Hochul Administration Launches Crackdown on Unlicensed Cannabis Shops

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In a swift response to the approval of 36 cannabis licenses in New York State, including 7 in the Finger Lakes region, the Hochul Administration is taking action against businesses involved in the illegal sale of cannabis.

Governor Kathy Hochul recently announced the initiation of enforcement measures against unlicensed cannabis establishments, showcasing the results achieved thus far.

"As the most equitable cannabis industry in the nation gains momentum, we continue to take action against bad actors who seek to skirt around our laws," Hochul said. "Unlicensed dispensaries violate our laws, put public health at risk, and undermine the legal cannabis market, and we will continue to take these critical enforcement measures to protect New Yorkers from illicit, unregulated sales."

Leading the effort are the New York State Office of Cannabis Management (OCM) and the Department of Taxation and Finance (DTF), empowered by a new law signed by Governor Hochul in May as part of the state's 2023 budget. Since June 7, these organizations have already conducted inspections of 33 dispensaries in New York, Ithaca, and Binghamton that lack the necessary licenses to sell cannabis.

Hochul expressed satisfaction with the progress made, stating, "We can now crack down on businesses that sell illegal cannabis. Unlicensed businesses are breaking our laws and with powerful new tools in our tool belt, we're sending a clear and strong message – If you sell illegal cannabis in New York, you will be caught and stopped."

The New York State Office of Cannabis Control Executive Director, Chris Alexander, emphasized their commitment to safeguarding public health and ensuring consumer safety. As part of their enforcement actions, authorities raided the cannabis businesses owned by David Tulley, a 42-year-old entrepreneur from Wayne and Cayuga Counties. Tulley, who resides in Lyons, was charged with obstruction for impeding the investigation conducted by the Office of Cannabis Management and the Department of Taxation and Finance during the raid on his Lyons business. Fingerlakes1 reports that Tulley intends to contest the charges.

The OCM and DTF are determined to continue their efforts to establish a fair and regulated cannabis marketplace. Both agencies have issued violations to 31 cannabis businesses, leading to the seizure and cataloging of approximately 1,000 pounds of illegal cannabis, with an estimated street value of nearly $11 million. Enforcement operations persist across the state, and the OCM is actively recruiting additional officers to aid in their mission of eradicating the illegal sale of cannabis.

Executive legislation passed alongside the budget empowers the OCM to impose civil penalties on unlicensed cannabis businesses, with fines ranging from $10,000 to $20,000 per day for the most egregious violations. Additionally, the agency can seek a state court order to shut down companies found in violation of the law. The legislation also criminalizes the sale of hemp and hemp products without a sales license.

Apart from OCM's enhanced authority, the new executive law grants the DTF the power to conduct regulatory audits of cannabis businesses to ensure proper tax payment. Civil penalties can be imposed if tax obligations are not met. The law also introduces a new offense for tax evasion by companies that willfully fail to collect or pay the required cannabis tax or possess taxable but unpaid cannabis for sale.

Hope Knight, President, CEO, and Commissioner of Empire State Development, newly appointed to the Cannabis Control Board (CCB), said Hochul's vision for a state-led regulatory framework and marketplace for cannabis sets the national standard.

The 31 businesses caught illegally selling cannabis have received cease-and-desist orders, posted outside their premises. These companies must now attend administrative hearings to determine their final fines and penalties. Violating the order may result in an additional fine of $5,000, along with further violations and tax penalties.

Following the initial inspections, the OCM (Office of Cannabis Management) and DTF (Drug Task Force) undertake continuous monitoring of the inspected premises to ensure that unauthorized activities have stopped. In case unlicensed operations persist, the OCM has the authority to request the state Supreme Court to enforce a lockdown on the business premises until compliance with the Cannabis Act and its associated regulations is achieved.

If an unlicensed establishment continues to sell cannabis products despite receiving a Notice of Violation/Order to Cease from the OCM, an Administrative Law Judge may impose an additional daily penalty of up to $20,000. If the unlicensed business removes the OCM Notice of Violation or Warning that is displayed on the business storefront, the business may face a fine of up to $5,000. "Illegal cannabis shops endanger the health, safety and welfare of the public with untested unregulated products, but also confuse the public by trying to operate their businesses and products under license and sanctions when not permitted,” New York State Assembly Majority Leader Crystal People-Stokes said.