Stakeholders in New York's cannabis industry are growing apart about how regulators must fix its dragging rollout as the state Office of Cannabis Management undergoes a state executive review.

The Cannabis Farmers Alliance on Wednesday blasted the Cannabis Association of New York in response to a letter that the organization sent to the Cannabis Control Board last week warning against the swift issuing of several more retail licenses. As part of its ongoing OCM review, the executive chamber is pressuring board members to expedite hundreds of retail licenses to defeat the state's thriving illicit market.

CFA leaders said CANY's argument that a steep increase of licenses could flood New York's market or cause a collapse is off base, and is an attitude that will only deepen the shortfall.

"[That] stance inadvertently supports the proliferation of the illicit market — a direct competitor that undermines our regulated system and continues to thrive amidst these restrictions," CFA leaders wrote. "Allowing the current situation to persist sends a concerning message to every legal retailer in New York state whose supply is awaiting sale."

The Cannabis Control Board has received thousands of applications for retail licenses that OCM has not reviewed with its limited staff.

The CFA cited New Frontier Group data that estimates New York's illicit market is valued at $7.4 billion — or 50% more than the revenue OCM estimated revenue for the third year of the legal market, which currently generates around $200 million.

"We urgently need a fully functioning legal market to attract customers who currently resort to illegal shops," according to the letter. "The restriction on legal stores only perpetuates the dominance of the illicit market. Our stance is clear: enforcement alone is insufficient without a corresponding increase in legally sanctioned retail outlets."

Leaders with CANY — the state's largest cannabis association — declined to be interviewed, but said in a statement the intention of the group's letter has been widely misunderstood and they want to have an open dialogue about the issue.

"Let’s be clear: CANY supports expanding licensing, especially in collaboration with market participants," CANY leaders said in a prepared statement. "As an industry association, we put the voice of our membership first. We thank those who agree with our premise that we need a constructive dialogue that supports the interests of all stakeholders in New York's cannabis industry.”

OCM Director of Cannabis Policy Jon Kagia made a presentation at the April 11 Cannabis Control Board meeting about the dangers of issuing too many licenses and how it could collapse New York's market. California's cannabis industry has taken a similar blow with hundreds of pot shops going out of business.

The more dispensaries in a jurisdiction relative to the population, Kagia said, the less money the average dispensary makes.

"The balance that needs to be managed is making sure that there are enough legal dispensaries to serve everyone in the state of New York, to make sure consumer access is not an issue, but also ensuring that it's not done in a way so you don't have this very acute downward revenue pressure that you have when you have too many licenses," he said during the meeting. "Because what happens is, it acutely impacts profitability."

But state Senate Subcommittee Chair Jeremy Cooney told Spectrum News 1 it's imperative for the Cannabis Control Board to issue more licenses of all types.

"There's no question that we need to approve more adult-use cannabis licenses," Cooney said in a statement. "Applicants have waited long enough and invested significant dollars; how much longer can we delay? An overwhelming majority agree that we need more licenses, transparency, fairness and a renewed commitment to social equity. The only way to effectively shut down the illicit market in New York is to expeditiously open legal businesses."

The disagreement shows a potentially deepening divide among cannabis stakeholders about how to build up the state's recreational market.

And cannabis farmers, who have been sitting on thousands of pounds of flower and product for three years, say they have more than enough to stock shelves across the state.

"Show me the data that indicates that there will be an oversupply or that it's going to cause public health issues," Cannabis Farmers Alliance acting President Joseph Calderone said. "The program really just needs to be open and we have to allow the winners and losers to emerge from it. ...We really just need to take the boot off the neck of the industry and allow it to mature without the brakes being put on."

Many cannabis farmers in the state are facing financial ruin with the shortfall of legal stores. The CFA recently polled the state's 289 licensed cannabis cultivators, and 97% of those who responded said they're operating at a loss.

"The burden rate for our farmers is $300,000 a year," Calderone said. "It's really difficult to make business decisions."

Gov. Kathy Hochul said Tuesday things have improved since she directed Office of General Services Commissioner Jeanette Moy to review department leadership, protocols and operations. The governor added the license approval process must be expedited to help farmers and other applicants who want to get involved in the state's cannabis industry.

But state lawmakers Thursday night said a proposed fund in the budget to help distressed cannabis farmers was removed from the state's $237 billion spending plan during negotiations.

Ongoing issues and delays with OCM have led some cultivators to decide to stop growing the crop. 

"Without a supply, there's not going to be a legal market this year," Calderone said. "Growing season is upon us right now."

Ulster County Executive Jen Metzger is a former state senator and was an initial member of the Cannabis Control Board who attended the opening of a new dispensary in New Paltz on Wednesday.

Metzger said balancing canopy supply with approved licenses is a challenge, and OCM needs more staff to speed up the licensing process.

"It's an art as much as a science, but I have faith we'll get to where we need to be in New York," Metzger said.