As the cannabis industry continues to grow and evolve, so too does the need for effective regulation and enforcement. In an effort to curb the illicit marijuana market in New York State, Governor Kathy Hochul has signed legislation granting the state Office of Cannabis Management (OCM) certain enforcement powers, as outlined in the recently passed 2024 budget.
One of the key provisions of the new legislation is the ability for the OCM to issue civil fines for unlicensed sellers. This will allow authorities to crack down on individuals and businesses operating outside of the legal framework, ensuring a level playing field for licensed operators.
To further strengthen enforcement efforts, the OCM, in collaboration with the New York State Department of Tax and Finance (DOF), now has the power to conduct surprise inspections. These inspections will enable authorities to identify and seize illegal cannabis products, uncover unlicensed sellers, and obtain court injunctions against those operating unlawfully.
In addition to targeting unlicensed sellers, the legislation also empowers the DOF to fine cannabis dealers who fail to pay the proper state taxes. This move aims to ensure that all businesses operating in the cannabis industry contribute their fair share to the state’s tax revenue.
To address the issue of tax fraud, the legislation establishes a new tax fraud crime. Businesses that willfully fail to collect or remit required cannabis taxes, or knowingly possess for sale any cannabis on which tax was required to be paid but was not, can now face criminal penalties.
Another significant change brought about by the legislation is the reestablishment of selling cannabis without a license as a criminal offense. It is now a Class A misdemeanor to knowingly and unlawfully sell, give, or cause to be sold any cannabis products without the required license.
As part of the enforcement measures, the OCM will have the power to compel a landlord to begin eviction proceedings against unlicensed cannabis businesses. This tactic aims to put additional pressure on illegal operations and discourage landlords from facilitating illicit activities.
While the legislation introduces stricter penalties and enforcement mechanisms, it also ensures that individuals with a history of possessing or knowingly distributing illicit cannabis are not eligible for licenses. This provision underscores the state’s commitment to professionalism and adherence to the regulatory framework.
The power to levy civil penalties and fines by the OCM to illicit cannabis shops can be significant, with fines of up to $10,000 per day for those who cultivate or sell cannabis without proper registration. Additionally, the OCM has the authority to impose civil penalties up to five times the revenue from the prohibited activities. In cases where shops continue their illicit activities despite warnings, civil penalties may be increased up to $20,000 per day.
Furthermore, the legislation increases penalties for improper possession and distribution of illicit cannabis. For example, first-time offenders caught possessing certain threshold amounts of illicit cannabis can now face fines of up to $25,000, with subsequent offenses potentially resulting in fines up to $50,000. The penalties escalate for larger quantities, with fines of up to $75,000 for a first offense and up to $100,000 for subsequent offenses.
In cases where individuals possess illicit cannabis with the intent to sell in a commercial location, additional penalties of up to $50,000 for a first offense and up to $100,000 for subsequent offenses can be imposed. Distributors who knowingly sell to unregistered sellers can also face fines of up to $50,000 for a first offense and up to $100,000 for subsequent offenses.
With these new enforcement powers, the New York Office of Cannabis Management aims to create a safer and more regulated cannabis market in the state. By cracking down on unlicensed sellers, collecting proper taxes, and imposing stricter penalties for illicit activities, the OCM is taking important steps toward achieving these goals.