No one can reasonably argue that opening a business is tough, even for entrepreneurs with abundant hustle-and-grind energy. Opening a cannabis business is even tougher and goes far beyond what most people would consider normal.
The first New York adult-use cannabis dispensary opened its doors on December 29, 2022. Since then, the industry has been a roller coaster ride for small business owners who jumped at what felt like a once-in-a-lifetime opportunity to get in on the ground floor of New York’s legal cannabis market. Many hoped to build stable, long-term businesses and generational wealth for their families.
That certainly holds true at Purple Owl Dispensary in White Plains. Co-founder Beth Smith is in business with her son, Brendon, and his childhood friend, Juan Alverio. Her father, who owned a pharmacy in White Plains in the 1990s, came out of retirement at 82 to manage Purple Owl’s inventory and paperwork. Smith says she felt lucky to have her dad on board, given his experience in the highly regulated pharmaceutical industry; better yet, she adds, he is thrilled to be back working and engaging with the community. Smith balances her role as a reading specialist at an elementary and middle school in Mount Vernon with running the dispensary in the evenings. She says the team raised startup capital through family and friends and proudly notes they are slowly but surely making good on their loans.
Smith’s story is one of many. Bootstrapping entrepreneurs across the state have drained savings accounts, taken on personal debt, and leaned heavily on family and friends to enter one of the most complex and highly regulated industries in the country, with startup costs that often reach into the millions. While the risks were high, many trusted the promise of competent guidance from New York’s Office of Cannabis Management (OCM). However, OCM has struggled to manage the industry’s rollout effectively. Licensed operators across the state describe what they say is an agency plagued by continuing mismanagement, inconsistent guidance, and severely lacking communication. Entrepreneurs report that emails seeking clarification go unanswered for months, if they are answered at all. Meanwhile, they attempt to operate under strict compliance requirements and razor-thin margins.
These tags played a part in the difficult start to New York’s mandatory product tracing.
Licensed operators across New York say the state Office of Cannabis Management is plagued by inept guidance and inconsistent, incorrect communication.
Track & Trace Turmoil
The most recent—and for many the most damaging—example of regulatory dysfunction came with the long-anticipated rollout of New York’s mandatory product track-and-trace system. Nearly two years ago, OCM announced that every cannabis product manufactured, distributed, and sold in the state would eventually be required to use a track-and-trace system. The goal was to prevent diversion and inversion between the legal and illicit markets and to protect consumer safety through full recall and audit capabilities.
Operators, eager to provide transparency, prepared accordingly. Throughout the summer, businesses invested in software, trained staff, and purchased supplies to implement the system through a company called BioTrack. Then, at the last minute, the OCM changed vendors. With just a few months’ notice, operators were informed they would instead be required to work with the company Metrc, a move that forced businesses to abandon months of preparation and absorb substantial, unplanned costs.
Jason Ambrosino, founder of the popular brand New York Honey, which is sold in Westchester dispensaries, says the financial impact was immediate and severe. By the time the mandate took effect, his company had already shipped thousands of individual products that now required Metrc tags. Under the new rules, products must be re-tagged multiple times as they move through cultivation, manufacturing, and distribution, even when handled by the same operator. As a result, the nominal ten-cent tag fee can compound to more than 40 cents per unit by the time products reach the market. “That’s additional money we didn’t expect to have to pay,” Ambrosino says. He estimates that implementing Metrc will cost his business close to $2 million per year, compared with roughly $250,000 under the originally planned BioTrack system. For small and mid-sized operators already struggling to reach profitability, the difference is nothing short of devastating.
“New York’s Cannabis market holds enormous potential. It creates jobs, generates revenue, and builds prosperity in communities that were left out of the economic mainstream for decades. Realizing that potential requires strong leadership, a deep understanding of the regulatory framework, and a steadfast commitment to the people of this state.”
—Governor Kathy Hochul, in a statement to The Capitol Pressroom
Hidden Costs and Monopoly Concerns
According to the Cannabis Association of New York (CANY), this compounding cost was never clearly disclosed and functions as a hidden tax that disproportionately harms small operators. Many in the industry are calling it a monopoly, citing a state-mandated requirement that forces New York operators to purchase Metrc tags exclusively from a single vendor at a fixed price. According to CANY, New York appears to be the only state with such a restriction, preventing businesses from sourcing approved tags at competitive market rates. Following urgent, pointed advocacy from industry groups, the OCM extended the deadline for retail inventory uploads to January 12, 2026, allowing dispensaries to remain open through the critical holiday sales season rather than shutting down to complete massive data entry projects.
