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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The city of Los Angeles’ Department of Cannabis Regulation last week announced that it had “successfully conducted the retail application lottery, also known as the Phase 3 Retail Round 2 Lottery,” during which it “selected 100 verified Social Equity Individual Applicants (SEIAs) for the opportunity to apply for a cannabis retail license in the City of Los Angeles.”

“The Lottery was the culmination of nine months of planning, including a verification process that allowed individuals to request verification as a Social Equity Individual Applicant (SEIA). More than 1,000 individuals requested verification and over 500 SEIAs met the criteria to participate and timely registered to be entered in the Lottery. Additional information on the SEIA criteria and process can be found here,” the city said in a statement on Thursday.

“The SEIA verification criteria align with the mission of the Social Equity Program (SEP) to promote equitable ownership and employment opportunities in the cannabis industry. The SEP is an integral part of the Department of Cannabis Regulation and provides economic opportunities for those most affected by the War on Drugs,” the statement continued.

That application process faced a legal challenge, when a Michigan man named Kenneth Gay sued the city last month. 

Per MJBizDaily, Gay “filed the California lawsuit a month after filing a similar suit in New York, where a federal judge ruled that state regulators couldn’t issue dozens of adult-use marijuana retail licenses until the legal action was resolved,” after it was determined that he “didn’t meet the criteria for eligibility under L.A. law, which requires an applicant to have a ‘prior California cannabis arrest or conviction’ and either be low income or live in an area identified as disproportionately affected by policing.”

In his lawsuit, Gay asserted that “he satisfied all three requirements, ‘except that the relevant events occurred in Michigan rather than California,’” and that his suit “also contended that because Los Angeles ‘enacted laws and regulations that provide a preference to California residents over out-of-state residents for the Lottery,’ the city’s social equity program violates the U.S. Constitution’s dormant commerce clause.”

The city’s Department of Cannabis Regulation explains that the latest lottery, which took place on December 8, was part of a “triple-blind, random selection process.”

“A ‘blind’ selection process means that the entity which selects the applicants does not know their identity. A ‘triple-blind’ process means that no one involved in the process, including FTI, DCR, and other City departments, knew the identity of who was selected until after the selection process had been completed and the data from each party was reconciled,” the regulators explained in a press release.

The city said that it “contracted with a third-party global business advisory firm called FTI Consulting Inc. (FTI) to administer the selection process.”

Social equity provisions have become a hallmark of cannabis reform efforts in states and cities across the country, with elected officials and policymakers cognizant of the importance of remedying previous harms of the War on Drugs.

California, which legalized recreational pot back in 2016, is no exception.

In September, the state’s Democratic governor, Gavin Newsom, announced that he “signed several measures to strengthen California’s cannabis laws, expand the legal cannabis market and redress the harms of cannabis prohibition,” per a release from his office at the time.

In addition to signing the measures, Newsom called “on legislators and other policymakers to redouble efforts to address and eliminate these barriers.”

“For too many Californians, the promise of cannabis legalization remains out of reach,” Newsom said at the time. “These measures build on the important strides our state has made toward this goal, but much work remains to build an equitable, safe and sustainable legal cannabis industry. I look forward to partnering with the Legislature and policymakers to fully realize cannabis legalization in communities across California.”

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The state of Illinois on Friday announced plans to award 185 new dispensary licenses for its adult-use cannabis program, less than a month after a judge cleared the way for the process to begin anew.

The Illinois Department of Financial and Professional Regulation said that the licenses will be awarded in “three waves” of lotteries this summer, and that the “pace of licensing will be determined by how quickly applicants’ compliance checks can be verified.”

“Today marks the beginning of the next chapter of the most equitable adult-use cannabis program in the country,” Illinois Governor JB Pritzker said in a statement on Friday. “After signing the most equity-centered program in the country into law, expunging thousands of low-level cannabis convictions, and investing tens of millions of dollars in cannabis proceeds in communities failed by the war on drugs, we are about to more than double the number of adult use cannabis dispensaries in Illinois. This means countless more opportunities for communities that have suffered from historic disinvestment to join this growing industry and ensure its makeup reflects the diversity of our state.”

The announcement on Friday was made possible by a ruling late last month from Cook County Circuit Judge Michael Mullen, who lifted a stay on new recreational cannabis dispensary licenses that had lasted nearly a year. 

The courts had issued an injunction on new licenses while it considered from parties who said they were wrong excluded from previous lotteries.

