Illegal pot shops selling goods on the cheap pose major challenge to legal stores, NYC Council warns

New York’s first recreational marijuana store is surrounded by shops that illegally sell cheaper pot products, challenging the state-sanctioned dispensary’s financial prospects, according to a blunt new City Council report.

A recent canvass by Council staffers found illicit cannabis sales in 11 of 17 smoke shops located within a roughly 10-block radius of the Housing Works Cannabis Co. dispensary in NoHo.

Most of the 11 stores “displayed seemingly illicit products openly,” stated the report, which was finalized ahead of a Wednesday Council hearing on marijuana regulation in the city.

It warned the spread of illegal sales could hamper the legal dispensary’s budding business.

“We know there is an illegal cannabis store, van or street vendor on what seems like every block in New York,” Councilwoman Gale Brewer (D-Manhattan), chair of the Council’s Oversight and Investigations Committee, said in the hearing.

“The proliferation of cannabis retailers over the last 22 months has gone almost unchecked by the city and state,” she added. “These illegal stores, it seems to me, suck up revenue that should be going to licensed dispensaries.”

Council staffers conducted their study Dec. 29, the same day that the Housing Works dispensary opened to much fanfare. The “tidal wave” of unlicensed weed sellers could threaten the financial health of new dispensaries as they open up, Brewer said.

In November, New York State issued its first 36 retail marijuana licenses. The Legislature legalized recreational cannabis use almost two years ago.

A second legal marijuana dispensary called Smacked was expected to open to the public this week in Greenwich Village.

Brewer praised efforts by the New York City sheriff’s office to crack down on a gray market of illegal weed sales that has exploded across the city.

But she said the city and state are facing significant challenges, in part because many New Yorkers believe that the unlicensed shops are legally selling the drug.

Illegal vendors are also offering a cheaper fix, the report found.

Weed vapes cost up to $45 more at the Housing Works outlet than at illegal shops, according to the study. Pre-rolls were $3 to $7 more, though cannabis consumers could save a few bucks on edibles from Housing Works.

The report said many businesses selling marijuana products “do not seem concerned about enforcement, no matter their location.”

The issue goes beyond enforcement, said Councilwoman Marjorie Velazquez (D-Bronx), who urged New Yorkers to report unlicensed sellers to their local Council member.

“We’re asking for our communities to join us in this fight,” Velazquez, chairwoman of the Consumer and Worker Protection Committee, told the Daily News after the hearing. “There are only two operating cannabis retailers in New York City at this moment.”

“If you’re not in those two stores, guess what?” she added. “If the store is selling cannabis, the likelihood is that they’re illegal.”