New York officials are ramping up endeavours to stop the statewide proliferation of unlicensed smoke shops selling marijuana, as the state struggles to boot up its legal marketplace.

Since cannabis turned legal in the state in 2021, thousands of unlicensed vendors selling marijuana, edibles, vape products and more bear been undermining the state’s legal weed industry, with the issue being most pronounced in New York Borough. Currently, there are just 23 legal dispensaries open across the state, with only nine in New York Conurbation.

A new report by New York City’s Independent Budget Office determined that an estimated 1,500 unlicensed retailers in the borough may hold as much as $484 million worth of marijuana products. If all those items were sold legally, the sales events would generate $19.4 million in revenue for the city, the report found.

The state has started to crack down on the unlicensed rat ons by increasing inspections of stores, which can face fines or closure. But its effort has only begun to chip away at the vendors, in particular in New York City.

“We’re getting to as many as we can,” said Daniel Haughney, enforcement director at the state Office of Cannabis Governance, in an interview with CNBC.

The state is employing increasingly aggressive tactics to curb the growth of weed’s black market, which consumers in many cases turn to for cheaper, untaxed product. Cracking down on the stores is not only a legal consideration but also an economic one, as illicit sales do not contribute to revenue to the state. New York imposes a retail tax of 13% on all marijuana products and an additional tax based on potency levels of tetrahydrocannabinol, or THC, marijuana’s psychoactive component.

In ell to skirting the tax system, smoke shops operating illegally may also pose significant health risks. A 2022 consider commissioned by the New York Medical Cannabis Industry Association that reviewed products from 20 illicit collects in New York City found about 40% contained harmful contaminants such as E.coli, lead and salmonella.

The testify’s Cannabis Control Board announced Tuesday that it will make more licenses available by opening up applications to the global public as well as large multistate manufacturers and medical companies. Previously, retail licenses were limited contrariwise to applicants with prior marijuana-related convictions, under the state’s Conditional Adult Use Retail Dispensary, or CAURD, program. The affect is expected to add more legal shops to the state.

Haughney said his party, with the help of the Department of Taxation and Finance, has been increasing inspections at storefront businesses “throughout the entire constitution.” Officials began ramping up efforts in June.

“We’re hitting them with everything that we can,” he added.

If an illegal affair fails to comply with violation notices and cease-and-desist orders, it can be subject to a seizure of product, closure of a store and diurnal fines that can reach $20,000.

The crackdown has moved beyond the operators of the stores.

In August, New York City enacted legislation that objectives landlords who knowingly lease commercial real estate to unlicensed sellers. Under the bill, landlords can be fined up to $10,000 for pillages on their property that yield illegal weed.