The current New York State regulatory regime regarding adult use cannabis has been overwhelmed in New York City with an estimated 1500+ unlicensed cannabis retail shops and only six licensed shops.  Those unlicensed shops represent tens of millions of dollars of uncollected tax revenues anticipated under the New York State cannabis laws.  They also flaunt the New York cannabis laws and regulations’ location limitations, age limitations and content and quality control limitations. The State and City are painfully aware of these problems.  Recently laws have been passed by the State and proposed by the City that are meant to eliminate the unlicensed retail shops in New York City. Below is a quick summary of both. First the State law:

In May New York State passed a law as part of the State budget process that allows the Office of Cannabis Management (OCM), the New York State entity entitled to regulate and license with respect to cannabis, to assess civil penalties against unlicensed cannabis businesses. Fines start at $10,000 per day and rise to $20,000 per day for the most egregious offenses. The new law also authorizes OCM to conduct regulatory inspections of businesses selling cannabis and cannabis product as well as businesses that sell and give away cannabis and cannabis products in indirect ways.  The OCM may seize untested cannabis and cannabis products from unlicensed businesses, seek court orders, closing orders, and removal of commercial tenants selling cannabis and cannabis products without a license.  The law further authorizes the New York State Department of Taxation and Finance, the state agency responsible for collecting the taxes under New York’s cannabis laws, to conduct regulatory inspections of businesses selling cannabis to determine if appropriate taxes have been paid and to levy civil penalties in cases where they have not.  Finally, the law makes it a crime to sell cannabis and cannabis products without a license and establishes a new tax fraud crime for businesses that willfully fail to collect required cannabis taxes, or knowingly possess for sale any cannabis on which tax was required to be paid but was not.

Meanwhile, at the City-level, the New York City Council passed legislation on June 22nd that will hold landlords liable for renting space to unlicensed cannabis retail shops. Mayor Eric Adams has until July 22nd to sign or veto the bill or it will become law by no-action. The New York City Council bill specifically would prohibit a landlord from knowingly leasing commercial premises to a tenant for the distribution or sale of cannabis without a license. The first time an unlicensed cannabis seller is found to be operating in a leased commercial premises and fined or otherwise penalized, the city’s sheriff office, NYPD and other relevant City agencies can issue a written warning to the owner of the premises. If the unlicensed seller is later found operating in the same premises and fined again and the owner has not commenced eviction proceedings, the owner would be liable for civil penalties. New York city landlords can be fined $5,000 for the first offense and $10,000 for subsequent violations.

While it remains to be seen if this new combination of laws will pack the one-two punch the State and City are hoping for, they do represent potent new tools that previously did not exist in the fight against unlicensed cannabis retail shops.

If you have any interest in discussing further the new State law and the proposed City Council bill with respect to enforcement against unlicensed cannabis retail shops, New York cannabis licensing or the New York Cannabis laws and regulations generally, please contact me at bkern@Griffitts.co