New York’s Consumption Lounges Aren’t Waiting For Licenses

New York’s adult-use cannabis market sales could generate between $2.2 billion and $2.7 billion by 2026. That figure could fall short if the Empire State falls trap to the thriving unlicensed market

A significant component of the sales could come from consumption lounges. The prospect of social consumption pot spaces piques the interest of numerous consumers and would-be operators. Many have already started buying. Consumers are unwilling to wait any longer, and finding shops isn’t a problem

Today, many dispensaries and lounges are about as out-in-the-open as possible, often using the state’s gifting laws or membership fees as loopholes. Regulators from the Office of Cannabis Management (OCM) have issued cease and desist warnings to temper the activity, but its effect doesn’t appear significant. 

How Many Unlicensed Shops Are There?

There is no public estimate on how many unlicensed lounges operate in New York City or the state. However, it’s clear that more than a handful of lounges sell cannabis and often offer a place to consume it

Those with legacy market connections may find an invite to private lounges set up at discreet stores or private residences. People unable to gain access to private lounges can still take part by breaking out Google Maps. Today, a search for a ‘marijuana lounge’ can produce over a dozen licensed and underground shops

“There are so many different types of lounges out there,” said Michael Zaytsev, Academic Director of Cannabis Degree Programs at LIM College. He likened the offering to coffee shops or bars, saying locations cater to all consumer types, from high-end gatherings to dive bar settings

The shops appear to get away without much police involvement, though often not far from the shops or trucks throughout the city. 

New York’s adult use cannabis market sales could generate between $2.2 billion and $2.7 billion by 2026. That figure could fall short if the Empire State falls trap to the thriving unlicensed market

A significant component of the sales could come from consumption lounges. The prospect of social consumption pot spaces piques the interest of numerous consumers and would-be operators. Many have already started buying. Consumers are unwilling to wait any longer, and finding shops isn’t a problem. 

 

Today, many dispensaries and lounges are about as out-in-the-open as possible, often using the state’s gifting laws or membership fees as loopholes. Regulators from the Office of Cannabis Management (OCM) have issued cease and desist warnings to temper the activity, but its effect doesn’t appear significant. 

How Many Unlicensed Shops Are There?

There is no public estimate on how many unlicensed lounges operate in New York City or the state. However, it’s clear that more than a handful of lounges sell cannabis and often offer a place to consume it

Those with legacy market connections may find an invite to private lounges set up at discreet stores or private residences. People unable to gain access to private lounges can still take part by breaking out Google Maps. Today, a search for a ‘marijuana lounge’ can produce over a dozen licensed and underground shops

“There are so many different types of lounges out there,” said Michael Zaytsev, Academic Director of Cannabis Degree Programs at LIM College. He likened the offering to coffee shops or bars, saying locations cater to all consumer types, from high-end gatherings to dive bar settings

The shops appear to get away without much police involvement, though often not far from the shops or trucks throughout the city

“Many are calling themselves CBD lounges or private clubs that have a paid membership to not draw attention,” said Kim Stuck, CEO and founder of compliance firm Allay Consulting. Stuck added that some operators choose to start underground to demonstrate a viable business ahead of licenses being determined. 

Impact On The Licensed Market

Sources say that cannabis products allegedly can come from untested, anonymous sources, unlicensed West Coast growers, or licensed operators, depending on the operation. No source would go on record to say as much. Still, several indicated that shops were financially backed by either legacy or licensed companies looking to enter the New York market before licensing was awarded

Frederic Abramson, a New York City lawyer practicing on-site consumption licensing for small businesses, reports that uncertain regulations and likely high cost of entry steers most from exploring on-site consumption licenses at this time

“The board’s very unclear about which direction they’re going right now,” he said, adding, “People don’t feel comfortable moving forward at all until there’s any kind of real regulation on the books.”

As Allay’s Stuck mentioned, some unlicensed shops hope to convert to the legal market. But, sources caution that route may not prove possible if they continue to shun regulator warnings.

Sources were torn on the fate of unlicensed lounge operators. Some speculated that those operators may find themselves out of luck when time comes to determine the state’s lounge license holders, if regulations even favored the current model taken up by most shops.

Stuck sees the outcome differently, predicting that the OCM creates pathways to convert shops. “I can’t wait to see the New York innovation kick in once these lounges are actually allowed and don’t have to hide,” she said

While excitement is high, the long struggle to launch in states like California, Nevada and other states could indicate what New York is up against. Between upset neighborhoods and to-be-enacted ordinances, the Empire State could find itself launching cannabis sales long before a lounge opens along with it

“Many are calling themselves CBD lounges or private clubs that have a paid membership to not draw attention,” said Kim Stuck, CEO and founder of compliance firm Allay Consulting. Stuck added that some operators choose to start underground to demonstrate a viable business ahead of licenses being determined. 

Impact On The Licensed Market

Sources say that cannabis products allegedly can come from untested, anonymous sources, unlicensed West Coast growers, or licensed operators, depending on the operation. No source would go on record to say as much. Still, several indicated that shops were financially backed by either legacy or licensed companies looking to enter the New York market before licensing was awarded. 

 

Frederic Abramson, a New York City lawyer practicing on-site consumption licensing for small businesses, reports that uncertain regulations and likely high cost of entry steers most from exploring on-site consumption licenses at this time. 

 

“The board’s very unclear about which direction they’re going right now,” he said, adding, “People don’t feel comfortable moving forward at all until there’s any kind of real regulation on the books.”

 

As Allay’s Stuck mentioned, some unlicensed shops hope to convert to the legal market. But, sources caution that route may not prove possible if they continue to shun regulator warnings.

 

Sources were torn on the fate of unlicensed lounge operators. Some speculated that those operators may find themselves out of luck when time comes to determine the state’s lounge license holders, if regulations even favored the current model taken up by most shops.

Stuck sees the outcome differently, predicting that the OCM creates pathways to convert shops. “I can’t wait to see the New York innovation kick in once these lounges are actually allowed and don’t have to hide,” she said

While excitement is high, the long struggle to launch in states like California, Nevada and other states could indicate what New York is up against. One company Planet 13 Holdings (OTC: PLNTH) has opened a restaurant within the dispensary but hasn’t opened its consumption lounge yet. NuWu Marketplace in Nevada operates one of the few dispensaries with a consumption lounge inside but that is because it is owned by the Paiute Tribe. Between upset neighborhoods and to-be-enacted ordinances, the Empire State could find itself launching cannabis sales long before a lounge opens along with it. 

 

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