A New York state lawmaker is proposing legislation that would give regulators the authority to revoke the liquor, lottery and tobacco retailer licenses from stores that sell weed without a license. If passed, the legislation would go into effect immediately, giving officials new tools to combat the illicit pot shops that have proliferated since the state legalized adult-use cannabis in 2021.

Democratic Assemblyman John Zaccaro Jr., a Democratic legislator from the Bronx, is the lead sponsor of the legislation in the New York State Assembly. The measure (A09520) has already attracted 70 co-sponsors in the chamber after being introduced late last month. A companion bill in the Senate (S08847), sponsored by Democratic Senator Jamaal T. Bailey, has 10 co-sponsors.

The legislation “Provides for the revocation of licenses to sell cigarettes, tobacco products, alcohol and lottery tickets for the possession or sale of illicit cannabis in violation of the cannabis law,” according to the text of the measure. Businesses caught selling cannabis without a license would be subject to losing their licenses for one year on the first offense. A second offense within three years would subject the businesses to license revocation for three years and a third violation would result in the loss of cigarette, liquor and lottery retailer licenses for five years.

Thousands of Unlicensed Pot Shops in New York City

The legislation was introduced as the state, particularly New York City, continues to deal with thousands of retailers selling cannabis without a license. The office of New York Mayor Eric Adams recently reported that approximately 2,500 unlicensed weed retailers were operating in the city. Meanwhile, a slow rollout of licensed cannabis retailers has seen only about 40 regulated pot shops open in the city since the first began serving customers in the closing days of 2022.

Zaccaro said that the unlicensed shops are “choking” the regulated cannabis market as it struggles to get on its feet. Most of the retailers selling weed without a license are smoke shops and bodegas, businesses that would be severely impacted by the loss of the revenue streams provided by cigarettes, alcohol and lottery tickets.

“We need to be able to go back to our districts and be able to let our constituents and people know that we took this issue seriously,” Zaccaro told the New York Daily News on Wednesday The lawmaker added that he hopes the legislation will pass quickly, either as a stand-alone bill or as part ongoing negotiations for the state budget, which have already exceeded a deadline of April 1.

State and city regulators have already made several attempts to combat the proliferation of unlicensed weed shops with little lasting success. In the New York City Council, local lawmakers are supporting a plan to shut down unlicensed pot shops under a decades-old nuisance abatement law that allows the city to close some businesses, such as brothels. Despite having 26 sponsors on the 51-seat council, however, the plan has not had a hearing.

While Zaccaro’s bill to revoke cigarette, liquor and lottery licenses from shops that sell marijuana without a license gives state and local officials new tools to combat the illicit operators, putting them to use is another matter. Cannabis attorney Fatima Afia said that state regulators at the state Office of Cannabis Management (OCM) will have to commit significant resources to enforcement for the legislation to be effective.

“I imagine that it would require a lot of resources, a lot of time, a lot of energy — basically all the things that OCM has clearly not had for purposes of enforcement up until now,”  Afia said, adding that the slow rollout of regulated cannabis retailers is exacerbating the problem.

“The biggest supporter of the illicit shops is the fact that we don’t have enough licensed entities out there to compete with them,” said Afia.

Zaccaro’s bill has been referred to the Assembly Economic Development Committee, while the Senate version is under consideration by the chamber’s Budget and Revenue Committee.

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New York City officials announced this week that they would take new steps to address the city’s growing number of unlicensed cannabis retailers in a bid to bolster the rollout of the regulated market for recreational marijuana. At a press conference in Manhattan on Tuesday, New York City Mayor Eric Adams and Manhattan District Attorney Alvin L. Bragg, Jr. said they would also target the landlords of retailers selling weed without a license from the state.

New York’s mayor and leading prosecutor noted that the district attorney’s office had filed complaints against four unlicensed shops selling cannabis in Manhattan. The complaints allege that an NYPD officer had observed the shops selling cannabis to underage individuals and that the city is moving to shut down the shops for making illegal sales of cannabis and operating without a license.

“Legalizing cannabis was a major step forward for equity and justice — but we’re not going to take two steps back by letting illegal smoke shops take over this emerging market,” Adams said in a statement from the mayor’s office. “Today, we are proud to announce we are taking direct action against four unlicensed smoke shops in the Ninth Precinct, which will complement our efforts with District Attorney Bragg to hold these illegal businesses accountable. We are laser-focused on protecting the health and well-being of New Yorkers and ensuring this emerging industry delivers equity to those who deserve it the most.”

