New York City Council members held their first major hearing on legal cannabis on Wednesday, and the hours-long hand wringing focused almost exclusively on how the city can rein in sprawling unlicensed cannabis sales across the five boroughs.
Council Members Gale Brewer, Marjorie Velázquez, and Lynn Schulman hosted the joint hearing as city and state officials attempt to successfully roll out legal adult use sales. The first legal adult use shop in the state opened its doors in downtown Manhattan on December 29, as Cannabis Wire reported.
The hearing, Brewer said, was prompted by a neighborhood survey that her office conducted on the Upper West Side at the end of last year. They found 26 unregulated cannabis shops. Since then, despite enforcement efforts that included both fines and product seizures, the number has grown to 28. There are no legal cannabis shops yet open in the neighborhood.
Meanwhile, there are estimated to be more than 1,200 unlicensed cannabis businesses in the city, according to New York City Sheriff Anthony Miranda. That number could be much higher. For example, one unlicensed shop might tip off another to close down before investigators arrive. Also, investigations related to unlicensed delivery services are challenging. And, there’s a whack-a-mole reality in which unregulated shops quickly reopen after seizures and fines, unfazed.
In response to a question from Brewer about whether building owners or landlords face penalties for housing unregulated shops, Miranda said that his office does send letters to landlords and that they are “in the process of finalizing an updated letter” with their “legal bureau.”
The “proliferation” of unregulated smoke shops “coincided with the COVID-19 pandemic, and that smoke shop operators were some of the only businesses opening brick-and-mortar locations amid pandemic-spurred vacancies and declining rents,” according to a committee report published ahead of Wednesday’s hearing.
“We are putting them on notice. Legally, we’ll figure out how to follow up with them if they fail to take corrective action,” Miranda said.
Another proposed solution is forthcoming from Albany. During Wednesday’s hearing, Sen. Liz Krueger, who co-authored the state’s adult use law, said that she’s currently negotiating with Gov. Kathy Hochul and the Assembly on an enforcement bill. Krueger told Cannabis Wire in September that she would reintroduce an amended version of the bill that she put forth at the end of the last session.
“If you are running one of these illegal shops, you’re not going to get a license from us, period. Because you know that you’re breaking the law,” Krueger said on Wednesday.
Throughout the hearing, one thing was clear: many of the state’s goals for legalization, from public health to equity to tax revenue, depend on eliminating unlicensed and unregulated sales.
New York’s law was crafted to prioritize equity, and regulators created Conditional Adult-Use Retail Dispensary (CAURD) licenses to give a head start to individuals who are “justice-involved,” which means that they have a cannabis conviction, or a close family member with one. So far, 36 CAURD licenses have been issued, and just one shop has opened, though several downtown Manhattan locations are expected to open their doors in the coming weeks.
The open shop, Housing Works Cannabis Co. is surrounded by unlicensed sales from both storefronts and trucks, which are “undercutting” the non-profit.
“How can we expect legal shops to compete in this kind of marketplace?” Brewer asked.
Lawmakers’ calls for a crackdown began to mount last fall, as Cannabis Wire reported at the time. But one question that has loomed large in recent months also emerged during Wednesday’s hearing: how can New York officials approach enforcement in a way that avoids re-criminalization?
One topic that came up multiple times was fines.
“We should all take a look at increasing … fines,” Shulman said, to applause.
Miranda discussed the two-week pilot task force that the city launched in November. It included the state’s Office of Cannabis Management, the city Sheriff’s Office, the NYC Department of Consumer and Worker Protection, and the New York City Police Department, “to address unlicensed businesses creating an ongoing public safety and public health crisis in many communities throughout the city.”
That pilot program included inspections of 53 locations throughout the city and more than 100,000 unregulated cannabis products seized, along with 600 pounds of cannabis, worth more than $4 million, Miranda said, leading to 500 civil violations and 66 criminal summons.
“It just can’t be a pilot. It has to be routine and present in government,” Brewer said. She asked Miranda for specifics about the task force, and whether it was made permanent.
“After the two weeks, we regrouped and we analyzed the information that we received,” Miranda said, adding that the task force is ongoing and that the more than 1,200 unlicensed cannabis shops that have been identified will be targeted with investigations.
And then there’s the issue of crime. Specifically, in 2022, there were 593 robberies at smoke shops, up from 250 in 2021. On the evening before the hearing, one such robbery resulted in a shooting.
“It’s with us now, it’s prevailing, and we’re doing everything we can to mitigate that,” Miranda said.
Members of the public were also invited to speak. Robert Bookman, founding member of the Hospitality Alliance, which represents thousands of the city’s restaurants, compared unregulated cannabis sales to the times of alcohol prohibition.
“To be successful, there must be rigorous enforcement,” Bookman said, adding that he opposed a suggestion of a transitional license, which came up earlier during the public comment period.
“We should not be entertaining the concept of giving a transitional license to people who are flouting the law.”
