Cannabusiness Advisory

As of recent data released by the Office of Cannabis Management (OCM), New York now has 65 adult-use and delivery licenses operational, with two adult-use stores being approved earlier this month. While the first date of commencement of operations is typically an exciting and pivotal time for cannabis retailers, things are not looking all too positive with the type of market these businesses are entering in NY.

Recreational cannabis sales commenced in NY in late December 2022. Despite their several attempts and re-attempts, the current NY regulatory regime has continued to face issues with the illicit cannabis market impeding lawful adult-use business operations with little resolution.

Under new legislation adopted last May, the OCM and the Department of Taxation and Finance have the authority to assess civil penalties against illegal cannabis stores and vending trucks that are not properly licensed. These regulatory authorities may impose $10,000 fines for each day of illegal marijuana sales and a fine of $20,000 per day against violators who continue to illegally sell cannabis after receiving a cease-and-desist order from the Office of Cannabis Management. Additionally, the Department of Taxation and Finance may conduct regulatory inspections to determine if proper taxes are being paid by such illicit businesses, which may subject such unlawful businesses to additional violations and penalties under applicable tax law.

However, recent data released by OCM in its enforcement updates indicate that the OCM and NY Department of Taxation and Finance have only collected $22,500 from illegal cannabis operations despite the $25 million of fines issued. In December alone, these regulatory agencies had inspected 48 retail stores, of which 17 were re-inspections of suspected unlicensed cannabis retailers, and seized $4.26M estimated value of cannabis products.

This highlights the State’s ongoing difficulties in implementing successful enforcement actions in NY’s challenging cannabis industry. While scattered rumblings fill the air of NY lawmakers’ desire to make some changes to the Marihuana Regulation and Taxation Act of 2021 to direct adult-use retail sales on an upward trajectory, other NY officials are speculating that such changes are likely to happen.