ALBANY — New York’s plan to legalize marijuana this year collapsed on Wednesday, dashing hopes for a potential billion-dollar industry that supporters said would create jobs in minority communities and end decades of racially disproportionate policing.
Democratic lawmakers had been in a headlong race to finalize an agreement before the end of the legislative session this week. But persistent disagreement about how to regulate the industry, as well as hesitation from moderate lawmakers, proved insurmountable.
“It is clear now that M.R.T.A. is not going to pass this session,” Senator Liz Krueger of Manhattan said in a statement on Wednesday morning, using an acronym for the legalization bill she had sponsored. “We came very close to crossing the finish line, but we ran out of time.”
She added, “Unfortunately, that delay means countless more New Yorkers will have their lives upended by unnecessary and racially disparate enforcement measures before we inevitably legalize.”
With just hours remaining before the session was scheduled to end on Wednesday, state lawmakers turned their attention instead to a backup plan to decriminalize, but not legalize, marijuana, which was introduced on Sunday.
The backup bill would reduce the penalty for marijuana possession and allow for certain marijuana-related criminal records to be erased. Other bills under consideration would expand the state’s medical marijuana program or regulate the hemp industry.
Gov. Andrew M. Cuomo, who had declared legalization a priority for this year, said he would support a decriminalization bill.
“I was asked earlier this week on a radio show if I would settle for decriminalization as a backup, and I said I keep fighting,” Mr. Cuomo said in a statement on Wednesday.
But, he continued, “We have now reached hour 20. Communities of color have been disproportionately impacted by laws governing marijuana for far too long and it has to end.”
Still, it remains unclear how much support decriminalization has in the Legislature. Ms. Krueger said on Wednesday that the Senate Democrats had not yet discussed the proposal and that she was “torn” about it, worrying that it would deflate future efforts for full legalization.
The failure to fully legalize marijuana was a blow to supporters who had held rallies in the State Capitol, bought social media advertisements and hired public relations firms for a furious last-minute campaign. On Tuesday, state lawmakers from Illinois, who successfully passed a legalization bill last month, traveled to Albany to meet with their New York counterparts.
A recent poll showed that 55 percent of voters supported legalization.
But the external pressure could not resolve an intraparty battle between state officials over who should control the estimated $1.7 billion in sales the recreational market could generate each year.
Mr. Cuomo had proposed creating a new state agency to oversee the industry and to decide how the money should be spent. But legislators, led by Ms. Krueger and Assemblywoman Crystal Peoples-Stokes of Buffalo, insisted on including in statute a guarantee that fixed proportions of revenue would be reinvested into communities most affected by the war on drugs.
Absent that guarantee, lawmakers, especially nonwhite ones, vowed not to legalize.
“I’m not willing to create a market that will allow existing wealthy people to gain wealth and leave out the people that I represent,” Ms. Peoples-Stokes said in an interview.
In the wake of the effort’s demise, Democrats blamed each other. Ms. Krueger said the governor had not lent his full support to the legalization effort, even sometimes “privately saying, ‘Maybe it’s not a good idea.’”
Rich Azzopardi, a senior adviser to the governor, said Mr. Cuomo’s office had been trying to devise a legalization bill that the Legislature would support for weeks.
“The Legislature wanted to do this outside the budget,” he said, referring to an April 1 omnibus bill. “The governor has always predicted it would be harder to do, and that’s where we are today.”
A diverse coalition of law enforcement officials, parent-teacher associations and health professionals celebrated the news of the bill’s failure, calling it a victory over a “predatory pot industry” that they said would threaten traffic safety and victimize communities already suffering from drug abuse.
“Today, New York legislators learned that commercializing marijuana brings along a host of significant health, safety and societal costs that result in no tax money and no social justice,” Kevin Sabet, the president of Smart Approaches to Marijuana New York, an anti-legalization group, said in a statement.
Opponents had especially focused their lobbying efforts on senators from suburban Long Island. Ms. Peoples-Stokes said on Wednesday that while her chamber supported legalization, the Senate did not have the votes.
Activists opposed passage of the alternative marijuana bills on Wednesday, calling them half-measures that would not address years of harm to communities of color. A coalition of public defenders including The Legal Aid Society and the Bronx Defenders said in a statement that the decriminalization plan fell “disastrously short.”
Like Ms. Krueger, they also worried that it would ease pressure for full legalization in the future.
But Ms. Peoples-Stokes, who also sponsored the decriminalization bill, said she was sure legislators would return to the issue.
“The market is so big. People are still going to want access to it,” she said. “But you cannot leave out the people that suffer.”