The State of New York has passed new legislation to increase penalties for the sale of cannabis by unlicensed and illicit dispensaries. The new measures give the Office of Cannabis Management (“OCM”) and the Department of Taxation and Finance (“DTF”) increased enforcement power to close illegal stores and prevent the sale of unregulated cannabis products. Fines of up to $20,000.00 per day can now be levied against businesses that violate these regulations.
Governor Kathy Hochul, who proposed the legislation in March, said the new enforcement tools would protect New Yorkers from illicit sales and allow for reinvestment of cannabis tax revenue in communities that have suffered from disproportionate cannabis enforcement. Governor Hochul added that unlicensed dispensaries violate the law, put public health at risk, and undermine the legal cannabis market by operating without a license and selling unlicensed cannabis products.
Under the new legislation, OCM and DTF can inspect any cannabis and smoke shop, licensed or not, without a warrant. The OCM will have the power to seize untested cannabis products and cannabis from unlicensed businesses and seek court orders to close such entities down. The DTF will also be able to levy civil penalties on businesses that fail to pay required taxes and establish a new tax fraud crime for businesses that fail to collect or remit required cannabis taxes.
The state has awarded 165 cannabis licenses to date, with more to be awarded this month. Currently, there are eight successful dispensaries and one delivery operation in New York State. Although numbers are still hazy, there are more than 1400 suspected stores selling illegal or unlicensed cannabis that may be subject to these new laws.
If you are looking to start a cannabis business in New York, or have any questions regarding New York’s cannabis laws or any of the information contained in this alert, please contact, Andrew Schriever, Doug Trokie, James K. Landau, David C. Holland, or any other member of the Prince Lobel Cannabis Team.
With thanks to Alexander Hymowitz for his work on this alert.