In 2021, New York State was the 15th state in the nation to legalize recreational marijuana use.
20 licensed cannabis dispensaries were operating in the Westchester area as of October 2025. Tax revenue generated in the MidHudson Valley has surpassed $8 million.
While retailers received additional time, cultivators, processors, and distributors did not, further exacerbating the problem. They remained subject to the December 17 inventory deadline, resulting in a disjointed rollout that severely disrupted the supply chain and left retailers facing empty shelves for the holidays. Jen Gierum, founder of Highlife Health, a dispensary in New Rochelle, says, “The fact that they rolled this out last minute during the holidays is absolutely insane to me. This is our busiest time of the year, and last week, I didn’t get over 50% of my deliveries because they weren’t Metrc compliant.”
“That’s additional money we didn’t expect to have to pay.”
—JASON AMBROSINO, founder of New York Honey, on the cost of implementing Metrc
Bleeding out, One Regulation at a Time
To hear some New York cannabis entrepreneurs tell it, the industry is slowly bleeding, not because demand isn’t there, but because poor regulatory governance continues to add friction, cost, and uncertainty at every step. Between a 9% excise tax at the wholesale level and an additional 13% at retail, margins are already thin. Add sudden compliance costs, frozen purchasing, and shifting rules, and many operators say they are questioning whether it still makes sense to stay open.
Matthew Nicoletti, co-founder of Quality High dispensary in Sleepy Hollow, shared that when he and his partner applied, the state initially required applicants to have a retail lease in hand before applying for a license. It ended up taking them six months to get approved, while watching their funds deplete month after month as they paid their rent, only to have the OCM reject their location four months after approving it.
“The state claims it received new information and sent us an email revoking the location, stating it was no longer compliant with state regulations,” Nicoletti says. “We had spent tens of thousands of dollars based on their approval, only to be told later, ‘Oops, we were wrong.’ We paid rent for a full 12 months and never even occupied the space.”
“To say we were disheartened would be an understatement,” said Nicoletti. “We are just two guys from Westchester trying to go after our dream of owning a cannabis company.” Thankfully, everything worked out in the end. “We couldn’t be happier to be in Sleepy Hollow. We feel so supported not only by the local municipality but also by the other business owners,” adds Nicoletti. The new location is across the street from town hall, which also includes the police and fire departments, the mayor’s office, town court, and the buildings department. “Everybody’s there, all eyes are on us,” he chuckles.
Federal Rescheduling Provides Relief
President Trump delivered a long-awaited win for the cannabis industry on December 18, 2025, when he directed the Department of Justice and the Drug Enforcement Administration (DEA) to finalize the process of moving marijuana from Schedule I to Schedule III under the Controlled Substances Act that the Biden administration initiated. While many industry stakeholders argue that full de-scheduling is ultimately needed to support long-term growth, rescheduling is a meaningful step forward that acknowledges cannabis’s medical value and opens the door to expanded research. For now, cannabis remains federally illegal. Just as important for small business owners, Schedule III status removes the application of Section 280E of the federal tax code that has long burdened licensed cannabis operators and is expected to provide immediate financial relief for businesses operating on narrow margins.
Local resident Allison Kirchhofer, director of cannabis practice at the accounting and advisory firm Sax, says the impact of rescheduling will be felt quickly. “Cash flow is the biggest challenge we see,” Kirchhofer says. “We work with New York clients weekly to forecast cash, decide which bills can be paid, and make sure they can hit payroll.”
Under 280E, cannabis businesses are taxed on gross profit rather than actual net income, often resulting in effective federal tax rates of about 70%, even in years when a company operates at a loss. Because expenses such as payroll, rent, utilities, marketing, and insurance are not deductible, many operators are taxed on what Kirchhofer describes as fictitious profits.
Jen Gierum of Highlife Health dispensary says that although New York State has decoupled from 280E, allowing standard deductions at the state level, the federal tax burden has continued to strain cash flow and limit reinvestment in her business. “It just prevents us from being able to expand and put money back into the building, because everything needs to go into reserves for taxes,” she explains.
