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New York Wants to Make it Easier to Shut Down Unlicensed Cannabis Businesses

That includes expediting padlock orders.

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Governor Kathy Hochul announced a series of actions to expand enforcement powers to combat illicit cannabis sales as part of her 2024 State of the State address. These efforts will be focused on shutting down the unlicensed cannabis businesses that have continued to open and operate throughout the state.

Governor Hochul’s proposals will strengthen enforcement authority to expedite the closure of unlicensed businesses. Measures will include expanding the powers of the Office of Cannabis Management (OCM) to streamline padlocking of illicit shops, authorizing local governments to execute OCM padlock orders to ensure swift action to close unlicensed dispensaries, and establishing local registries of licensed cannabis businesses to assist and empower local governments, including New York City, to padlock unlicensed business through their own laws and resources. These collaborative efforts will help New York’s growing legal cannabis market, which prioritizes small businesses and equity entrepreneurs.

New York is building a robust new market grounded in a social equity framework that will generate millions of dollars in revenue for the State and communities harmed by the legacy of cannabis criminalization. By taking decisive action against unlicensed cannabis businesses, the Governor will continue to make significant strides toward shutting down unlawful and unlicensed cannabis operations that jeopardize public safety, consumer well-being, and the integrity of the State’s legal cannabis market.

Local governments are currently empowered to seek closure orders from the State Supreme Court, sue landlords who fail to evict commercial tenants selling cannabis without a license, and arrest and prosecute business owners selling cannabis in stores without a license, which is a Class A misdemeanor. In addition, local governments may use existing or enact new local laws to address unlicensed illegal activity, such as the New York City Nuisance Law, the New York City Health Code, which allows for the padlocking of unpermitted stores manufacturing or selling cannabis-infused food products. The City of Buffalo established a law in 2023 to allow for a $1500 per day penalty for not displaying a license from the Office of Cannabis Management. Local governments may also make arrests and prosecute other cannabis-related crimes under the Penal Law, such as sales to minors, a Class B felony.

Throughout 2023, OCM and Department of Taxation and Finance (DTF) inspectors dispatched to 381 locations, including 105 re-inspections, yielding over 11,800 pounds of seized illicit cannabis worth more than $57 million. OCM and DTF investigators will continue inspections each and every week across the State in 2024 to shut down illicit operators as a new wave of legal dispensaries open their doors for business. In addition, on December 20, investigators from OCM, DTF, and the New York State Attorney General’s Office (OAG) shut down and padlocked Big Chief Smoke Shop, an egregious illegal cannabis store operating in Bay Ridge, Brooklyn, for operating without a license. Local community leaders had vocally opposed Big Chief Smoke Shop and the local community board passed a unanimous resolution to shut down unlicensed stores in their neighborhood. This was the ninth padlocking conducted by the State since Governor Hochul signed legislation with the passage of the FY 2024 Budget.

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. 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 previously announced partnerships between OCM and the OAG 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 from a court against an unlicensed cannabis 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, Governor Hochul previously announced additional State agencies will 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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