New York Cannabis Industry Skeptical of New Efforts to Crack Down on Unlicensed Sellers

New York cannabis stakeholders skeptical of new illicit enforcement push

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After New York Governor Kathy Hochul’s new push to crackdown on illicit cannabis sellers across the state, few in the legal cannabis industry believe that the policy would succeed, and several have predicted that the unregulated market would simply pivot instead of giving up.

Instead of cracking down on unlicensed smoke shops, bodegas, and delivery services selling cannabis, of which there are estimated to be at least 1,500 in New York City alone, multiple stakeholders believe that regulators should focus on providing more business licenses and helping the legal market become fully operational.

“Enforcement does not work. The government lost the war on drugs. So it’s up to us to find progressive, creative solutions, and I don’t think it’s in the new enforcement bill. I think it’s in another way. It’s in letting the market decide,” said New York attorney Paula Collins, who represents some unlicensed cannabis sellers.

Others believe it will be harder for the state to walk the fine line of cracking down on unlicensed cannabis shops without creating “Drug War 2.0.”

Instead, stakeholders propose that the easier solution would be to focus on issuing more licenses and making it easier for legal retailers to compete on price point.

Enforcement Provisions

The new enforcement tools, which were part of the state budget that Hochul signed on May 3, include:

  • Civil fines of up to $20,000 per day for unlicensed sellers.
  • Giving the Office of Cannabis Management and the Department of Tax and Finance new powers to conduct surprise inspections, seize illegal products, and obtain court injunctions against unlicensed sellers.
  • New power for the Department of Tax and Finance to fine cannabis dealers who aren’t paying the proper state taxes.
  • A new tax fraud crime.
  • A provision that reestablishes selling cannabis without a license as a criminal offense.

The New York Office of Cannabis Management declined to comment on the potential criminal penalties, but other media reported that the focus of the enforcement push will be mainly civil fines instead of throwing unregulated cannabis sellers in prison.

However, the details surrounding the enforcement push are unclear, such as whether it will be a major sweep by the New York Police Department, or whether it will be a more incremental approach.

Lauren Rudick, a New York cannabis attorney, believes that civil fines have proven in other markets to be an inadequate deterrent.

“Fines, they don’t work. They don’t work up in Canada. You see illicit operators, they pay the fines, they pay their taxes, and they’re happy to stay operating. So this is definitely a competition (issue),” Rudick said.

At least one licensed retailer, Union Square Travel Agency in Manhattan, welcomed the news, applauding the new move by Hochul.

“Not only is it in the interest of the state to aggressively pursue shutting down these stores, it creates a more sustainable environment for all stakeholders who are involved in the legal industry to be successful, and it ensures that New York consumers can purchase safe and tested cannabis products,” said Union Square Travel Agency CEO Paul Yau.

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