When New York’s first legal adult use dispensaries come online later this year, aspiring operators will have to get used to competing with tax-free Canadian product from sovereign Native American territory in New York’s North Country.
The St. Regis Mohawk Reservation, straddling the border between New York and Canada, allows travelers to move from one country to another through the reservation without going through customs. For almost three years cannabis dispensaries have been operating on the Reservation, funneling Canadian cannabis and wild edibles such as THC-infused shaved ice and THC-infused snack foods that look a lot like Cheetos and Doritos.
With a three year head start, dispensaries on the Reservation are dominating the regional cannabis market, while New York State only began accepting applications for adult use dispensaries on August 25. Despite this, the state’s Office of Cannabis Management and the Cannabis Association of New York have had little to say on the matter, considering the sovereignty of the Reservation, known as Akwesasne by its inhabitants.
Throughout the many dispensaries are budtenders who openly discuss which products come from outside of the reservation, even to reporters. It is more than an open secret, because few people on the reservation even acknowledge that it might be perceived as a problem.
“We get a lot of edibles from Canada,” one budtender nonchalantly told this reporter. Among the edibles were packages that mimicked popular snack brands, like Chips Ahoy, Sour Patch Kids and Cheetos. Packages in multiple stores carried Canada’s octagon THC logo. Others had California’s CA label. Clearly, some of the offerings had not been produced on the reservation.
When interviewed, budtenders working at reservation dispensaries repeatedly said they regularly see customers from as far as one or two hours away. So how will New York licensed establishments in adjacent towns going to compete? Considering the prices we saw, including US$1.58 prerolls, they probably won’t.
New York’s industry and regulators are hands off
Despite this potential for conflict, a representative from the Cannabis Association of New York, which represents the nascent adult use industry in the state, is not concerned with how cannabis is regulated on the St. Regis Mohawk Reservation.
“The tribal territories are sovereign territories. They create their own rules and regulations and, we don’t begrudge them, or their ability to do that,” said Dan Livingston, Executive Director of Cannabis Association of New York. “You have to take what’s going on along your borders into account, but, I don’t really anticipate a time when our association would ever be in the business of giving a sovereign tribal Nation a hard time for the policy decisions that they choose.”
Similarly, the state’s Office of Cannabis Management was reluctant to note any discord with Akwesasne.
“Cannabis flooding into the New York state adult use market is something that we don’t want. Whether it be from California or Colorado, or Massachusetts or Canada,” said OCM spokesperson Trivette Knowles.
Knowles was echoing an argument that was actually presented in a 2018 impact study on cannabis legalization in New York.
Reservation’s prices challenge state’s revenue estimates
“If marijuana is not legalized, the cross-border effects in NYS [New York State] are likely to be substantial, involving numerous counties and municipalities,” said the report, titled Assessment of the Potential Impact of Regulated Marijuana in New York State. “Legalization in neighboring jurisdictions raises the likelihood of revenue flowing from New York into those jurisdictions.”
The Assessment Report estimated that in the first year of legal adult use sales, New York state would still have an illicit market pulling in $1.7 to $3.5 billion in revenue. That estimate assumes illicit cannabis will be valued between $270 and $340 per ounce and that New York’s cannabis retail tax rate would be between 7% and 15%.
The Assessment Report warned that high taxes could dissuade consumers from abandoning the legacy market for the legal one.
“A higher legal market price will have a greater price effect, which will result in users less likely to exit the unregulated market,” said the Report.
Issued four years ago, in hindsight some of the Assessment Report’s estimates seem wild – especially since multiple dispensaries on the Mohawk Reservation are selling flower for $80 to $100 per ounce.
One Reservation dispensary manager claimed his and other local stores all recognize New York state’s 3 oz. per customer limit on transactions, but a renegade entrepreneur could easily fill their car with product in a single trip down the 10-mile strip of NY Rt. 37 that passes through the Reservation’s sovereign land.
Putting aside the Reservations’ rock bottom retail prices, the lack of taxes alone could be enough to cement Akwesasne’s regional cannabis dominance..
As it stands, New York state is set to impose excise taxes on exchanges of cannabis from both wholesaler to retailer and retailer to customer. The tax rates are based on THC concentration, with a half-cent per milligram of THC in flower, 0.8 cents per milligram of THC in concentrates and 3 cents per milligram of THC in edibles.
For example, one shop I visited sold an ounce for $80 that was close to 25% THC. That comes out to about $35 dollars in tax. The 1000mg pack of imitation Sour Patch Kids I saw on the reservation for $40, would have an extra $30 tax, assuming they were produced entirely in house.
In both cases, the price differences could easily offset the cost of driving an extra hour, so the economic impact of the reservation’s legal weed market will continue to be felt throughout the North County.
Unclear jurisdictions on tribal land
The St. Regis Mohawk Council issued its first cannabis licenses on Dec. 14, 2021 – three conditional cultivation licenses. Since then, the number of Council-approved cannabis businesses has jumped to 11 dispensaries and four cultivation sites.
As I reported previously, I counted about two-dozen dispensaries before I lost count, and the fact that I failed to visit one with a supply shortage implies that there is product from more than just four producers. This also indicates that there are clearly a lot of businesses operating outside of the Tribal Council’s authority.
Tribal Council spokesperson, Brendan White, confirmed this to me while adding that the Council is attempting to convert some of those businesses that have since foregone Council licensure.
“We want to get them into compliance,” he said.
Periodically active dispensaries on the Reservation have been raided by tribal police. At least one of the dispensary owners reportedly claimed that they had been authorized by “the longhouse,” referencing one of three governing bodies in Akwesasne who are often in conflict with the St. Regis Mohawk Council over who is in charge.
Federal authorities also appear to be aware that there is a possibility for trafficking. The U.S. Drug Enforcement Administration halted a large-scale operation in February.
According to the DEA, agents monitored a speed boat crossing south on the St. Lawrence River, whose cargo was then loaded into a convoy of trucks on the Reservation. That convoy was stopped by New York State Police after it approached the Lake Placid area, about 45 minutes southeast of the Reservation. The convoy’s alleged final destination was Florida.
The affidavit that preceded the indictments stated that the trafficking of cannabis from Canada through the reservation and into the United States started earlier than January 2020.
“Based on my training and experience, drug smugglers commonly use boats to smuggle narcotics between Canada and the United States,” wrote DEA agent Niles DuPont in the 8-page affidavit that led to the bust.
It seems that for now, the New York State government will maintain its “wait and see” approach to how cannabis from Akwesasne will affect the New York market.
“Native Americans living on federally recognized, sovereign tribal land can choose to operate dispensaries that are not regulated under the New York State cannabis law, which has been done in other states that have legalized cannabis,” an OCM spokesperson wrote Grown In. “The OCM has the ability to enter into agreements with tribes through tribal compacts to integrate them into the state program if all parties can agree to terms.”
In recent months, the St. Regis Mohawk Council has sought voter approval to enter into negotiations with New York State to expand reservation cannabis businesses into New York State. While this does not pose an easy solution, it does suggest that the debate over tribal weed will continue.