When New York Governor Kathy Hochul our legislative tracker: priority licensing for individuals with prior cannabis convictions, geographic preference for communities with high rates of cannabis arrests, and a mandate that 50% of all licenses go to equity applicants.
What followed was one of the most complicated cannabis rollout stories in American history — a case study in how good policy design can be undermined by implementation failures, legal challenges, and the gap between legislative intent and bureaucratic reality.
The CAURD Program
The Office of Cannabis Management, created by the MRTA, devised a social equity licensing bottlenecks operators into the market before the larger wave of conventional licenses.
The program identified approximately 900 applicants who met its equity criteria and began awarding CAURD licenses in 2022. To give these equity licensees a market window before large MSOs could enter, the state simultaneously restricted conventional retail licensing — a sequencing decision that kept the market small but concentrated it in equity operators.
The program was quickly challenged in court by applicants who argued the CAURD criteria were unlawfully restrictive. Multiple injunctions were issued at various points, freezing license issuance and disrupting the rollout timeline. Applicants who had invested months of preparation and significant capital into applications waited through legal proceedings that stretched for a year.
When the injunctions were lifted and licensing resumed, the market that equity operators entered bore little resemblance to what had been promised. Supply was limited — the state had severely restricted cultivation licensing in the early years, producing a legal supply shortage that pushed prices high and limited the product selection that equity retailers could offer. The illicit market, which had operated openly in New York City for years, continued operating with minimal enforcement.
The Supply Problem
New York’s supply problem was, in retrospect, predictable. The state licensed cultivation slowly, prioritizing equity in cultivation as well as retail — a laudable goal that had the unintended effect of restricting total supply at a moment when demand was strong.
Legal dispensaries that opened in 2023 and 2024 often operated with limited menus, inconsistent availability, and prices well above the illicit market. Consumers who could access the abundant and competitively priced illicit market had limited incentive to pay a premium at the few open legal stores.
The state has subsequently moved to expand cultivation licensing more aggressively, and supply constraints are easing as more farms reach production. But the early supply shortage may have permanently damaged the perception of New York’s legal market — at a formative moment when consumer habits were being established.
Revenue Underperformance
New York’s cannabis tax revenue has substantially underperformed the projections used to sell the MRTA to legislators and voters. The State Comptroller’s office reported $97 million in cannabis tax revenue for fiscal year 2025 — a fraction of the $350 million annually that early projections suggested the legal market would generate within two years of full operation.
The underperformance is attributable to the limited number of open legal stores, the supply constraints that kept prices high, and the continuing dominance of the illicit market. New York City alone — a market that cannabis industry analysts call potentially the largest in the world — has fewer legal dispensaries than many smaller cities in states with mature cannabis markets.
The revenue gap has practical consequences: funding for the Social Equity Fund, which was supposed to provide capital to equity operators, has been less than projected. The reinvestment-in-communities component of the MRTA’s tax distribution has delivered less money to the communities it was designed to serve.
Signs of Progress
The situation is improving. The OCM has significantly accelerated licensing in 2025, with hundreds of conventional adult-use licenses issued across retail, cultivation, and processing. The legal store count in New York City crossed 100 in late 2025 — still low relative to the market size, but meaningfully higher than the single-digit counts of 2022-2023.
Supply constraints are easing. Prices are declining as competition increases. The illicit market, while still large, is no longer operating in a competitive vacuum.
“We’re building the market we should have had from day one,” said an OCM spokesperson. “The early years were harder than anyone wanted. The direction is now clearly right.”
For the equity operators who survived the early chaos — and many did not, their capital exhausted by delays and legal uncertainty — the improving market offers some vindication. The promise of New York’s MRTA was real. The execution was not.
Both facts will shape how the next generation of legalization advocates write their laws.
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