Last month, city leaders pledged to take action against the multitude of illicit marijuana retailers that have set up shop in New York City since the state legalized marijuana for adults last year. In December, New York City Mayor Eric Adams launched a pilot interagency task force to address the growing number of unlicensed retailers. The task force, which includes the Sheriff’s Office, the NYPD, the Department of Consumer and Worker Protection, and the Office of Cannabis Management, has identified at least 1,200 unlicensed marijuana shops in the city. An analysis by city council staff revealed 11 unlicensed shops selling cannabis within a 10-block radius of the city’s first licensed retailer.

Warnings Sent To 400 Smoke Shops

In addition to the four complaints against unlicensed shops, Adams and Bragg said that the district attorney’s office had sent letters to the more than 400 smoke shops in Manhattan, warning them that the city could initiate eviction proceedings for unlawful cannabis sales. The letter specifically informs commercial entities that the city is prepared to use its authority under New York real estate law “to require owners and landlords to commence eviction proceedings of commercial tenants who are engaged in illegal trade or business, and to take over such eviction proceedings if necessary.” The letter also noted that within five days of written notice that prosecutors would “take over such eviction.”

“For nearly two years, we’ve seen a proliferation of storefronts across Manhattan selling unlicensed, unregulated, and untaxed cannabis products. It’s time for the operation of unlicensed cannabis dispensaries to end,” said Bragg. “Just as we don’t allow endless unlicensed bars and liquor stores to open on every corner, we cannot allow that for cannabis. It’s not safe to sell products that aren’t properly inspected and regulated for dosage, purity, and contaminants. And it certainly isn’t fair to competing businesses.”

Mark Sims, the CEO of cannabis investment firm RIV Capital, said in an email that the proliferation of unlicensed businesses hurts both the newly licensed adult-use cannabis retailers and existing medical marijuana firms including Etain Health, a chain of New York medical marijuana dispensaries operated by RIV, and called for more action from the state.

“While we commend Mayor Adams’ actions to combat the illicit market—it’s a positive step forward—the problem of illicit smoke shops cannot be viewed or solved in isolation,” Sims wrote in an email. “With more than 1,200 illicit shops (which is double the number of Starbucks in New York) suspected to be trafficking in illicit cannabis products, products that have been shown to be unsafe for human health, a more holistic approach must be taken to successfully combat the steady flow of illicit market product.”

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New York City Mayor Eric Adams on Thursday said that his administration is ready to crack down on the illicit cannabis retailers that have multiplied throughout the five boroughs. 

“We are not going to allow these stores to stay open,” Mayor Adams said at a press conference, as quoted by the news outlet NY1.

The stores, which have become a fixture in the Big Apple this year, capture how awkward it can be for state and local officials to implement new marijuana laws.

Recreational pot was made legal in New York in 2021, when then-Gov. Andrew Cuomo signed a bill that ended the prohibition of pot in the Empire State.

The new law took effect immediately, allowing adults aged 21 and older in the state to have weed in their possession and to toke up in any public space where cigarettes are also permitted. 

But the state’s regulated cannabis market has yet to fully launch. That has not stopped a number of eager entrepreneurs to get in a head start on the coming “greenrush,” even though none of the stores selling marijuana in New York are technically legal. 

Mayor Adams appeared at the press conference on Thursday alongside New York City Sheriff Anthony Miranda who “held up an edible in a wrapper made to look like a Willy Wonka chocolate bar,” according to NY1.

“These are the products that are not geared toward our adult population, and these are the products that are endangering our children,” Miranda said, as quoted by the outlet. “This is enticing our children, and it’s being very misleading.”

NY1 reported that “Adams said authorities visited 53 locations, seized $4.1 million worth of product and issued 566 violations during a recent two-week sting operation.”

Miranda told reporters at the press conference that “the average fines for each location totaled $30,000 to $50,000,” per NY1.

This is not the first time that the officials in New York have launched a crackdown aimed at the unregulated weed retailers. 

In February, the state’s Office of Cannabis Management said that it had sent cease and desist letters to a number of such businesses, ordering them to stop immediately and warning that continued sales could jeopardize their prospects of landing a marijuana retailer license. 

