Governor Hochul Signs Legislation to Reign in New York’s ‘Wild West’ of Illicit Cannabis

The “Wild West” which is currently New York State’s cannabis sales market, is about to become a little less wild. Governor Kathy Hochul signed new legislation on Wednesday to increase civil and tax penalties for the unlicensed and illicit sale of cannabis in New York. The legislation provides additional enforcement power to the Office of Cannabis Management and the Department of Taxation and Finance to enforce the new regulatory requirements and close stores engaged in the illegal sale of cannabis.

There are currently only eight licensed dispensaries, and one licensed delivery service, in a State of some 20 million residents which legalized weed in March 2021. To put that into perspective, there are 1,200 licensed dispensaries in California (which legalized cannabis in 2016), a State with twice the number of residents.

Any cannabis roll-out takes time of course. But time is money, and lacking any real enforcement, some entrepreneurs decided to go ahead without government approval. Actually, quite a few, although nobody really knows the exact numbers. In New York City alone, there were at least 1,400 illegal shops selling cannabis back in January when the City’s Sheriff, Anthony Miranda, decided to try and get a better idea of the situation.

Sheriff Miranda said then that illegal smoke shops are “rampant throughout the city”. But there wasn’t much he could do about it. Law enforcement in NYC could only punish illegal operators with a $250 fine.

Law enforcement was also having a problem with crime. With so many unsecured locations opening– many working largely worked on a cash basis–they became sitting ducks for criminals.

NYPD estimated in January that $1.5 million had been stolen so far —an average of $2,500 for the 593 reported robberies. And nearly a third of the robberies of smoke shops were committed by teenagers between the ages of 15 and 19.

Gov. Hochul’s new enforcement legislation hopes to get things back to the way government would like to see them. “Unlicensed dispensaries violate our laws, put public health at risk, and undermine the legal cannabis market,” she said. “With these enforcement tools, we’re paving the way for safer products, reinvestment in communities that endured years of disproportionate enforcement, and greater opportunities for New Yorkers.”

The legislation empowers the Office of Cannabis Management and the Department of Taxation and Finance to curb the sale and/or gifting of cannabis from unlicensed operators. Specifically, the Office of Cannabis Management can now assess civil penalties against unlicensed cannabis businesses with fines of up to $20,000 a day for the most egregious conduct.

The Office of Cannabis Management will also be allowed to conduct regulatory inspections of businesses selling cannabis products, as well as businesses that sell and give away cannabis and cannabis products in indirect ways, such as so-called “sticker shops.”

The Department of Taxation and Finance will also be able to conduct regulatory inspections of businesses selling cannabis to determine if appropriate taxes have been paid. The legislation also establishes a new tax fraud crime for businesses that willfully fail to collect or remit required cannabis taxes, or knowingly possess for sale any cannabis on which tax was required to be paid but was not.

Office of Cannabis Management Executive Director Chris Alexander said he “appreciates” the new legislation. “By giving the Office of Cannabis Management real power to shut down businesses trying to flout our laws and ensure that communities who were promised reinvestment dollars are not shortchanged…the State took a necessary step to protect the public health of New Yorkers and to support our state’s growing cannabis industry.”