Cannacurio #77: The Unlicensed Cannabis Market

The US cannabis unlicensed market is estimated to be about $60 billion in sales – or more than twice the licensed market size of about $30 billion. Starting at the end of 2022, Cannabiz Media’s research team sought to find these unlicensed businesses and add them to the database. As the industry’s database of record, it was a gap that we thought needed filling. 

We operated under the notion that the customer facing unlicensed businesses were a lot like their licensed counterparts in that they often had websites, phone numbers and a social media presence. They only lacked a license number, a regulator and a license expiration date. So far we have added 1,001 records with more in the queue.

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Why Are These Useful?

Many Cannabiz Media clients use our platform for license verification to ensure that they are only working with licensed entities. Having unlicensed businesses in there as a “knockout” file helps ensure that our clients stay in compliance. Other Cannabiz Media clients are looking for leads and these unlicensed businesses need goods and services as well, so this collection of information serves to bring buyers and sellers together.  

We also expect this data to be useful for regulators to assist in pointing out trouble spots or to recruit future license holders. Here’s New York City’s first dispensary, surrounded by unlicensed competitors:

How did we find them?

To scale and scope the effort, we have focused on California, New York and Washington DC.   These regions have all decriminalized cannabis so unlicensed entrepreneurs have fewer risks.  We also prioritized customer-facing businesses like delivery and retail as they need to find customers, just like their licensed competitors.  The team found some unique markers that helped to quickly identify these businesses – here are just a few:

• Selling quantities greater than an ounce or even a pound of flower
• Touting “No Taxes”
• Offering items not produced in that state
• Providing delivery across state lines
• Allowing credit card payments
• Offering illegal drugs

In addition, we relied on the methods honed in the last decade to source this information and have been pleased with the verifiable data sourced from regulators, law enforcement and public complaints.  So far we have uncovered 1,001 unlicensed businesses across 9 states. We have another thousand in the queue and we will continue to add them as they are vetted.  

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Types of Businesses

We found a mix of unlicensed businesses spanning the cannabis value chain. However, the largest percentage of businesses are stores and delivery services.  

• Retailer 
• Delivery 
• Cultivator 
• Manufacturer
• Microbusiness 
  

Leaderboard

California has provided the most unlicensed businesses in the dataset. Given the size of the state and the long history of cannabis there, that is not a surprise. We realize this is a very small sample of the unlicensed market and that we’ll never capture all businesses. However, it does provide valuable context to the challenges that the new legal entrants face in places like New York.

 Key Points

These records share a lot of similarities to their licensed competitors. Noise NYC below has a store front, a full suite of social accounts as well as a phone number, website and an email address:

Most notable is that Noise NYC is a “chain” with multiple stores – like a Single State Operator:

Conclusion

Here on the east coast we see the enforcement efforts in New York City – where some estimate that there could be 1,500 unlicensed cannabis stores.  In other parts of the country we have seen stores with legitimate vape vending or tobacco licenses, shut down for selling cannabis.  We are in the process of gathering those “license adjacent” records as well to help draw the  clearest picture of the industry.  If you are a vendor or regulator with lists of unlicensed businesses, please send them to me at ekeating@cannabiz.media. 

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Authors

Ed Keating is a co-founder of Cannabiz Media and oversees the company’s data research and government relations efforts. He has spent his career working with and advising information companies in the compliance space. Ed has managed product, marketing, and sales while overseeing complex multi-jurisdictional product lines in the securities, corporate, UCC, safety, environmental, and human resource markets.

Shea Sanford is Product Manager for Cannabiz Media’s Cannabiz Intelligence product. He’s responsible for sleuthing out corporate transactions and keeping track of MSOs, SSOs, REITs, SPACs and any other acronyms we can find.

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Cannacurio is a weekly column from Cannabiz Media featuring insights from the most comprehensive license data platform. Catch up on Cannacurio posts and podcasts for the latest updates and intel.