“We want to make sure these operators fully understand the law and the consequences they face, and now that these letters have been sent, we fully expect them to cease and desist their activities—if they don’t, we will take action,” Office of Cannabis Management Executive Director Chris Alexander said at the time. 

State regulators have warned that the products sold at unlicensed retailers may be unsafe, an assessment supported by a report released late last month by a coalition of trade organizations representing the legal cannabis industry in New York and surrounding states.

The report found that roughly 40% of the marijuana products sampled from unregulated New York City stores contained contaminants such as E. coli, salmonella, and lead.

“The report’s findings are deeply troubling and highlight the tremendous risks posed by unscrupulous firms operating above the law,” said Ngiste Abebe, the president of the New York Medical Cannabis Industry Association (NYMCIA), one of the group’s behind the report. “New York has a responsibility to not only protect the health and safety of its residents but also to fulfill the promise of a socially equitable adult-use market. Neither goal can be realized without stricter enforcement against bad actors.”

New York Gov. Kathy Hochul said in October that she expected the state’s first regulated cannabis retailers to open by the end of the year. 

“We expect the first 20 dispensaries to be open by the end of this year,” Hochul said. “And then every month or so, another 20. So, we’re not going to just jam it out there. It’s going to work and be successful.”

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The deadline for the first adult-use cannabis dispensary licenses in New York arrived on Monday, and now hundreds of applicants await feedback from the state.

Monday’s deadline came a month after the state’s Office of Cannabis Management officially opened the application portal on August 25.

Since then, the agency has been flooded with applications from individuals hoping for the first crack at the Empire State’s legal marijuana market.

Earlier this week, The New York Times reported that roughly “500 applications had been submitted by Sunday,” adding that hundreds “of ineligible people have been turned away, but so have dozens more who did qualify and needed help navigating the state’s online portal.”

The state will award 150 licenses for the first round this fall, and those have been designated exclusively for applicants who have previously been convicted of a pot-related offense (or a family member of someone who has).

Billed as the “Seeding Opportunity Initiative,” the policy goes further than most of the so-called “social equity” provisions in other states’ marijuana laws.

“New York State is making history, launching a first-of-its-kind approach to the cannabis industry that takes a major step forward in righting the wrongs of the past,” New York Gov. Kathy Hochul said in announcing the policy back in March. “The regulations advanced by the Cannabis Control Board today will prioritize local farmers and entrepreneurs, creating jobs and opportunity for communities that have been left out and left behind. I’m proud New York will be a national model for the safe, equitable and inclusive industry we are now building.”

New York City has taken similar steps toward enhancing opportunities in the emerging cannabis industry for individuals adversely affected by erstwhile marijuana laws.

The city’s mayor, Eric Adams, announced last month “a first-of-its-kind initiative and suite of services to support the equitable growth of the cannabis industry in New York City.”

The initiative, known as Cannabis NYC, will provide “technical assistance for cannabis license applicants, as well as other business services to take entrepreneurs beyond licensing to a thriving operation,” while also supporting “cannabis entrepreneurs and their workers as the industry develops.”

It will also collaborate with “industry stakeholders to create good jobs, successful small businesses, and sustainable economic opportunities, while also addressing the harms of cannabis prohibition.” Adams’ office said that the “first phase of Cannabis NYC will focus on ensuring that justice involved New Yorkers are able to apply for and secure retail licenses from the state.”

“Today, we light up our economy and launch Cannabis NYC — a first-of-its-kind initiative to support equitable growth of the cannabis industry in New York City,” Adams said in a press release last month. “The regulated adult-use cannabis industry is a once-in-a-generation opportunity for our underserved communities that have, for too long, faced disproportionate rates of drug-related incarceration to get in on the industry on the ground floor. Cannabis NYC will plant the seeds for the economy of tomorrow by helping New Yorkers apply for licenses and understand how to open and successfully run a business, while simultaneously rolling equity into our economy by giving those who have been justice-involved and those with a cannabis conviction a chance to succeed. This is about creating good jobs, successful small businesses, and finally delivering equity to communities harmed by the ‘War on Drugs.’”

The first state-regulated recreational cannabis dispensaries in New York are not expected to open until late this year (as the earliest).

But countless small business owners there have not waited to get in on the “kush rush.” New York City in particular is teeming with illicit cannabis shops, prompting state regulators to crack down on some.

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