Hochul Administration Taking Swift Actions Against Unlicensed Cannabis Shops
Weeks after approving some 36 cannabis licenses in New York State—including 7 in the Finger Lakes region—New York State is cracking down on businesses selling illegal cannabis.
Governor Kathy Hochul made the announcement recently and heralded results of initial enforcement actions against unlicensed cannabis businesses.
The effort is led by the New York State Office of Cannabis Management (OCM) and the Department of Taxation and Finance (DTF) which was authorized under a new law Hochul signed in May as part of the state's 2023 budget.
Since June 7, the organizations have already “inspected” 33 dispensaries in New York, Ithaca and Binghamton that are not licensed to sell cannabis.
"We can now crack down on businesses that sell illegal cannabis, and I'm pleased to report that we've seized nearly $11 million in the first three weeks of our efforts to keep illegal products off the streets," Hochul said. "Unlicensed businesses are breaking our laws, endangering public health and undermining the legal cannabis market, and with powerful new tools in our tool belt, we're sending a clear and strong message– If you sell illegal cannabis in New York, you will be caught and stopped."
“OCM is committed to protecting public health and ensuring consumer safety," New York State Office of Cannabis Control Executive Director Chris Alexander said.
David Tulley, 42, who owns cannabis businesses in Wayne and Cayuga Counties, had both his businesses raided. According to fingerlakes1.com, Tulley, who lives in Lyons, was charged with one count of obstruction after impeding an investigation by the Office of Cannabis Management and Department of Taxation and Finance from performing their duties during a raid of his Lyons business.
Fingerlakes1 says he plans to fight the charges.
OCM and DTF say they will continue their efforts to “ensure a fair and regulated marketplace.” Both agencies issued violations to 31 cannabis businesses, seizing and cataloging at least 1,000 pounds of illegal cannabis, with an estimated street value of nearly $11 million, with more still to be tabulated. Enforcement continues every week across the state, and OCM is actively recruiting more officers with the goal of stopping the illegal sale of cannabis.
New executive legislation passed as part of the budget allowed OCM to impose civil penalties on unlicensed cannabis businesses with fines starting at $10,000 per day and up to $20,000 per day for the most egregious behavior. The new law also gave the agency the power to seek a state court order to lock up companies found to have violated the law, among other penalties. In addition, the law makes it a crime to sell hemp and hemp products without a sales license.
In addition to the powers given to the OCM, the new executive law gives the DTF the power to conduct regulatory audits of businesses that sell cannabis to determine if taxes have been properly paid and seek civil penalties if they have not. The law also creates a new tax evasion offense for companies that willfully fail to collect or fail to pay the required cannabis tax, or knowingly possess taxable but unpaid cannabis for sale.
Empire State Development President, CEO and Commissioner Hope Knight, newly appointed to serve on the Cannabis Control Board (CCB) said, "Governor Hochul's vision for a state-led cannabis regulatory framework and market sets the national standard.”
31 businesses that illegally sold cannabis had orders to cease unlicensed activity posted outside their doors. Those companies must now attend an administrative hearing to determine their final fines and penalties. Violation of the order may result in an additional fine of $5,000, and may be subject to additional violations and tax code penalties.
After these initial inspections, the OCM and DTF monitor the inspected locations to ensure that unauthorized activity ceases. If persistent unlicensed operations are found to continue, OCM can ask the state Supreme Court to lock down the business premises until the area complies with the Cannabis Act and related regulations.
If an unlicensed location is found to continue selling cannabis products after OCM issues a Notice of Violation/Order to Cease, an additional per-day penalty of up to $20,000 may be assessed by an Administrative Law Judge. Further, should the unlicensed business remove the OCM Notice of Violation or Warning affixed to the business storefront, the business is subject to a fine of up to $5,000.
"Illegal [cannabis] shops endanger the health, safety and welfare of the public with untested unregulated products, but also confuse the public by trying to operate their businesses and products under license and sanctions when not permitted,” noted New York State Assembly Majority Leader Crystal People-Stokes.
