ALBANY, N.Y. (AP) — New York’s legal cannabis market has been hampered by inexperienced leaders who treated the state licensing agency like a “mission-driven” startup rather than a government office, according to an internal review released Friday.

The report detailed several problems at the state Office of Cannabis Management, including constantly shifting licensing rules, poor transparency and an absence of enforcement mechanisms, all of which have stalled the legal market and allowed illicit storefronts to flourish.

Gov. Kathy Hochul, who has called the state’s program a “disaster,” ordered the comprehensive review in March, hoping to address the cascade of bureaucratic stumbles and legal challenges that have plagued the agency.

“There are deep-seeded issues at OCM, issues that have limited its ability to fulfil its licensing role,” Hochul, a Democrat, said at a news conference Friday.

The governor announced the agency’s leader, Chris Alexander, would depart his post in the fall and that officials would begin a series of reforms to correct problems in the state cannabis office.

The state legalized marijuana sales with social equity in mind, reserving the first round of retail licenses to nonprofits and people with prior marijuana convictions, an effort to mend damage done by the war on drugs.

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But the process was soon beset by lawsuits, a slow rollout and other hurdles. In one case, a judge temporarily blocked parts of the program for months after finding state regulators wrote licensing rules that did not adhere to the law legalizing marijuana.

The state has had a little more than 120 legal cannabis dispensaries open since sales began in late 2022, while thousands of black market shops have cropped up. The problem is particularly pronounced in New York City, where unlicensed retailers have operated with impunity, often from glittering storefronts on seemingly every block.

Lawmakers this year strengthened local officials ability to shut down illicit shops, a move to correct a bureaucratic roadblock, and at one point, Hochul pressed Google and Yelp to stop listing illegal stores online.

The report determined the agency struggled to balance its social equity framework with the humdrum administrative duties of a government agency primarily tasked with licensing. “Since its inception, OCM has operated as a mission-driven policy start-up, but has struggled with the transition to a mature regulatory entity,” the report reads.

The review found that most of the agency’s senior leadership had little experience leading regulatory entities and changed licensing processes so frequently that an estimated 90% of applications required corrections because would-be retailers couldn’t keep up with the rules.

In one instance, the agency wasted significant time trying to create a unique mapping program when similar software exists within state government and was offered to the agency.

The report details a series of policy fixes to address the agency’s problems, such as hiring more staff to process licenses, streamlining the application process and hosting public “listening sessions” to identify issues, among other things.

“One of the great successes of this task force is the ability to point to the problems, which I think we all knew at some level that things were not working the way that they needed to,” said Jeanette Moy, the commissioner of the state’s Office of General Services tasked with leading the review.

“Everyone wants OCM to be successful. We want it for their staff, we want it for the leadership and we want it for the New Yorkers who want to see this industry thrive.”

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