New York cannabis industry enters 2026 with growth, uncertainty – Rochester Business Journal

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Special to the RBJ//January 14, 2026//
(Depositphotos)
New York cannabis industry enters 2026 with growth, uncertainty
(Depositphotos)

Special to the RBJ//January 14, 2026//

As 2026 begins, New York’s cannabis industry is no longer brand new — but it’s not yet stable either. Rochester-area operators and attorneys say the year ahead will be defined by a tug-of-war between expanding opportunity and persistent uncertainty.
“The progression that has been made is substantial to us retail operators,” said Britni Tantalo, CEO and co-founder of Flower City Dispensary Inc. and president and co-founder of the New York Cannabis Retail Association, about the changes she’s seen in the last year alone.
When New York State first began accepting license applications for cannabis retail operations in the summer of 2022, Tantalo applied immediately. Flower City Dispensary, located in Victor, celebrated its one-year anniversary open for business in December 2025.
“There is a deep desire from our community to learn,” Tantalo said. “People don’t just want to consume cannabis; they want to know more about it, because so much innovation and ingenuity at a rapid pace is being applied to cannabis in New York state right now. It’s an exciting time.”
As 2026 begins, Tantalo says New York’s legal cannabis industry is showing clear signs of consumer-driven momentum, but operators are still working through the practical realities and regulations of building a stable marketplace.
For example, Tantalo said when her dispensary first became operational, state regulations limited her business to two signs, which made it difficult to even let customers know she was open.
“My particular location was very vacant for a while, so people were unfamiliar with looking there,” she said. “Having two signs made it even more difficult to let our community know that we were there.”
Tantalo said retailers now have more visibility thanks to some recent changes in signage rules. She is optimistic about that, as well as about the potential return of grower showcases – community-centered events that allow operators across the supply chain to engage with customers and build education and visibility.
“It gives you that open outdoor time where you can engage with your community and educate them again,” she said, adding that it could also become a meaningful revenue source for legal businesses.
Tantalo also credits improvements in collaboration across the industry, pointing to increased engagement from state legislators and evolving communication from the Office of Cannabis Management (OCM). “We have so many senators and assembly members that have stepped up and engaged with us,” she said, adding that stronger communication with operators is a necessity.
However, significant operational challenges remain — including a major transition underway with the state’s track-and-trace system, the seed-to-sale inventory system used to track cannabis as it moves from cultivators and processors to distributors and retail shelves.
New York initially selected BioTrack as the state’s track-and-trace vendor, but late last year, the OCM unexpectedly began shifting operators to Metrc, software for secure, end-to-end cannabis supply chain visibility, that requires businesses across the supply chain to migrate inventory and comply with updated tagging and reporting steps.
Tantalo said she supports the intent of track-and-trace — strengthening market integrity and consumer safety — but worries about cost burdens that ultimately land on customers from the vendor change. “We just want to ensure we’re not increasing the cost of legal cannabis,” she said.
For growers and processors, the transition to New York’s new track-and-trace platform has created immediate disruption, according to Zachary Sarkis, founder of FLWR CITY Collective, which partners with farmers to craft high-quality, sustainable products.
Sarkis said the timing of the track-and-trace change is especially frustrating because cultivation quality across New York is improving — giving the state a stronger foundation for long-term growth.
“This past year we grew the best weed we’ve ever grown,” Sarkis said, pointing to increased consistency, better production practices and stronger output from small indoor growers and farms.
But Sarkis argues that this momentum is threatened by the state’s compressed rollout of Metrc. In addition to a steep learning curve, he said the accelerated timeline during the holidays created confusion and bottlenecks across the supply chain — slowing purchasing and delaying product testing during what is typically a peak sales period.
“December sales were the worst they’ve ever been for small operators,” Sarkis said, adding that some retailers entered 2026 with inventory gaps because local brands were delayed or temporarily unavailable.
Sarkis said the transition has also put disproportionate pressure on smaller operators, as inventory that would normally move through distribution has been slowed or temporarily frozen while businesses complete new tracking and tagging requirements.
“At the end of the day, the government needs to make this right for its New York state businesses,” Sarkis said. “New York state needs to step up and prove that it is willing to support all its cottage industries.”
Ryan Martin, co-founder and co-owner of MJ Dispensary, said New York’s retail cannabis market is entering 2026 with momentum even as operators navigate regulatory uncertainty and inconsistent pacing at the state level.
MJ Dispensary opened its first location in Henrietta in December 2023, becoming Monroe County’s first recreational cannabis dispensary. In late 2025, MJ Dispensary opened a second location in Spencerport.
“It’s been a wild ride,” Martin said, “but I would do it all over again.”
Looking ahead, Martin said the biggest opportunity is unlocking the market’s full potential as regulations mature and more consumers shift toward legal, regulated products.
“This is a multi-billion-dollar industry that is just being held back,” Martin said. “It hasn’t yet reached its full potential.”
The biggest challenge, he said, is the continued lack of stability at the state level, particularly when it comes to staffing consistency at the Office of Cannabis Management. Martin also said some marketing restrictions remain a barrier for licensed retailers trying to build public awareness and compete with unlicensed sellers.
