Despite being half the size of the legal cannabis market in California, New York is poised to impact the larger industry and culture beyond its state lines and U.S. borders.

Why it matters: Even as cannabis is still simultaneously illegal at a federal level and only somewhat legal in 42 states, New York’s unique global identity and mix of industries will enable changes in perception and business operations, experts say.

Driving the news: New York is now one of 16 states that have passed legislation to legalize recreational use, with many aspects of the law taking effect immediately.

• How it works: Retail cannabis sales are expected to begin in 2022, but smoking cannabis in public is now permitted wherever smoking tobacco is allowed locally, and adults can possess up to 3 ounces of cannabis for recreational use.
• There are currently around three dozen marijuana dispensaries statewide for medical marijuana, and going forward, two new agencies will create and implement new regulations and licenses.
• The New York Governor's Office expects the industry to create 30,000–60,000 jobs and collect $350 million in annual tax revenue.

What they're saying: New York is one of the most visited destinations in the world, so the state can play “cultural cannabis ambassador that no other jurisdiction has played to date,” says John Kagia, chief knowledge officer of New Frontier Data, a marijuana market research firm.

• Going forward in New York, medical marijuana patients can be prescribed treatments for a larger list of medical conditions, which may expand the state's existing operations. 
• Existing medical operators can now also obtain a license to cultivate, process and distribute cannabis — while most other companies won’t be allowed to handle all parts of a recreational transaction. 

What to watch: Expect an East Coast domino effect.

• Govs. Ned Lamont and Daniel McKee, of respective neighbors Connecticut and Rhode Island, seem eager to align, while New Hampshire's Gov. Chris Sununu does not.

The dominos may also start to fall elsewhere.

• Starting July 1, Virginia will become the first southern state to allow adult use.
• Pennsylvania is a regional holdout as the state’s Republican-controlled legislature resists Democratic Gov. Tom Wolf’s commitment for change.

In the long run, New York may aid the East Coast in becoming a bigger market with more lobbying power. But the West Coast — Washington, Oregon and California — wins on price thanks to supply gluts and unlimited licenses.

• When Wall Street sees how the market develops on its own block, there’s some expectation that financial players will want the SAFE Banking Act passed so they can work with cannabis clients without federal penalties.

By the numbers: With approximately 28 million people of age, California is the largest legal cannabis market in the world — nearly twice the size of New York’s legal market (15 million).

• California generated $4.4 billion in legal marijuana sales in 2020, or roughly 20% of global cannabis sales. 
• New York is expected to generate about $3.7 billion in sales by 2025, which is about half of what California is expected to generate that year, New Frontier Data says. 

The bigger picture: As much excitement as there is for the economic benefits of an expanded cannabis industry, New York’s passage also demonstrates the social need for legalization and decriminalization.

• Black and Hispanic people are still arrested at higher rates for possession. 
• Democratic lawmakers fought and won against Gov. Cuomo to use a majority of the tax revenue toward disproportionately impacted communities, public education, and drug treatment and prevention. 
• New York’s legislation also lays out a goal for social and economic equity — specifically, that half of the state’s licenses will be given to women, minorities, disabled veterans, farmers and people who have been impacted disproportionately by cannabis enforcement. 

Yes, but: Opponents of broader legalization argue that increased use will lead to more incidents of impaired driving and that approving the New York bill sends a “message to children that marijuana is harmless fun endorsed by the state.”

The bottom line: There has never been a greater likelihood of public support in the U.S. for the legalization of marijuana, according to Gallup. As one of the most populated and influential states in the country — and a financial center of the world — New York will have an outsized impact on the shape of the cannabis industry.