Challenges in New York’s Regulated Marijuana Market
Since adult-use sales of marijuana launched in late 2022, New York’s regulated marijuana market has faced various funding and operational challenges. However, the market has largely avoided credit delinquencies between retailers, distributors, and brands—but two companies have not been so fortunate.
Addressing Delinquency: Smacked LLC and Royal Leaf NY LLC
While there are currently 171 operational retailers throughout the Empire State, two companies are on a regulator’s list for being 30 days past due on bill payments, according to a Green Market Report.
While the New York Office of Cannabis Management (OCM) curates a list of delinquent retailers, this list typically remains confidential, accessible only to other business license holders further up in the supply chain, like growers, distributors, and other brands. The Green Market Report was able to obtain information on the delinquent companies from an anonymous industry source of the OCM.
The two companies on the OCM list are Smacked LLC and Royal Leaf NY LLC, which conducts business as Statis. Both companies are located in the Big Apple and were early recipients of Conditional Adult Use Retail Dispensary (CAURD) permits. CAURD is New York’s version of social equity.
Under New York law, marijuana operators who buy cannabis products on credit have 90 days to pay in full, and payment and credit terms must be reported to the OCM, according to guidance from the agency.
Despite New York being one of the few, if not the only, medical and recreational marijuana markets with a credit law directed to rein in unpaid invoices, nonpayments are a nationwide challenge that ultimately led to the historic collapse of Herbl, Medmen Enterprises, and others. Collections expert Brett Gelfand stated that nonpayments are the No. 1 reason why cannabis companies fail.
According to Whitney Economics, an Oregon-headquartered cannabis data and research company, the nation’s delinquent payments in the regulated marijuana industry are likely to extend beyond $4 billion in 2024.
Many fresh individuals in the New York cannabis trade agree that most operators are still trying to get their bearings. However, several sources reported that the relatively low number of operators named on the OCM list points out that the underlying policy is working as intended, as a solid motivator for shops to stay up-to-date on their bills, especially because the only way to come off of the OCM list it to settle your bills.
“I would say about 90% of the time, we’re getting paid promptly,” said Joann Kudrewicz, the owner of Ravens View Genetics, one of the licensed marijuana farms in upstate New York. “The few folks that have been bad payers, I just disengage from.”
Owner and founder of processing firm Naturae, Nicolas Guarino, revealed that he has kept an eye on the list since it went live in April, estimating that there have only been about eight licensed retailers in New York that have even had their names officially put on the list at one point.
“It’s not very many. You really have to be egregious,” Guarino said. “Everybody isn’t just putting the hammer down at 30 days. In general, it’s only used when the retailer is not responding … They get posted on there, and everyone is like, ‘This is a bad actor.’”
Smacked, which opened for business in Manhattan in January 2023, was the first individually owned CAURD store to open, as well as the first to take on a loan from the Dormitory Authority of the State of New York (DASNY). While DASNY was initially intended to help CAURD licensees, these loans reportedly came with hefty regular monthly payments due back to the state—which may be why Smacked has fallen behind on its finances.
Opening in July 2023 in the Bronx, Statis Cannabis wound up on the list for similar reasons, according to company President Christian Chavez. Statis is still being run out of a location that was originally planned to be a small temporary pop-up shop. Due to the original permanent location falling through after an attempted partnership with DASNY, “all fell apart,” stated Chavez.
The incentive provided by the list may be a godsend, with Kudrewicz stating, “If you’re still operating on fumes, the 30-day turnaround is a big deal. That at least helps. But there’s just a lot of debt to pay back.”
