New York marijuana: What to know about pot-pricing cliffs, banking wars and drug dealers
NJ Weedman sold marijuana outside the statehouse in Trenton ahead of the possible vote on legalization. The vote ultimately got canceled. Asbury Park Press
Based on extrapolation of illegal street sales, the New York marijuana market is between $1.7 billion and $3.5 billion, a study determined.
- A state study says street dealers charge between $270 and $340 per ounce of marijuana.
- In Colorado, for instance, the average price of marijuana bud dipped to $864 per pound last year
- One of the ongoing efforts involves granting the cannabis industry full access to banking services
New York’s recreational marijuana battle sits on the front line of a generational war over American cannabis laws. As debate heats up, USA TODAY Network New York is compiling answers to key questions about legalized cannabis.
As New York considers legalizing marijuana for recreational use, it faces a raft or problems that includes mismanaged marijuana harvests, pot-pricing cliffs and banking challenges.
From overzealous marijuana producers collapsing prices to banks fearing federal government crackdowns on pot business, the legal cannabis marketplace in states across the country has faced severe growing pains.
The Yonkers police said they discovered a marijuana grow house during what was initially an investigation into a motor vehicle accident. (Photo: Yonkers Police Department)
Concerns about legal marijuana’s financial regulation have some lawmakers, including Gov. Andrew Cuomo in New York, pushing reforms to keep pace with one of the fastest-growing segments of the American economy.
Some cited how U.S. medical and recreational marijuana sales are expected to reach tens of billions of dollars in coming years, despite fiscal hurdles driving some cannabis players into Canada’s legal marijuana investment rush.
What follows is an analysis of New York’s cannabis economics based on government data and the USA TODAY Network’s ongoing investigation of the issue.
Authorities in New York looked to street drug dealers for guidance on pricing recreational marijuana as part of the push towards legalization.
In a state-sanctioned study of the issue, officials based fiscal estimates for legal marijuana, in part, on reviews of illegal pot sales in New York, where dealers charged about $270 per ounce for medium quality strains and $340 per ounce for high quality.
Further, New Yorkers buy about 6.5 to 10.2 million ounces per year, which means the state’s marijuana market is between $1.7 billion and $3.5 billion, the study asserted.
After accounting for potential markups, the drug dealers’ pot prices proved key to Cuomo’s plan to collect about $300 million in tax revenue per year if marijuana is legalized.
The pot study, however, also broadly conceded other states already permitting legal weed have struggled with pricing volatility, noting New York should set prices accordingly to limit risks.
Yet the gritty details in states like Colorado and Oregon underscored pitfalls of legal marijuana economics, such as drastic price cuts threatening legal weed businesses, missed tax collection estimates and thriving black markets, according to USA TODAY Network.
Oversupply and demand
Experts described legal marijuana pricing stumbles as an ongoing attempt to define a historically shadowy marketplace.
In Colorado, for instance, the average price of marijuana bud dipped to $864 per pound last year, having fallen from a peak of about $2,000 in 2015. It dropped as the highly competitive initial rush to sell legal weed overestimated demand and misjudged entrenched street dealers, USA TODAY network reported.
“Retail marijuana is a relatively new, maturing market with a lot of early entrants and resultant over-production,” said Steve Ackerman, who owns a Colorado dispensary, Organic Alternatives.
“Downward pressure on prices will drive the less efficient players out of the market and prices will stabilize,” he added.
Yet while prices dropped and endangered some businesses, marijuana tax collections steadily climbed in Colorado despite missing early estimates. The annual total for taxes, licenses and fees related to legal marijuana hit about $267 million last year from $68 million in 2014, Colorado records show.
In Oregon, a similar over-production pricing curve helped destabilize the fledgling industry. Regulators last year temporary halted new marijuana business applications amid outcries over unstable prices, illegal sales to minors under 21 and legal pot being smuggled onto the black market.
In New York, Cuomo’s cannabis legislation would leave recreational pot pricing up to retailers, but it influences them through taxes and business licensing tied to government regulation of the cannabis industry from seed to sale.
Medical marijuana lessons
New York’s first-hand legal marijuana experience is limited to its medical cannabis program, which struggled for years to attract and retain patients in part due to high prices.
One reason is insurance companies largely refused to cover medical marijuana, citing federal prohibitions and leaving some to pay hundreds of dollars per month for cannabis-based drugs to treat serious illnesses like cancer and epilepsy.
The situation got so bad that Cuomo directed regulators to formally remind health insurers of their obligations under state law.
A public notice in 2017 explained insurers cannot deny coverage because a doctor may provide medical marijuana certification during an otherwise covered office visit, removing some cost barriers.
But patients still pay out-of-pocket for the drugs that are illegal under federal law, which makes it unaffordable for some as prices reflect the costly production involved in meeting medical quality standards.
Reforms that expanded the list of eligible illnesses, including chronic pain, and medical professionals allowed to certify users, however, have grown the patient pool to about 100,000.
Cuomo has also urged banks and credit unions to accept medical marijuana companies and hemp growers dealing in the non-psychoactive cannabis cousin.
He vowed last year that state financial regulators wouldn’t punish anyone involved in the financial deals, despite the threat of federal interference.
“As the federal government continues to sow discord surrounding the medical marijuana and industrial hemp businesses, New York has made significant progress in creating a supportive economic development and regulatory landscape for these companies,” Cuomo said.
Marijuana legalization advocates across the country focused on the banking issue while pushing reforms during last year’s elections, which saw several more states allow medical or recreational use of the drug, USA TODAY Network reported.
