NY officials are making a mess of their efforts to legalize cannabis—here’s what’s at the eye of the latest shitstorm.
Back in February, New York State’s Office of Cannabis Management (OCM) announced that they sent cease-and-desist letters to dozens of shops across the state that they suspect of selling cannabis without a license. Failure to comply with the request could prevent a store from acquiring a legal license once they become available later this year, the letters warned.
But last week, a Freedom of Information request filed by The Gothamist forced the OCM to release the letters. Within them, plain for all to see, were the names of the businesses told to cease operations.
Of the 66 letters, two went to businesses that claim they’ve never heard anything from the OCM or received any letters. One business claimed that they don’t even sell cannabis.
State officials say they want to help ease gray market operators into the fast-approaching legal market. But these cease-and-desist notices, and the public disclosure of who received them, have only created new questions as the state eyes a fall or winter opening day for adult-use sales.
NYC Mayor Adams sends mixed signals
In June, New York City mayor Eric Adams further complicated the situtation by telling millions of residents and visitors to light up without fear of repercussions. Mayor Adams said unlicensed operators could expect slaps on the wrist for now. But the former NYPD officer hinted that harsh consequences could come to those who ignore initial warnings to stop unlicensed sales.
‘Light up,’ says NYC Mayor Adams, defying state’s desire to crack down on illegal weed
The day before the mayor told New Yorkers to “light up,” New York’s Senate passed a bill that would crack down on unlicensed possession and sales. That bill needed approval from the state Assembly before June 3 to move forward. But the date passed without a vote. On the same day, NYC’s Mayor encouraged everyone to smoke more weed from the shops, trucks, and legacy sellers that were told by the OCM to cease and desist.
With state officials estimating that New York State will generate $1.25 billion in revenue over the next six years, lawmakers and regulators from the state and every local municipality need to get on the same page, and fast. But only if they’re serious about launching a successful and equitable legal weed market in America’s most populated city.
If they continue to send legacy providers and users mixed signals, much of that billion and change they project to generate could leak into the illicit market and neighboring states like New Jersey and Massachusetts.
Gray-market providers should proceed with caution
The drama surrounding the letters underlines a paradox of the state’s own making: How can they support the legacy market and bring it into the new system, if they think it’s operating outside of the law?
The letters effectively “out” many of the businesses mentioned. While some are out in the open, others are now exposed to an increased risk of robbery or bodily harm.
“It’s weird. It’s confusing,” Ryan Lepore, a member of Empire State NORML’s Board of Directors, told Leafly. “Anyone in the legacy market should proceed with caution. I don’t say this to fearmonger. I think the state is trying to figure out a way to do this. They’re trying more than a lot of other states have tried at the inception of a program,” he added.
Gray area shops live in pot purgatory
New York State is home to a robust, and dynamic, gray market; New York City allegedly smokes more than any other city in the world. But when NYC legalized marijuana in March 2021— via the Marihuana Regulation & Taxation Act (MRTA)—things got sticky very quickly.
The bill makes it legal for adults to “transfer” cannabis up to three ounces of cannabis to each other, as long as “no compensation” gets exchanged. (It also legalizes most public consumption.) As a result, many “gifting” shops began to sprout up around the city. Sure, customers couldn’t buy pot outright. But anyone could pay $40 or $50 for an NFT, and get an eighth thrown in their bag, free of charge.
Some of these shops stand boldly in the open, for all to see, while others take a more clandestine route.
New York has shown intermittent support for legacy businesses while building out their adult-use program. Most substantially, Governor Kathy Hochul (D) announced this spring that the state would allocate $200 million to help the first 100 adult-use license holders—who, by law, must be victims of the War on Drugs, or members of disenfranchised communities—to open up shop.
But with the cease-and-desist letters, they’ve muddied their stance on supporting existing businesses.