“We want everybody to know that legal cannabis is out there, but yet we’re hindered by the fact that we can’t advertise and promote our companies,” he said. “We’re trying to start a brand-new industry in New York state.”
Martin said he is closely watching federal developments tied to rescheduling and the potential impact on banking access and business taxes. Banking remains a persistent hurdle for licensed operators, he said, and he criticized the tax structure and burdens cannabis businesses face.
Looking ahead, Martin said he plans to continue engaging municipalities that are weighing whether to welcome cannabis businesses. With operating data now available locally, he said communities can better evaluate potential benefits — including local tax revenue and regulated consumer access — as the legal market continues to take shape.
“There are a lot of things to look forward to in 2026 and beyond for this industry as it grows,” Martin said. “I’m really blessed to be a part of it and will do my part this year to talk to other towns to have some cannabis conversations to see whether or not now is a good time to bring legal cannabis in.”
Attorney Jacob H. Zoghlin, a partner at Underberg & Kessler who chairs both the firm’s environmental practice group and municipal practice group, said one of the biggest opportunity drivers for New York’s cannabis market in 2026 may come from outside Albany: federal policy.
“From a legal and regulatory perspective, one of the most consequential developments shaping opportunities in 2026 is the anticipated federal rescheduling of cannabis from Schedule I to Schedule III under the federal Controlled Substances Act,” Zoghlin said. “In December 2025, the White House issued an executive order directing federal agencies to expedite this rescheduling process, reflecting a formal policy shift toward recognizing cannabis’ accepted medical use and lowering its classification from the most restrictive category.”
Zoghlin emphasized that rescheduling would not immediately legalize cannabis at the federal level or override state law but could strengthen the New York market and provide potential relief from a longstanding tax barrier.
“Perhaps the most significant immediate impact of federal rescheduling will be relief from the punitive federal tax treatment imposed by Internal Revenue Code Section 280E,” he said. “Under current law, because cannabis is a Schedule I substance, state-licensed cultivators, processors, and retailers cannot deduct ordinary business expenses such as payroll, rent, and utilities, effectively inflating their federal tax burden well above typical corporate norms.”
Zoghlin also pointed out that rescheduling removes one of the principal legal risk factors that have long deterred banks, credit unions, and institutional lenders from offering comprehensive services to cannabis businesses.
“Although rescheduling alone does not guarantee immediate access to federally insured banking, it significantly lowers regulatory risk and is likely to encourage more financial institutions to engage with state-legal operators,” he said.
When it comes to challenges facing New York’s cannabis industry in 2026, Zoghlin flags the persistent role of litigation in shaping, and often disrupting, the regulatory landscape.
“Since the launch of the adult-use program, lawsuits challenging licensing criteria, social equity preferences, enforcement authority, zoning decisions, and agency rulemaking have become a recurring feature of the market rather than an exception,” he said. “These cases matter not only because of their ultimate outcomes, but because of the interim relief courts can and do grant.”
Temporary restraining orders and preliminary injunctions have the practical effect of freezing licensing rounds, delaying enforcement actions, or pausing regulatory initiatives mid-stream, Zoghlin said, adding that, from a business perspective, litigation-driven uncertainty undermines the predictability that regulated markets require to function efficiently.
Attorney Jason Klimek, co-leader of the cannabis industry team at Harris Beach Murtha, said he sees continued growth as one of the biggest opportunities for New York’s cannabis industry in 2026 and believes the market has not yet reached a saturation point.
“The market is just exploding,” Klimek said, noting the rapid expansion in licensed retail. “I think we started 2025 with somewhere around 300-ish dispensaries and ended with around 550.”
Even as more licenses come online, he said, many dispensary operators are continuing to see revenue growth—a sign the market is still expanding. He also pointed to expanded indoor cultivation as a meaningful market shift.
Klimek said this growth is beginning to attract more private investment capital than the industry saw in prior years, helping fund expensive projects such as indoor cultivation.
“OCM has opened up the indoor cultivation, which the market had really been kind of clamoring for since the start,” said Klimek, adding that increasing New York’s in-state indoor supply could help stabilize the market and reduce diversion pressure.
Another opportunity area, he said, is legal clarity around municipal restrictions that limit where dispensaries can be located. Klimek described downstate litigation challenging local laws that contravene state cannabis regulations, including zoning and distance restrictions.
If appellate courts uphold decisions finding those rules preempted by state law, he said, the impact could be significant, because local siting constraints have created one of the biggest hurdles for legal operators.
“One of the biggest problems in New York right now is the lack of real estate for dispensaries,” he said. “When somebody’s trying to locate a dispensary, it’s next to impossible.”
Another challenge Klimek pointed out is inconsistent state leadership and shifting interpretations from the OCM that can make it difficult for operators to plan expansions, structure compliance decisions, or predict regulatory risk.
“Even if you don’t like the outcomes of decisions, if they’re consistent, you can plan around them,” he said. “Businesses love consistency.”
Caurie Putnam is a Rochester-area freelance writer.
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