New York Governor Signs Legislation to Crack Down on Illicit Cannabis Market as Part of State Budget

New York Gov. Kathy Hochul is taking a multipronged approach to her fight against the state’s illicit cannabis market; last month, Hochul introduced a public education campaign to educate New Yorkers on why they should purchase cannabis from regulated dispensaries, and this month, she signed legislation to allow officials to take harsher action against unlicensed shops.

Hochul signed legislation May 3 as part of the state budget for fiscal year 2024 to crack down on New York’s still-thriving illicit cannabis market. The Office of Cannabis Management (OCM) can now seize product and seek injunctions to close illicit shops, and the Department of Taxation and Finance (DTF) may issue fines and penalties for unpaid taxes. Penalties can include fines of up to $20,000 per day.

Hochul first proposed the legislation in March to provide additional authority to the OCM and DTF to enforce the new regulatory requirements of New York’s adult-use cannabis program and to close retailers that are illegally selling cannabis.

“As New York State continues to roll out a nation-leading model to establish its cannabis industry, these critical enforcement measures will protect New Yorkers from illicit, unregulated sales,” Hochul said in a public statement. “Unlicensed dispensaries violate our laws, put public health at risk, and undermine the legal cannabis market. With these enforcement tools, we’re paving the way for safer products, reinvestment in communities that endured years of disproportionate enforcement, and greater opportunities for New Yorkers.”

The legislation officially makes it a crime to sell cannabis products without a license and increases the OCM’s ability to conduct regulatory inspections of cannabis retailers, including “sticker shops,” or stores that sell and give away cannabis in indirect ways.

Under the new law, the OCM can seize untested cannabis products from unlicensed businesses and may seek court orders, closing orders and the removal of commercial tenants who sell cannabis without a license.

In addition, the DTF can now conduct regulatory inspections of cannabis retailers to determine if they have paid appropriate taxes, and officials can levy civil penalties in cases where appropriate taxes have not been paid. The legislation also creates a new tax fraud crime for businesses that willfully fail to collect or remit the required cannabis taxes, as well as those that knowingly possess cannabis for sale on which tax was required to be paid but was not.

“Today, the state took a necessary step to protect the public health of New Yorkers and to support our state’s growing cannabis industry,” OCM Executive Director Chris Alexander said in a public statement. “I appreciate Gov. Kathy Hochul, Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie for demonstrating their commitment to establishing the most equitable cannabis market in the nation. Today’s legislation will further those goals by giving the Office of Cannabis Management real power to shut down businesses trying to flout our laws and ensure that communities who were promised reinvestment dollars are not shortchanged.”

The OCM has issued 165 adult-use cannabis licenses to date, with more scheduled to be awarded at the Cannabis Control Board’s meeting later this month. Eight licensed dispensaries are currently operational in New York, as well as one delivery service.

“Strengthening tax laws as they pertain to the cannabis industry and providing for robust and fair enforcement will help the industry to be successful over the long term,” Acting Commissioner of Taxation and Finance Amanda Hiller said in a public statement.

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