New York Gov. Kathy Hochul on Wednesday finally released her plan for enforcement against unlicensed cannabis shops. It includes much steeper fines for unlicensed sellers and greater enforcement powers for cannabis regulators and tax officials, but, according to her announcement, promises not to allow local law enforcement to “perform enforcement actions against individuals.”
It’s an important balancing act, as regulators and lawmakers figure out what to do about 1,400 plus unlicensed storefronts in New York City alone, but strive not to slide back into criminalization.
Hochul introduced her plan as a draft program bill in both the Senate and Assembly, which remains under three-way negotiation between the governor and Senate and Assembly leaders. The legislation that amends both tax and cannabis law to “enable” cannabis and tax regulators, as well as local law enforcement, to “enforce restrictions on unlicensed storefront dispensaries.”
In other words, according to Hochul’s announcement, this legislation would allow, “for the first time,” these regulators to “crack down on unlicensed activity, protect New Yorkers, and ensure the success of new cannabis businesses in New York.”
The fines could be up to $200,000 for violations related to “illicit cannabis plants or products,” or up to $10,000 a day for those “engaging in cannabis sales without a license.”
“The continued existence of illegal dispensaries is unacceptable, and we need additional enforcement tools to protect New Yorkers from dangerous products and support our equity initiatives,” Hochul said in a statement on Wednesday.
The attention given to landlords in Hochul’s plan is significant. Of 35 pages, more than 10 lay out all of the ways in which officials would be given power to go after those who essentially enable unlicensed activity.
The draft legislation notes that, “following service of a notice of violation and order requiring immediate cessation of unlicensed activity,” the Office of Cannabis Management or the state Attorney General “may bring and maintain a civil proceeding in the supreme court of the county in which the building or premises is located” as such violations constitute “a public nuisance that presents a danger to the public health, safety, and welfare.”
Building owners and entities leasing properties, for example, where unlicensed cannabis activities are happening “shall be made defendants in the proceeding.” And, the legislation proposes fines of up to $10,000 for each day it is found that a defendant “intentionally conducted, maintained or permitted the unlicensed activity.”
These penalties “shall be paid to the office of cannabis management.”
The draft legislation includes a handful of definitions that also aim to pave a clearer path for future enforcement. For example, it added the term “purported cannabis” to mean “any product labeled as, advertised as, or held out to be, cannabis or a substance possessing the properties of cannabis or THC.”
Also, the terms “sell” or “sale” or “sold” mean “any sale, transfer of title or possession or both, exchange or barter, rent, lease, or license to use or consume, conditional, or otherwise, in any manner or by any means whatsoever for a consideration or any agreement therefor, or dispose of for compensation, including through a membership program or through some other indirect means.”
This would apply to the so-called “sticker shops,” in which a customer would purchase a random item and then be “gifted” cannabis. Cannabis regulators have insisted for months that this approach falls outside of what is legal, but this draft legislation spells it out.
The legislation details the inspection authority that OCM will have, including the “books, papers, invoices and other records of any place of business or vehicle.” Refusal could lead to a $150,000 fine.
This legislative session has seen the introduction of a number of “clean up” bills that aim to fix emerging issues in the state’s young cannabis program, from packaging and recycling to overhauling cannabis taxes.
Lawmakers passed the Marihuana Regulation and Taxation Act in March 2021 with equity top-of-mind. Regulators spent much of 2022 hiring for the Office of Cannabis Management and getting to work on rulemaking. Part of those rules included the decision to allocate a set of priority licenses to “justice-involved” individuals and related non-profits. Regulators made 150 of these types licenses available at first, calling them Conditional Adult Use Retail Dispensary (CAURD) licenses. Early this month, they doubled the number to 300, and so far, 66 CAURD licenses have been awarded. Five shops are open.
“The success of New York’s historic equity-based approach to the cannabis industry depends on upholding our cannabis laws,” Chris Alexander, executive director of OCM, said in a statement on Wednesday. “Entrepreneurs looking to participate in our legal cannabis industry – especially justice-involved individuals looking for a CAURD license – are being economically harmed by bad actors filling their storefronts with products that are questionable, unregulated and potentially dangerous.”