more than $264 million in cannabis tax revenue in one fiscal year.
While it’s hard to argue with those numbers, the story is more complicated for those of us who have been operating from the beginning. We can see the progress and still recognize how difficult it remains to run a legal cannabis business in New York. We can celebrate the billions in sales while acknowledging that many operators are working with razor-thin margins. We can be proud that hundreds of entrepreneurs have received CAURD social equity licenses while worrying about whether those businesses have enough financial breathing room to survive.
At Housing Works Cannabis Co, we’ve had a front-row seat to all of it. We were the first licensed adult-use dispensary to open in New York, and when we opened our doors at the end of 2022, there was a real sense that we were participating in something historic. Regulations were still evolving, systems were being built as we operated and many businesses, particularly those with CAURD licenses, were trying to navigate an entirely new industry without the capital or infrastructure that larger companies could take for granted.
One of the biggest things we need to address is the financial pressure that comes with being a legal cannabis business while cannabis remains federally controlled and technically, illegal. Section 280E is the most obvious example. Under the current federal tax code with cannabis as a Schedule I substance, businesses subject to 280E cannot take many of the ordinary business deductions available to other industries. We can operate legally under state law, hire employees, pay rent, invest in compliance and follow every rule, yet the federal tax structure still treats us fundamentally differently from other legitimate businesses.
That has a very real impact on our ability to reinvest. At Housing Works Cannabis Co, we estimate that if adult-use cannabis is moved to Schedule III and 280E no longer applies to us, the change could save our business as much as $500,000 a year in federal taxes. I don’t think of that as simply a tax break. I think about what we could actually do with that money. We could reinvest in our employees and our operations, strengthen the business, and of course contribute even more resources to advance the mission that brought Housing Works into cannabis in the first place.
Because Housing Works Cannabis Co is New York’s only 100% charity focused retailer, the question is particularly tangible for us. A healthier business gives us more ability to support the larger Housing Works mission of providing housing, healthcare, job training, and other services to New Yorkers. Rescheduling would not just change a line on our balance sheet. It could change the lives of some of New York’s most vulnerable demographics.
The Promise Behind Legalization
This year marks 55 years since President Richard Nixon formally declared the so-called “War on Drugs” in June 1971. It can be tempting to look at that history as something that happened a long time ago, separate from the cannabis industry we are building today. It isn’t. The consequences of that policy are still visible in the communities that were disproportionately targeted by drug enforcement, and they are part of the reason New York made equity and restorative justice such central pieces of its legalization framework.
When the state passed the Marihuana Regulation and Taxation Act, the goal was not simply to create a regulated way for adults to buy cannabis. The legislation was built around equity, economic opportunity and repairing some of the damage caused by prohibition. The state’s CAURD program was one expression of that vision, creating a pathway for people with qualifying cannabis convictions and nonprofit organizations serving communities disproportionately impacted by cannabis enforcement to participate in the legal market.
Five years later, it’s time to ask ourselves what it really means to fulfill that promise.
At Housing Works Cannabis Co, we see that promise as something that extends beyond the walls of our dispensary. Housing Works is part of a development team transforming an underused NYPD parking lot in the East Village into The Aurea, a new 131-unit affordable housing development that will include homes for formerly homeless New Yorkers. Housing Works will also provide on-site supportive services to residents. For us, this is what the connection between cannabis and community looks like in practice: a successful cannabis business can help support an organization doing tangible work to address the housing and healthcare needs of New Yorkers.
New York has made meaningful progress. 342 CAURD licenses have been approved statewide, with 86% of those being currently active. The state has worked to address the criminal justice consequences of prohibition while investing in community reinvestment and creating pathways for people disproportionately impacted by cannabis enforcement to participate in the legal industry.
The state’s broader social and economic equity framework is an important part of that work. A license is an opportunity, but it is not a guarantee of a successful business. CAURD operators and other social equity entrepreneurs entered a complicated, highly regulated industry without the same access to capital and established infrastructure as larger companies, and that stems directly from cannabis’ Schedule I status. Many operators have taken on significant financial risk simply to get to the point where they can open their doors. If we want legalization to create lasting economic opportunity for people who were disproportionately harmed by prohibition, then we have to make sure those businesses have a realistic chance to survive and grow.
That is where the conversation around rescheduling becomes much bigger than cannabis taxes.
We cannot spend 55 years criminalizing cannabis and disproportionately harming certain communities, then declare the job finished simply because adults can now legally purchase it. If legalization is supposed to help right some of those wrongs, economic participation has to be part of the equation. It isn’t enough to expunge a record and issue a license if the person can barely keep the lights on. The point of social equity was never simply to hand someone a license and wish them luck.
What We Have Built Is Worth Protecting
The irony is that New York’s legal cannabis market has already demonstrated how much economic opportunity is possible when the system works. More than $3.3 billion in legal retail sales means consumers are choosing regulated businesses in significant numbers. More than $264 million in annual cannabis tax revenue means the state itself is benefiting from that legal market. And more than 600 licensed dispensaries means consumers in communities across New York now have access to regulated products from legitimate businesses. We should be proud of that.
Rescheduling will not fix every problem. It won’t eliminate the illicit market, simplify every regulation or make the cost of operating a cannabis business disappear. It also won’t automatically guarantee the success of a social equity operator. However, it will greatly improve their chances to succeed.
For Housing Works Cannabis Co, that could mean as much as half a million a year that we can put back into our mission instead of paying under a federal tax structure that puts cannabis alongside heroin. For another operator, the number and its use may be different, but the impact can be just as meaningful. It could be the difference between hiring another employee and delaying that hire. It could mean investing in a store, paying down debt or simply having enough cash flow to weather a difficult quarter.
Those are the kinds of things that allow businesses to operate successfully for years, and we need federal policy to catch up with the reality that already exists.
We need a legal market where compliance is rewarded rather than financially punished. Illicit operators don’t worry about paying their taxes, and we need small and social equity businesses to have a real chance to compete. We need continued enforcement against the unregulated operators who undercut businesses that follow the rules. We need regulatory clarity and a system that recognizes that these are real businesses employing real people and contributing real money to the state’s economy.
Rescheduling is not a cure-all. Cannabis still needs a thoughtful federal framework, and New York still has plenty of work to do to make its own market more sustainable. But fifty-five years after the War on Drugs began, we have a chance to do something that goes beyond acknowledging the damage of prohibition. We can build a legal cannabis industry that actually creates opportunity for the people and communities who were left carrying much of that damage. Five years into legalization, that feels like a reasonable next step.
Sasha Nutgent is the VP of Cannabis Retail for Housing Works Cannabis Co, the first licensed adult-use dispensary in the state of New York.