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As Illegal Pot Dispensaries Thrive, NYC Goes After Landlords

Manhattan District Attorney Alvin Bragg said his office has sent notices to more than 400 smoke shops.

AP Photo/John Minchillo

NEW YORK (AP) โ€” In a renewed push to snuff out New York City's thriving illegal cannabis market, Mayor Eric Adams and Manhattan's top prosecutor announced Tuesday that they would go after landlords who allow hundreds of illicit shops to operate.

During a news conference with the mayor, Manhattan District Attorney Alvin Bragg said his office has sent notices to more than 400 smoke shops that illegally sell cannabis, warning them of potential eviction proceedings. If shop owners do not cease operation, his office would seek to force property owners to evict the shops.

It was the latest effort by authorities to force the closure of illegal dispensaries that could undermine the state's nascent legal cannabis market, which began rolling out in recent months and is expected to quickly grow as more state-sanctioned shops open.

When the state legalized recreational marijuana two years ago, "many people took it that you can just open up a location any way you want," Adams said.

Unauthorized pot shops have cropped up in droves, operating out in the open โ€” and offering cheaper prices than the legal stores, where the products are highly taxed. The number of illegal shops across New York's five boroughs could exceed 1,200, according to some estimates.

The illicit stores are cashing in on a lucrative market that the mayor says could reach $1.3 billion, potentially generating $40 million in yearly tax revenues for the city โ€” as long as they are not undercut by illegal offerings.

"Marijuana legalization in New York came with rules, and those rules must be respected," Bragg said. "Instead of respect for the law, we have seen ... the proliferation of storefronts across New York City selling unlicensed, unregulated, untaxed cannabis products."

The notices say that the district attorney's office is prepared to use its authority "to commence eviction proceedings of commercial tenants who are engaged in illegal trade or business," adding that prosecutors within five days of the written notice would "take over such eviction."

The New York Police Department has sued four illicit cannabis shops in Manhattan's Lower East Side to try to shut them down under the city's nuisance and abatement law, as well as the state's new marijuana rules. The city said it took the action after a decoy operation found evidence that the shops sold cannabis products to people below 21 years of age, the legal age to buy marijuana under state law.

The state legalized recreational marijuana use in March 2021 and authorized the Office of Cannabis Management to begin establishing a legal marketplace. Most of the shops are to be operated by people of color who had been incarcerated by prohibitionist laws.

Thus far, the state has issued 66 licenses of the 175 the state expects to distribute. Only two shops have opened, but the rate of openings is expected to accelerate in the coming months.

"Those legitimate businesses face stiff competition from shops not following the rules," Bragg said.

He said it was also a safety issue to ensure that dangerous products, including those containing contaminants, do not make it out on the market.

"These illicit storefronts are putting public health at risk while undermining our ability to build an equitable market that works to offset the harms caused by the disproportionate enforcement of cannabis prohibition," said Chris Alexander, the executive director of the state cannabis office.

Matt Mundy is the general counsel for RIV Capital, which operates four medicinal dispensaries in the state, including one in Manhattan.

Mundy said the illicit marketplace not only poses competitive pressures on the developing legal recreational market but also undermines the state's medicinal operations.

"Our biggest concern as a registered organization and as a soon-to-be participant in the adult-use cannabis market is public safety and health," he said. "The rapid expansion of the illicit market poses significant risks to both of these."

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