New York Vowed to Shut Down Illegal Weed Shops. It Just Licensed One.

New York officials had said that those who jumped the line to cash in on cannabis would not be rewarded over those who played by the rules.

A year after New York legalized marijuana for recreational use, a bright-green sign shaped like the plant’s leaf signaled the arrival of a dispensary called Budega on an industrial corner in Queens.

The sleek shop, where customers purchase memberships for points that can be redeemed for weed, is one of thousands of illegal dispensaries that the state vowed to shut down. Their owners would be banned from the legal cannabis market, officials said.

But instead, Budega was awarded a retail license last month — the first confirmed instance of an illicit shop receiving one of the permits. The situation exposes lapses in the vetting process, undercutting New York officials’ assurances that those who jumped the line to cash in on cannabis would not be rewarded over those who played by the rules.

“They said this would not happen,” said Alex Norman, a licensee involved in a trademark dispute over the use of the name Budega. He owns Budega NYC, a clothing and lifestyle brand whose name he intended to use for his own dispensary.

The Budega situation has surfaced as the state Office of Cannabis Management is under immense pressure from the governor and the industry to ramp up the pace of licensing and expand the legal market. It suggests that the agency, which is understaffed and has about 30 people assigned to review 7,000 applications, lacks the bandwidth to stop some bad actors from gaming the system.

Budega received a license, but it has not been granted official clearance to open. When reached by phone last Wednesday, Haydee Velez Keeby, a Long Island woman who identified herself in city paperwork as the social club’s owner, said she felt “good” about receiving a license and insisted that she and her co-owners had been “following all the rules and regulations.”