Saddled with court challenges slowing the rollout of its legal cannabis program, New York now wants to move fast when it comes to the illegal marijuana market.

Gov. Kathy Hochul recently unveiled several initiatives to crack down on illegal sellers, including empowering local governments to act under state enforcement provisions. Hochul’s initiatives are part of the Fiscal Year 2025 Enacted Budget.

"Unlicensed dispensaries have littered New York neighborhoods, blatantly circumventing our laws and selling potentially dangerous products,” Hochul said. “Enough is enough. I promised to protect our communities and hard-working, legal cannabis licensees by expediting the closure of illicit storefronts. I’m proud to stand up and say we got it done.”

The tough talk comes as the state faces intense pressure from legal marijuana retailers to shut down unlicensed marijuana shops that have thrived while the legal market -- approved by voters in 2021 -- has faced delay after delay and is still not fully operational. New York City has an estimated 2,000 illegal cannabis stores and many more proliferating through-out the state, with the true number at best a guess. They sell their product cheaper than legal marketers because they don’t pay taxes, employees don’t receive the same state mandated benefits and can ignore the myriad regulations that have been imposed by the Office of Cannabis Management.

Crackdown Could Calm Angry Legal Marijuana Retailers

Hochul’s initiatives are an attempt to buoy the spirits of legal retailers, and potential retailers, who have complained about the mistakes and delays in implementation of 2021’s Marijuana Regulation and Tax Act (MRTA). Many claim the delays and the thriving illegal market have put their businesses at risk.

Among Hochul’s new efforts:

• The state’s Office of Cannabis Management is authorized to padlock businesses for selling illicit cannabis and posing a threat to health and safety with:
• Sales to minors
  
  • Unlicensed processing of cannabis
  • Violent conduct
  • Presence of unlawful firearms
  • Proximity to schools, houses of worship or public youth facilities
  • Products leading to illness or hospitalization
  • Products not tested or labeled according to NY Law
• Businesses that don’t pose a threat of imminent harm will be issued a notice of violation and ordered to cease unlicensed activity. Those who continue will be padlocked and, if they sell alcohol, lottery tickets, tobacco or vaping products, their license to do so will be at risk.
• The state is launching a statewide task force to close illegal stores through civil enforcement. The task force is empowered to target suppliers.
• The standard of proof required to evict a tenant in violation of cannabis law will be lower, with landlords only needing to prove a business is habitually engaged in selling cannabis without a license instead of solely, or primarily, doing so. And, landlords who permit the illegal sale of cannabis and fail to evict tenants violating cannabis laws will face a $50,000 fine in New York City or a fine of five times the rent outside of the city.
• Local governments can establish laws to regulate unlicensed cannabis businesses, with the assurance of consistent enforcement through inspections, hearings and emergency padlocking of businesses. They are also permitted to initiate emergency proceedings against the unlicensed businesses and landlords.
• New York City’s Administrative Code will be amended, allowing the city to immediately inspect illegal retailers, issue violations, seize cannabis and padlock stores. The Sheriff’s Office will lead enforcement and can deputize other personnel to assist.

“New York City will finally be able to use the full force of the law to inspect, enforce, and shut down illegal dispensaries,” New York City Mayor Eric Adams said. “These measures, combined with our already robust enforcement efforts, will help keep the playing field level and push back against the quality-of-life issues that have resulted from the proliferation of illegal smoke shops.”

Courts Critical of New York’s Legal Cannabis Rollout

While legal retailers are angry about the illegal market, the courts have been critical of the way the state has rolled out its legal market. Numerous lawsuits, some already garnering unfavorable rulings for the state, have been filed to challenge the adult-use regulations. Earlier this month, state Supreme Court judge Kevin R. Bryant sharply rebuked the state’s Cannabis Control Board third-party marketing regulations, saying they were “unlawful and void as arbitrary and capricious.”

In his ruling, Bryant criticized state regulators for not providing evidence documenting the development or crafting of the harsh regulations.

“They have also failed to submit any transcripts or meaningful minutes of meetings that would enable this court to determine the factual basis or the reasoning supporting their decision to adopt the regulations,” Bryant opined.