One of the ongoing efforts involves granting the cannabis industry full access to banking services, which remain partly out of reach because many banks are wary of running afoul of money-laundering laws or dealing with the increased red tape required for documenting transactions with marijuana-related businesses.
As a result, cannabis sales remain mostly cash deals, raising safety and logistical concerns, a concern that is part of ongoing debates over various marijuana legislation in Washington, D.C.
Meanwhile, New York’s acting Department of Financial Services Superintendent Linda Lacewell recently joined 23 other state financial regulators in pushing federal reforms to fix medical and recreational marijuana banking flaws, according to an April 15 letter to Congress, first reported by Forbes.
“It is incumbent on Congress to resolve the conflict between state cannabis programs and federal statutes that effectively create unnecessary risk for banks seeking to operate in this space,” the letter states.
“The looming threat of civil actions, forfeiture of assets, reputational risk, and criminal penalties is not conducive to a legal, regulated marketplace.”
New York state officials turned to illegal pot street sellers to gauge what it should charge for recreational pot.
This Is How Much Weed Costs in 120 Cities Across the World
This article originally appeared on VICE Colombia. Leer en Español.
The travel itinerary of a dedicated pot smoker is never complete if it doesn’t include research on the cost of weed in the country they’re slated to visit. Not only is it wise to avoid being ripped off, but it’s also important to know how much you’ll have to save up to budget accordingly. And even though lingering global drug prohibition means it’s still difficult to collect conclusive data—especially given the vast number of variables that factor into the street sale of weed around the globe—there is data out there that can help.
Seedo, a company that manufactures devices geared toward growing weed, recently published the 2018 Cannabis Price Index, a ranking developed by using information from the UN’s Office on Drugs and Crime (UNODC). According to the company, its objective was “to illustrate the constant need for legislative reform regarding cannabis use around the world” and “to determine if there are some lessons that we should learn from cities in [the] vanguard of marijuana legalization.”
The study includes 120 cities from around the world, among them some where the use of marijuana is still penalized and others where the drug is at least partially legal. In addition, Seedo developed a framework for calculating the potential tax revenues legalization might bring to cities (we didn’t include it in our map below, but you can find the complete table here), comparing the taxes on marijuana in cities where it’s legal with the taxes imposed on cigarettes.
Uri Zeevi, chief marketing officer of Seedo, said that all of this illustrates how, “[by eliminating] the criminal component of marijuana, governments could regulate production in a more secure manner, robbing criminal gangs of their power and—as we show in this study—generating enormous tax revenues for the development of countries.”
The most expensive weed in the world, according to the study, is in Tokyo, where a gram sells for approximately $32.66.
To determine the price per gram, the study’s authors conducted surveys at the local level, adjusting their findings with statistics obtained from the 2017 World Drug Report by the UNODC. These averages may be outdated—the price of weed in any given city on any given day obviously depends on the quality and whims of a dealer, among other things. For example, in Bogotá, Colombia, we know from experience that you can buy a gram of weed for 2,000 Colombian pesos ($0.70 USD), despite the fact that the study set the average street value at $2.20 USD (approximately 6,000 Colombian pesos).
The average number of metric tons of weed consumed annually in each city was calculated using an equation that considers the total population, prevalence of consumption (the percentage of the population that consumes weed during the course of a year, according to the UNODC’s report), and estimated total (annual) consumption in grams.
Some of the most relevant conclusions in the study were:
- New York has the highest average cannabis consumption in the index, with 77.4 metric tons per year.
- The most expensive weed in the world is in Tokyo, where a gram sells for approximately $32.66.
- The cheapest weed in the world is in Quito, Ecuador, and in Bogotá, Colombia. According to the averages published in the report, the respective sale prices are $1.34 and $2.20 per gram.
- Among the cities where it’s at least partially legal, Boston is at the top of the list when it comes to cost per gram, at $11.01, while in Montevideo, Uruguay, the average is about $4.15.
- Among the cities where it’s totally illegal, Jakarta, Indonesia, has the cheapest weed ($3.79 per gram), despite the fact that consumption can still bring very harsh jail or prison sentences.
Top ten cities with the most expensive weed in the world
Top ten cities with the least expensive weed in the world
Top ten cities with the highest weed consumption in the world
Top ten cities with the lowest weed consumption in the world
Image via the 2018 Cannabis Price Index/Seedo
Take some time and explore all of the 120 cities included in the study through this map, which with was put together with lots of love by VICE Colombia. You’ll find information about the (estimated) price per gram in dollars, the legal status of the drug in that city, and the (estimated) average annual consumption in metric tons. Every city is designated with a different color pin, with data extracted from the study:
- Green: Indicates the cities where marijuana is legal, both in terms of possession and sale, as well as for recreational and medicinal use.
- Orange: Indicates the cities where marijuana is partially legal, which is understood as including at least one of the following:
- Possession of the drug in small quantities can be legal.
- Only medicinal use is permitted.
- Possession is legal, but sale is illegal.
- Weed is only legal for scientific uses.
- The use of weed is restricted to controlled areas (inside homes or in coffee shops, as is the case in Amsterdam).
- There are other laws that restrict use to specific purposes.
- Red: Indicates cities where use is completely illegal, both sale and possession, for recreational and medicinal uses.
Interactive Map: How much does weed cost around the world?
Zoom in, scroll around, and click on the pins to learn more about each specific city:
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We built a map with data from the 2018 Cannabis Price Index, a study that condenses data collected by the United Nations Office on Drugs and Crime (UNODC) and other research.