If you’re a New Yorker or a person who has visited New York recently, you’ve probably seen or heard of stores selling a product or service to consumers and providing cannabis as a “gift” in return. Others – banking on lack of enforcement – may simply be selling cannabis at retail even though no licenses are yet available. Some of the “dispensaries” are even in the heart of Manhattan. This practice, known as “gifting”, has proliferated since the passage of the Marijuana Regulation and Taxation Act (“MRTA”) in March 2021.

After former Governor Andrew Cuomo signed the MRTA into law last year, adults 21 and older were immediately permitted to possess and use cannabis, as well as gift cannabis to other adults as long as they were not receiving compensation. But while state regulators work to launch the legal market for adult-use cannabis, some businesses are offering “free” cannabis to adult consumers who buy a commensurate dollar amount of other lawful products and services.

Well, now the Office of Cannabis Management’s (“OCM”) Enforcement Unit is cracking down on those businesses and unlicensed cannabis sales. On February 8, the OCM sent “cease and desist” letters to more than two dozen businesses that they allege are either engaging in gifting or selling cannabis without a license, warning them that they are putting at risk their ability to obtain a license for the legal market while also facing fines and possible criminal penalties. While the MRTA legalized the possession and use of cannabis for adults 21 and older, as the OCM stated in the letter, “there are currently no licenses available from the Office of Cannabis Management (OCM) or other permissions available from any other New York state agency that authorizes the legal sales of cannabis.” As such, unless you are a New York registered medical marijuana patient or one of the state’s 10 Registered Organizations, the purchase and sale of cannabis remains illegal.

Concerns for public health and safety has been the primary reason cited by the OCM for this prohibition on unlicensed sales. “New York State is building a legal, regulated cannabis market that will ensure products are tested and safe for consumers while providing opportunities for those from communities most impacted by the over criminalization of the cannabis prohibition, and illegal operations undermine our ability to do that. We encourage New Yorkers to not partake in illicit sales where products may not be safe and we will continue to work to ensure that New Yorkers have a pathway to sell legally in the new industry,”[1] said OCM Executive Director Chris Alexander.

While regulating the sale of cannabis to ensure that consumers are receiving a product that is safe to consume is certainly reason enough to crackdown on illegal sales, there is another critical reason for strict enforcement – the fact that cannabis continues to remain illegal under federal law. Failure to effectively regulate the cannabis market in New York could gain the attention of federal authorities and put New York’s cannabis program at risk of federal enforcement of the Controlled Substances Act. Notwithstanding the permissive regulatory environment of cannabis at the state level, it is no secret that the cultivation, distribution, sale, and possession of cannabis remains illegal under federal law.[2] To protect New York’s budding legal cannabis industry from federal intervention, it is crucial for the state to maintain a well-regulated licensing and enforcement regime.

Quelling the unauthorized sale of cannabis is an important step to strengthen the foundation of the legal regulated cannabis market New York is building. In order to adequately regulate the cannabis market and meet the goals of the MRTA to build an inclusive, equitable, and safe industry, it is critical that the OCM create proper pathways for legacy operators and local entrepreneurs to access the legal market without being left behind. That pathway should not include jumping the regulatory structure through a “gifting” loophole, but the longer it take OCM to promulgate regulations and release license applications, we expect to see more this push and pull.

[1] https://cannabis.ny.gov/news/office-cannabis-management-announces-enforcement-action

[2] Controlled Substances Act, 21 U.S.C. § 801, et seq.