“There are no businesses currently licensed to sell adult-use cannabis in New York State. Selling any item or taking a donation, and then “gifting” a customer a bag of untested cannabis does indeed count as a sale under New York’s Cannabis Law,” said Tremaine Wright, Chair of New York’s Cannabis Control Board, in a recent press release.
What weight do these letters actually carry?
The cease-and-desist letters suggest that the state will eventually start punishing businesses that continue adult-sales without a license. But the OCM doesn’t appear to have the power to sanction any punishment at the moment (hence the warnings). And even when they can start cracking down, regulators should be careful not to hassle the legacy providers they claim to be supporting for social equity.
New Jersey is latest battleground for social equity in cannabis
“The state has not done a great job of defining what legacy is, or providing protection [to those businesses],” Lepore, of Empire State NORML, told Leafly.
“[But OCM] is trying to do anything and everything. A lot of people on their staff are not trained and versed in this market. Some of them are. They’re finding their rhythm at the same time,” he added.
“This could be way worse,” Lepore notes. He feels the state has demonstrated restraint by not jumping into attack mode and immediately raiding shops or seizing assets. But that could just mean they are sitting back and allowing targets to build their cases for them.
Syracuse.com reported that the OCM’s view that gifting is illegal is “not unanimously shared by DAs across the state.” In March, the Erie County DA’s office told NY Cannabis Insider that “the current criminal penal law does not prohibit” gifting. NYC mayor Eric Adams has further complicated the situation with his laissez-faire approach.
“There needs to be a system of not heavy-handedness, but going in and explaining to that store that, ‘Listen, you can’t do this,’ give them a warning,” Adams told reporters in June at a cannabis industry expo.
OCM did not respond to a request for comment for this story clarifying whether they have taken punitive actions against any of these businesses yet. Mayor Adams’ office also left Leafly’s request for comment unanswered.
Naming the shops could put them at risk
Lepore believes outing these shops could put them in real danger. “Once you out someone’s location, there are plenty of people that would take advantage of that and try to do nefarious things to those people, knowing there’s cannabis and money there,” he said. “Some of these people could actually get hurt.”
Lepore cited one recipient of the letter, a smoke shop, where employees have balked at coming to work since the warning. He also noted a shop upstate where robbers broke in armed with assault rifles.
Deadly robberies on the West Coast have become more common as businesses must juggle protecting their cash-only operations from both cops and robbers.
With such high stakes riding on New York’s next cash crop, state officials aren’t inspiring confidence. Nicole Reynolds, the owner of an events business that got a warning letter despite never selling or advertising cannabis, told the Ithica Voice that the way the OCM bungled this initial enforcement campaign is a discouraging sign of its ability to handle the massive new industry they’re about to unleash.
Reynolds said “the social media fallout, gossip, questions relating to my/our commitment to this community, and whether we are practicing illicit and illegal activity stings.” The LakeWatch Inn owner added, “the legal ramifications will take time… I have fielded calls from concerned hosts.”
Some businesses will fight the cease-and-desist letters
Some “gifting” stores remain adamant that they are operating within the law. And they’re not being quiet about it. Empire Cannabis Club, in the heart of the NYC neighborhood Chelsea, for one, refuses to close up shop.
The shop’s attorney, Steve Zissou (no, not that Steve Zissou) argues that since the shop sells memberships, not weed, directly, they cannot be shut down. Zissou insisted to CBS New York that “there [is] no compensation for the cannabis that’s distributed.”
During the same event, Adams noted that he’d like to see these illicit businesses join the legal market. If they don’t, he warned there might be repercussions.
“If they refuse to adhere to the rules, then you have to come back and take some form of enforcement actions, such as a summons,” he said.
Adams regularly touts the burgeoning New York cannabis industry as a potential windfall. Earlier this year, he made headlines by suggesting that the city convert public housing rooftops into ganja greenhouses.
Before thinking that big, city and state officials should come to agreement on the proper way to roll out their next big cash crop.