Call it a conundrum: the passing of the Marijuana Regulation and Taxation Act (“MRTA”) allowed New Yorkers 21 years or older to use recreational marijuana legally but provided no legal way to purchase it.
The result was – and is – a “gray” marijuana market of pop-up storefronts, smoke shops, bodegas, and mobile stores throughout the state illegally selling marijuana to meet the demand. These sellers operate in plain sight, presumably due to the delay in regulated market operations. The MRTA allows adults 21 years or older to “share” up to 3 oz of cannabis without compensation, and some gray market operators are utilizing this allowance to their advantage.
But now that licensed sales are occurring – the first dispensary, Housing Works, opened in New York City on Dec. 28, 2022, at 4:20 p.m. – both the state’s Office of Cannabis Management (“OCM”) and some municipalities are cracking down on illegal sales. The crackdown is motivated by the need to ensure the product is safe to consume and enforcement is necessary to keep illegal sellers from stealing business from licensed sellers.
The state’s Cannabis Control Board (“CCB”) jumped into the fray. At its November 21, 2022 meeting, it authorized the state’s first cannabis retail licenses and approved emergency enforcement regulations . Those regulations – approved without public comment – gave OCM temporary powers to investigate businesses selling marijuana illegally. Those found to be in violation of the organization’s rules face fines, suspension or revocation of license, seizure and/or quarantine of product, and referral to local enforcement authorities for civil or criminal investigation and penalties.
Since November, OCM has sent numerous cease-and-desist letters to unregulated operators and conducted a number of raids on cannabis sellers throughout the state. The moves target both marijuana businesses selling cannabis illegally and those businesses operating legally, such as a CBD retailer, but illegally selling marijuana or edibles for recreational use.
Cities Are Also Cracking Down On Illegal Cannabis Sales
At the same time, cities such as New York and Syracuse also have strengthened laws and conducted enforcement investigations. In December, New York City Mayor Eric Adams discussed a city-wide crackdown resulting in hundreds of civil and criminal violations and the seizure of $4 million in cannabis products. (Crain’s New York estimates 1,400 sellers operate illegally in the city.)
The City of Syracuse’s Common Council recently approved a law allowing the city to fine or close businesses selling marijuana without a license and issue fines to property owners where the sales are occurring. The law is being enforced by the Division of Code Enforcement, which assigns points to all businesses found to “fail to maintain good order.” Common examples include activities like prostitution and gambling and can include assaults and larcenies. Now that list has expanded to include the illegal sale of cannabis. In addition to being able to levy fines of up to $10,000 against business and property owners, the “point system” also allows the city to get a court order to close businesses that accumulate 12 points, with the illegal sale of cannabis constituting a four-point violation.
But these enforcement actions have not gone without criticism and questions. While OCM can be credited for building the plane while flying it, the state’s slow rollout of licenses has frustrated users and sellers and is thought to have contributed to the “gray market” now seen as a problem.
Some of the businesses claimed not to know or understand that they were operating illegally. Many complained about the passage of emergency enforcement rules without public comment. (Most proposed state regulations go through a 60-day comment period before acceptance and enforcement.) Others wondered why certain businesses were targeted while others – even in close proximity to a raided business – went unscathed.
Crackdown Hurting Those That Decriminalization Was Supposed To Help?
Most of all, many wondered if the crackdowns are harming the very people decriminalization was supposed to uplift – New Yorkers who had been harmed by cannabis laws. The MRTA, signed in March 2021, was touted as a way to help those who had been incarcerated or harmed by the state’s old marijuana laws by prioritizing them to be among the first to receive licenses to sell. But many caught up in the current crackdowns are people who would fall into the category of those targeted by the MRTA’s decriminalization efforts.
Advocates are urging for a path for unlicensed retailers to obtain licenses, not punishment. They fear the enforcement approach taken by OCM and local municipalities essentially re-criminalizes and continues to stigmatize cannabis. Sen. Liz Krueger, who co-authored the MRTA, said she’s currently negotiating with Gov. Kathy Hochul and the Assembly on an enforcement bill. The goal of the bill is to effectively enforce the laws without punishing those who possess or use marijuana.
The regulatory landscape for the cannabis industry is still very much unsettled. Harris Beach’s Cannabis Industry Team continues to monitor developments in the fast-moving New York cannabis industry. For more information, please contact William M. X. Wolfe at (315) 214-2059 and email@example.com, or the Harris Beach attorney with whom you most frequently work.
This alert is not a substitute for advice of counsel on specific legal issues.
Harris Beach has offices throughout New York state, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as Washington D.C., New Haven, Connecticut and Newark, New Jersey.
 The New York State Cannabis Control Board is the approval and oversight body of the Office of Cannabis Management.
 The first licensees are eligible for funds from a $200 million state fund established to secure and renovate retail locations.