According to the Chicago Tribune, “Black and Latino applicants have complained they have been unfairly kept out of the legal cannabis business in Illinois, where just 21 licenses for full-size growers have been issued, almost entirely to white owners, several of whom have come to dominate the industry nationally.”

In March, Pritzker’s administration announced “rules to simplify the cannabis dispensary license application process, remove barriers for social equity applicants, and expand opportunities targeted to the communities most impacted by the failed war on drugs.”

“From day one, Illinois has been dedicated to leading the nation in an equity-centric approach to legalizing cannabis, and these proposed changes to the application process will make it much easier for social equity applicants to pursue licenses.” Pritzker, a Democrat, said at the time. “I appreciate all the feedback we have received from stakeholders since the start of the cannabis program, whose work informed this proposal and is continuing to make Illinois’ growing cannabis industry the most equitable in the nation.”

Mario Treto, Jr., Acting Secretary of the Illinois Department of Financial and Professional Regulation, said at the time that the state is “committed to an inclusive and equitable cannabis program that continues to build on its successes while also recognizing and taking steps to improve it further.”

The state said Friday that to “ensure fairness for all applicants and correct any errors in the lottery process, [Illinois Department of Financial and Professional Regulation] has also announced its plans to conduct three corrective lotteries in June (one for each of the cannabis dispensary license lotteries held in 2021).”

“We recognize this is a long-awaited day by many seeking to join the most diverse and inclusive adult use cannabis industry of any state and IDFPR is prepared to take the next steps forward together,” Treto said in a press release on Friday. “Our agency is ready to work with applicants throughout the next stage so they may obtain their licenses and join Illinois’ robust adult use cannabis industry.”

The Department of Financial and Professional Regulation said Friday that it will issue conditional licenses in three lottery waves beginning on or before July 22.

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Illinois will launch a new lottery program specifically for the six applicants who did not make it, so that they will now have another shot at winning and being able to operate their own recreational cannabis stores. This official new lottery was announced this past Friday, and it already has the new market buzzing with possibilities. 

According to officials who commented on the new lottery process, those who were wrongly denied chances in the first three lotteries held this summer (lotteries that gave out 185 new licenses each) will now have another chance. The new licenses will be officially authorized by state law, which allows up to 500 new licenses total. 

While the applicants who were wrongly denied won’t be guaranteed licenses, the digital lottery is meant to be a more fair system than the original lottery held, and the goal is to re-create what the odds of winning should have been originally. 

When it comes to the former lotteries, a “clerical oversight in terms of data entry” led to the mistakes, according to Toi Hutchinson, senior adviser on cannabis to Governor J.B. Pritzker. This and other issues in the licensing system have delayed the official awarding of licenses by more than a year so far. 

This new announcement came as Illinois also unveiled the 51 winners from the previous three lotteries. However, the official licensing for those winners is still delayed, as seven challenges are currently pending in court that could impact who is truly awarded at the end of the process. Cook County Judge Moshe Jacobius has even gone so far as to order the state to not to award any licenses until he rules on a case that has to do with applicants and the scoring process. 

Illinois Struggles with Licensing Process 

In total, 937 businesses submitted 4,518 applications last year. However, the issue arose when only 21 of those applicants earned the perfect scores necessary to qualify for the first lottery. Those who lost went on to file lawsuits on the basis that scoring, which was done by the consultant KPMG, gave varying scores to different applicants even when the same information was added. There were also other problems noted with the scoring system. 

In order to remedy this issue, the state passed a law that would create two more lotteries to make up for the problems with the first one. With this lottery system, the applicants only needed to score 85 percent or better to qualify. However, applicants still complained about this round of lotteries, saying that the process favored folks who were white, politically connected and wealthy, since it allowed unlimited applications attempts for those who could afford the $5,000 application fee multiple times.

Hutchinson admitted that there is an issue with the industry being mostly white-owned, but also claimed that Illinois is doing better than other states with getting licenses to those who are minorities or social equity applicants. In total, 79 new licenses have been given out in August, and 43 percent of those went to Black-owned businesses. 

She also claimed that each step along the way, regulators realized more errors and acted to correct them, helping to make the process more fair and equitable. She claimed the process was a “marathon and not a sprint.” 

However, she did admit it’s a marathon that went on for a while.

“It’s been painful to watch how long this has taken,” she said. “As we move forward, this could get better every single year.”

It remains to be seen if that is true, and if this new round of lottery will work out better for applicants, but it’s clear that Illinois isn’t giving up when it comes to perfecting the process.

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