Civic leaders in New York City this week promised increased action to address the proliferation of unlicensed marijuana retailers, just weeks after regulated sales of adult-use cannabis began in the nation’s most populous city. At a meeting of the New York City Council on Wednesday, officials pledged increased enforcement against unlicensed cannabis retailers and said that the state legislature is drafting new legislation to give law enforcement additional powers to shut down illicit pot shops.

“We know there is an illegal cannabis store, van or street vendor on what seems like every block in New York,” Councilwoman Gale Brewer, chair of the Council’s Oversight and Investigations Committee, said during the hearing of the council’s Committee on Consumer and Worker Protection.

“The proliferation of cannabis retailers over the last 22 months has gone almost unchecked by the city and state,” she added in a statement quoted by the Daily News. “These illegal stores, it seems to me, suck up revenue that should be going to licensed dispensaries.”

Task Force Found 1,200 Illicit Pot Shops in New York City

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. Brewer said that an analysis by city council staff had revealed 11 unlicensed shops selling cannabis within a 10-block radius of the city’s first licensed retailer.

“The tidal wave of unlicensed sellers in the state’s largest market threatens to undermine – I’m afraid – the laudable effort” made by the state’s cannabis legalization law.” Brewer said.

At Wednesday’s hearing, officials with the city’s Sheriff’s Office, the NYPD, the Department of Health and other local agencies appeared to speak with council members about the number of unlicensed cannabis retailers setting up shop in the city. NYC Sheriff Anthony Miranda said that about 600 pounds of weed has been confiscated from the illicit stores, resulting in referrals for civil action and criminal prosecution.

“The task force is continuing, our operations are increasing, we are doubling – if not tripling – the enforcement that we have,” Miranda said. “We want them to know the type of enforcement that’s going on so that they understand that we’re not going away.”

State Senator Promises New Legislation

State Senator Liz Krueger, who was the lead sponsor of New York’s cannabis legalization bill in the Senate, said during a public comment period that she understands the frustration caused by unlicensed retailers. She added that lawmakers would take new action on enforcement during the 2023 legislative session.

“We are going to be implementing new, expanded laws that give the state more tools, and our police departments and our sheriffs and our marshalls,” Krueger said, adding that the unlicensed shops are “harming the entire model that we’ve been trying to build and establish across the state.”

Elliot Choi, chief knowledge officer at the cannabis and psychedelics law firm Vicente Sederberg LLP, said that illegal dispensaries must be addressed for the legal market to have a viable chance at success in New York.

“There are costs that go into obtaining and maintaining a legal cannabis dispensary that illegal dispensaries are bypassing,” Choi wrote in an email to High Times. “It creates an unfair advantage since the illegal dispensaries can sell cannabis products cheaper, especially not collecting any taxes.”

Choi also noted that unlicensed cannabis retailers pose a danger to unwitting consumers.

“Many consumers mistakenly believe the illegal dispensaries are licensed and therefore, the products they are selling are safe,” said Choi. “But that isn’t the case as the illegal dispensaries are in many instances selling unregulated products that have been shown to be contaminated.”  

Mark Sims, president and CEO of cannabis goods company RIV Capital, agreed, noting that an investigative report examining products from illicit operators in New York last year showed that illicit products being sold had a 100% fail rate under the state’s cannabis testing standards and contained dangerous toxins including heavy metals and E.Coli.

“The report highlighted one of the primary reasons it is so important for state regulators to work with local government and law enforcement to shut down illicit operations,” Sims told High Times. “It’s great to see New York City Council and law enforcement take these public health concerns seriously, and we encourage state cannabis regulators to do more to assist with these efforts to shut down the illicit market. There is certainly more work to be done here to protect consumers – but this is a step in the right direction.”

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The New York Senate voted this week to approve a bill to crack down on the state’s cannabis gray market, giving regulators the authority to seize illicit weed and increasing fines for unlicensed operators. State Senator Liz Krueger introduced the measure on Sunday and by Wednesday, the Senate had voted to approve the bill, offering an indication of the legislature’s interest in addressing New York’s unregulated pot market before legal sales of recreational cannabis begin later this year.

Justin Flagg, a spokesperson for Krueger, said that the bill is designed to empower the New York Office of Cannabis Management (OCM) and the Department of Taxation and Finance to address unregulated cannabis retailers, which have become brazenly ubiquitous in Manhattan and other areas since state lawmakers legalized adult-use cannabis last year. The OCM is currently working to establish rules for the regulated market, which should begin licensed recreational cannabis sales by the end of 2022.

“This bill is aimed at gray market operators such as retail cannabis stores that have emerged during the period after legalization but before licensed businesses begin operating,” Flagg said in an email quoted by Syracuse.com. 

Flagg added that Krueger drafted the legislation with cooperation from OCM and the tax and finance department, noting that their action was “prompted by the difficulty of enforcement against several illegal cannabis stores that have been hard to shut down under the existing statute.”

The bill gives the OCM the authority to seize illicit cannabis and expands the authority of the Taxation and Finance Department to assess fines against unlicensed cannabis operators. The measure also doubles civil penalties for anyone who knowingly possesses illicit pot, which is defined as taxable cannabis products for which no tax has been paid. Flagg clarified that the legislation applies to any cannabis product that was not grown by or purchased from a cannabis business licensed by the state.

Fines for Illicit Weed Doubled in New York

Fines for illicit cannabis would be increased from $200 per ounce of flower to $400 per ounce. Fines for other cannabis products would also be doubled, with edibles rising to $10 per milligram of THC and concentrates to $100 per gram, while the fine for each illicit cannabis plant would jump to $1,000. The bill also allows the Taxation and Finance Department to revoke certificates of registration for businesses that sell or possess illicit cannabis.

Flagg said that restraining the illicit market is in part a safety issue because unlicensed operators do not follow packaging rules and other regulations designed to curtail cannabis use by children.

“Addressing these illegal operators will help ensure that licensed equity operators have the opportunity to succeed and also help ensure that cannabis products are sold in a responsible way,” Flagg said.

Joshua Waterman, a cannabis grower and the co-founder of the Legacy Growers Association, told local media that Krueger’s bill was drafted with good intentions, but he does not support the legislation.

“Although the idea of shutting down dispensaries that are flooding the market with … products from other states is something we would support, we just don’t see that in this bill,” he said. “I’m afraid this will end up being another way for the state to fine and penalize lower-class individuals, especially minorities.”

Waterman added that the bill will strengthen legacy growers’ mistrust of legalization and make them less likely to join the ranks of the regulated market, which has been a goal advanced by lawmakers and regulators.

“The state and the OCM keep saying they want to include and incentivize legacy people to enter the legal market,” Waterman said. “Putting out a bill to stop legacy operations before releasing applications for licensing is disgraceful, and truly shows where lawmakers stand when it comes to the legends that created the cannabis industry without ever asking for their support.”

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