New York is cracking down on illicit cannabis sneaking into the legal market.
The New York State Legislature passed the Anti-Inversion Act, taking aim at cannabis inversion, when bad actors disguise illegal marijuana as legal product, slip it into the regulated supply chain and undercut businesses playing by the rules.
Much of the illegal product comes from states like Oregon, Washington and Oklahoma and isn’t tested in New York labs, New York Assemblymember Landon Dais, who sponsored the bill, told MJBizDaily.
“This is a supply-chain integrity bill and a product-safety bill,” Dais said. “Products grown by New York farmers and producers are passing stringent testing and don’t have heavy metals or harmful chemicals.”
What are the penalties for bad cannabis operators?
Those who don’t play by the rules face harsh consequences – up to $10,000 per day, plus multipliers on illicit sales or inventory and possible product seizure and destruction.
“This is setting stiff penalties for bad operators and putting due process guardrails in place for good operators,” Mack Hueber, president of the Empire Cannabis Manufacturers Alliance (ECMA), told MJBizDaily. “It makes a bad actor look at inversion as uneconomical now.
“I don’t think there’s always a perfect solution, but we have a much bigger deterrent now.”
The measure passed both chambers of the Legislature and is headed to Gov. Kathy Hochul for consideration. If signed into law, the bill would give regulators additional tools to identify and stop illegal cannabis from moving through the state.
The bill also establishes parameters around how cannabis products move through the market and who owns them.
The legislation’s provisions also include:
- Formally defining cannabis inversion in New York law
- Stricter recordkeeping and traceability that prohibits possession of cannabis without valid documentation showing the complete chain of custody
- Giving regulators the authority to suspend licenses for up to 30 days during an investigation
- Greater scrutiny of certificates of analysis, with fraudulent COAs resulting in license revocation if tied to cannabis inversion
How did the cannabis Anti-Inversion Act come to be?
The bill was sparked by a white paper from the Empire State Green Standard Alliance, a consumer advocacy group that saw the inversion problem coming early.
The group’s paper laid out how illicit cannabis was creeping into the regulated supply chain and mapped out a legislative fix to stop it.
The ESGSA wasn’t alone. A broad coalition of industry groups backed the bill, including the New York Medical Cannabis Industry Association, the Association of New York Cannabis Processors, the Cannabis Farmers Alliance, the Cannabis Association of New York and the Black Cannabis Industry Association.
What role does cannabis track-and-trace play?
New York’s Office of Cannabis Management and Cannabis Control Board have been criticized by operators in the $1.6 billion market over what’s perceived as lax enforcement activity.
At the heart of the inversion problem last year was New York’s lack of a track-and-trace oversight system, more than two years after the state’s first regulated adult-use sale.
Track-and-trace requirements in the New York market went live earlier this year after years of delays.
“Track and trace is a big part of the bill in that it can be used as more evidence by regulators in the inversion findings,” Hueber said.
Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.
