Today, the New York State Office of Cannabis Management (OCM) published the first in a monthly series of enforcement action updates against unlicensed cannabis shops across the State.
“…seized illicit cannabis worth nearly $50 million…”
These updates will be released on the first Monday of each month going forward. During the month of October, investigators from OCM and the Department of Taxation and Finance (DTF) inspected 47 shops, including 21 re-inspections, suspected of selling unlicensed cannabis. These inspections resulted in the seizure of 730 pounds of flower, 622 pounds of edibles, 45 pounds of concentrate with an estimated value of $6,209,043. These actions bring the total of inspections to 289 locations, 79 of which have been re-inspected, to yield roughly 10,000 pounds of seized illicit cannabis worth nearly $50 million. OCM and DTF investigators will continue inspections each and every week across the State.
In October, OCM and DTF investigators conducted regulatory inspections in the Bronx and Queens. During these inspections, 8 locations were found to be selling cannabis and cannabis products without a license. OCM and DTF seized a total of 350 pounds of illicit cannabis during these inspections, specifically 202 pounds of flower; 13 pounds of concentrate; and 135 pounds of edibles. The seized items have an estimated street value of $1,713,186.
“…legal cannabis industry built on equity…”
“New York State has zero-tolerance for unlicensed cannabis shops that disregard local communities committed to creating a legal cannabis industry built on equity,” said Chris Alexander, Executive Director of The New York State Office of Cannabis Management. “Collaboration and coordination are necessary to build a successful and equitable adult-use cannabis market. In that spirit, we will continue to work diligently, using our enhanced enforcement powers to seize unlicensed products and fine-tune a more efficient closure process. This work requires an all-hands-on deck approach alongside local government officials and stakeholders to comprehensively address this public health crisis.”
In addition to these inspections and enforcement actions, OCM, the Real Estate Board of New York (“REBNY”), and the Manhattan District Attorney’s Office coordinated an October webinar attended by hundreds of commercial property owners and brokers across New York City. The goal of the October Webinar, titled, Unlicensed Cannabis Shops and the Real Estate Industry: Laws and Liabilities, was to educate the New York real estate industry on current laws and enforcement regarding legal and illegal cannabis dispensaries.
Also highlighted was the potential liability for landlords leasing commercial storefronts to unlicensed cannabis retailers, and options to evict the illegal businesses.
New York State currently has 27 licensed adult-use cannabis dispensaries and has approved 44 Cannabis Growers Showcases. All regulated, licensed dispensaries must post the Dispensary Verification Tool sticker near their main entrance. Any store selling cannabis that does not display this sticker is operating without a license.
Businesses found to be illegally selling cannabis have been issued Notices of Violation and Orders to Cease Unlicensed Activity affixed to the outside of the doors. Those businesses must appear at an administrative hearing, where the final fines and penalties they will face will be determined. Fines for the illegal sale of cannabis start at $10,000 per day and can rise up to $20,000 per day for the most egregious conduct. An additional fine of $5,000 can be levied for removal of the Order, and the inspected businesses may also be subject to additional violations and penalties under the Tax Law.
Additional fines may be assessed. The enforcement legislation passed in May 2023 also authorizes OCM to seek a State court order to ultimately padlock businesses found to be in repeated violation of the law. In addition, the law makes it a crime to sell cannabis and cannabis products without a license.
To bring many levels of government together to combat the illicit sale of cannabis, Governor Hochul announced partnerships between OCM and the Attorney General’s Office through which municipalities across the state can receive training on how to utilize a particular provision — Section16-A — of the new enforcement law signed by Governor Hochul in May 2023 to pursue padlocking orders in State Court. 16-A authorizes local governments, including county attorneys, with OCM’s approval, to pursue padlocking orders based on inspections conducted by OCM and the Department of Taxation and Finance instead of OCM having to petition the court for such an order against a business found to be engaged in egregious conduct. This authority significantly augments the ability for different levels of government to work together to shut down illegal cannabis operators.
In addition to these new partnerships with localities, the Governor announced that additional State agencies will now be bringing the weight of their business enforcement powers to bear as part of the State’s creative and aggressive approach to combating the illicit market. The Department of Labor and the Workers Compensation Board are joining these efforts to ensure businesses selling cannabis without a license are compliant with New York State labor and workers compensation laws.
This approach, which combines the enforcement powers of labor law, tax law, and cannabis law, can result in non-compliant business owners potentially facing tens of thousands of dollars in penalties as the result of a single inspection and violations, significantly enhances the State’s ability to crack down on those who engage in illicit sales, and reaffirms the Governor’s deep commitment to ensuring that the law is being followed and that New Yorkers are protected from potentially unsafe products.
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