New York cracks down on unlicensed weed dealers

With the legal sale of recreational cannabis months away in New York, state regulators are cracking down on unlicensed companies that are hasty and already selling weed. Last week, officials from the New York City Office of Cannabis Management (OCM) publicly identified 52 companies that had been sent cease-and-desist orders directing businesses to cease all illegal cannabis sales.

“You are hereby ordered to immediately cease all illegal activities,” read the cease and desist letters cited by The Gothamist. “If you don’t stop this activity, you are putting your ability to obtain a license in the legal cannabis market at significant risk.”

The OCM added that the identified retailers misrepresented their stores as licensed cannabis dispensaries. OCM Chair Tremaine Wright said in a press release that unlicensed sales, including through companies that purportedly offer free marijuana products with the purchase of other goods, are illegal and pose a health risk to the community.

“There are currently no businesses licensed to sell adult-use cannabis in the state of New York. Selling an item or accepting a donation and then gifting a bag of untested cannabis to a customer actually qualifies as a sale under New York cannabis law,” Wright said in a statement from the agency. “You need a license to sell cannabis in New York. Licensed sales and a regulated marketplace are the only way New York consumers can rest assured that the cannabis products they purchase have been tested and tracked from seed to sale. Selling untested products puts lives at risk.”

Businesses face a permanent ban on the legal cannabis industry

The cease and desist letters sent by the OCM indicate that the continued illegal sale of marijuana by the identified retailers will no longer entitle the companies to obtain a cannabis business license from the agency going forward. If the agency-designated businesses do not cease operations immediately, they will be referred to the Cannabis Control Board “to permanently lose cannabis licenses in New York State,” the agency said.

“These stores masquerade as licensed, regulated stores, but they are nothing like that. They don’t create opportunity, they create confusion – New Yorkers think they are buying a quality, tested product when they are not,” said Chris Alexander, executive director of the Office of Cannabis Management. “These deals not only violate New York City Cannabis Law, but also violate state taxes and several municipal laws. I look forward to working with other regulators across the state to hold these businesses accountable for their blatant violations of the law.”

Cease and desist orders were initially sent to the identified companies in February, telling them that their operations were illegal under the Marijuana Regulation and Taxation Act (MRTA), passed by the New York state legislature last year. The OCM announced the regulatory measures at the time, but declined to publicly name the retailers affected. But pressured by local media, the OCM provided the list of storefronts that had been warned by the agency last week.

“We have an obligation to protect New Yorkers from known risks and to strengthen the foundation of the legal, regulated marketplace we are building. We will achieve the goals of the MRTA to build an inclusive, just and safe industry,” Wright said in February. “Therefore, these violators must cease their activities immediately or face the consequences.”

Other retailers are being investigated

The OCM also noted last week that it had received information from law enforcement and the general public about additional retailers who may be selling cannabis in violation of the law, and will be reviewing the tips for possible additional regulatory action. The agency added that until it goes on sale for adult use at licensed retailers, which is expected later this year, the only legal way to source safe, laboratory-tested cannabis is through the state-regulated medical marijuana program.

“New York is building the nation’s fairest cannabis industry, one that prioritizes those communities most harmed by cannabis prohibition. Stores selling unregulated cannabis products without a license undermine these efforts. Plain and simple,” said Damian Fagon, OCM’s Chief Equity Officer. “Illegal businesses don’t contribute to our communities, they don’t support our public schools, and they don’t protect consumers. That’s why we work with partners all over the world [the] government to investigate these operations and hold them accountable.”

One of the operations identified by the OCM last week is the Empire Cannabis Club, which has two locations in Manhattan. At Empire, customers buy a daily or monthly membership to the club and receive cannabis as a free gift. Steve Zissou, an attorney representing Empire, said the company is confident its operations are legal under the MRTA, which defines what constitutes a “sale” of cannabis and specifically the transfer of up to three ounces of cannabis “without Compensation” allowed.

“Empire’s business model is based on that,” said Zissou. “It is a non-charitable, not-for-profit cannabis dispensary and receives no compensation for the distribution of cannabis.”

The lawyer added that Empire stands ready to defend its position in court if necessary.

“There’s an old saying: If you want peace, prepare for war,” Zissou said. “That’s why the Empire wants peace, but they’re prepared for war if and when it comes.”