Once rescheduling is finalized, Kirchhofer says operators will finally be taxed like other legal businesses, freeing up capital that many need to stay open. She added that while rescheduling cannabis provides some tax relief, businesses that end up failing do not have bankruptcy protection to fall back on because cannabis is still federally illegal under the law.
Banking Barriers and Financial Struggles
Cannabis operators also face a lack of access to traditional business banking services and the ability for consumers to pay using credit or debit cards, since many financial institutions consider the risk too high to service a federally illegal industry. According to Kirchhofer, “There are banks that will service the industry, but they’re expensive, with a lot of hurdles and ongoing reporting required on a regular basis.”
Jen Gierum says she wants to purchase the building where her dispensary operates but cannot secure a loan under current federal law. Because large banks will not lend to cannabis businesses, even profitable operators are effectively locked out of conventional real estate financing. As a result, she explained, cannabis entrepreneurs are often targeted by predatory lenders offering loans with unfavorable terms and extremely high interest rates.
In the cannabis industry, unfair competition from illegal operators, market saturation, and crippling tax burdens drive down profits and make reinvestment difficult.
“The minute anybody hears that I’m involved in cannabis, they automatically think that I’m a billionaire,” Gierum notes. “They don’t know how tough this industry really is.” She added that any other real estate deal would move forward, but income generated from cannabis is still not treated the same way.
The lack of banking access has also hurt Gierum’s delivery business, which she has been eager to launch. She described frequent frustrations when customers place orders, only to have payments blocked by their bank when transactions are tied to Apple Pay or similar services, resulting in lost sales.
“I think the way we support our customers, and our employees, is what sets us apart.”
—JEN GIERUM, founder of Highlife Health, a dispensary in New Rochelle
Confusion Over Fake Storefronts
Just as consumers trust the FDA to ensure the food and drinks they buy are safe to consume, they also trust that retail stores in their communities selling cannabis products are legitimate and properly licensed. Unfortunately, a proliferation of storefronts across New York masquerading as legal cannabis businesses continues to sell untested and illegal products, confusing unsuspecting consumers about their legitimacy.
The OCM has the authority to penalize unlicensed cannabis businesses, including issuing fines of up to $20,000 per day for egregious violations and initiating the closure of locations operating without a license. However, according to numerous licensed operators, the agency lacks the resources to consistently enforce those penalties. This lack of enforcement not only sorely undercuts licensed businesses that are paying a high price to operate legally but also puts consumers at risk and allows minors access to cannabis products without age verification. Licensed dispensaries are required to check valid identification before allowing anyone to enter.
What’s in It for Westchester?
According to the Office of the New York State Comptroller, currently led by Comptroller Thomas DiNapoli, 23 licensed cannabis dispensaries were operating in the Westchester area as of January 2026. Tax revenue generated in the Mid-Hudson Valley has surpassed $10 million.
Despite that revenue, county officials say they are struggling to distribute cannabis tax dollars as required by law. The New York State Association of Counties issued a press release expressing frustration with the OCM for failing to provide sales tax revenue reports within the timeframe mandated by the Marijuana Regulation and Taxation Act (MRTA).
County leaders and finance officers are calling on the OCM to address what they describe as serious deficiencies in the reporting systems used to share sales data with counties. Under the MRTA, counties are responsible for distributing 75 percent of the local 4 percent cannabis excise tax to the cities, towns, and villages where dispensaries are located.
However, many counties say they have not received timely or complete sales information from the OCM, making it difficult to determine how much revenue each municipality is owed. The MRTA requires counties to distribute cannabis tax revenue quarterly within 30 days of receiving funds from the State Comptroller, but persistent delays in sales reporting have made compliance challenging.
Looking Ahead: Survival of the Fittest
Despite all of New York’s challenges, industry expert Allison Kirchhofer sees a light at the end of the tunnel. “If you look at the viability of the industry overall, it looks great, but if you look at each operator, they all have their challenges, and it’s going to be a survival of the fittest at the end of the day. Not everyone’s going to make it through, but it is still a growing, amazing market for our licensed dispensaries.”
Writer Pam Chmiel is the editor of the Cannabis Industry Journal and producer and host of the “Innovating Cannabis Podcast,” where she interviews business leaders, scientists, innovators, and creators. She lives in the NYC metro area.
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