New York regulators raid unlicensed marijuana stores, enact new rules

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Image of illicit marijuana products for sale in lower Manhattan

Illicit marijuana products are openly on sale at Washington Square Park in lower Manhattan's Greenwich Village neighborhood.

New York regulators have started seizing products and issuing violations as part of a statewide initiative to rein in unlicensed marijuana operators in one of several new developments aimed at jump-starting sales in the state’s adult-use market.

Democratic Gov. Kathy Hochul on Thursday announced the launch of a multi-agency enforcement effort and the first product seizures in New York City, where as many as 1,400 unlicensed stores, trucks and bodegas are selling marijuana products.

Seven stores were issued violations for selling unlicensed marijuana products and ordered to cease operations, the New York Post reported. They also each face up to a $10,000 daily fine.

The alleged offenders were:

  • Baby Jeeter.
  • LaGuardia Smoke.
  • Maze.
  • Nomad.
  • Play Lane.
  • Roll 2 Nation.
  • Varieties on Broadway.

Enforcement officers from the state’s Office of Cannabis Management (OCM) and Department of Taxation and Finance are inspecting storefront businesses not licensed to sell cannabis and issuing them “notices of violation” and “orders to cease unlicensed activity.”

Lawmakers enacted the new measures in May as part of legislation that makes it a crime to sell marijuana products without a license.

The new law also allows the OCM to impose fines of up to $20,000 a day.

And it permits the tax and finance department to issue civil penalties to businesses that don’t pay applicable marijuana taxes and creates a new tax fraud crime for businesses that don’t collect or remit required MJ taxes or sell untaxed cannabis.

“These enforcement actions are critical steps to protect and help those individuals who were promised a shot to start a legal business and be successful,” Hochul said in a statement.

The enforcement developments came a day after the OCM announced that retail stores will open this month in Farmingdale and Syracuse.

The scheduled openings are the first in the Central New York region and on Long Island, where the vast majority of towns and cities have opted out of retail.

Only 13 retailers have been licensed since the Dec. 29 launch of recreational marijuana sales in New York, widely missing market expectations touted by the governor and regulators leading up to adult-use sales.

State officials this week also outlined several changes to the Conditional Adult-Use Retail Dispensary (CAURD) program, which was established to enable applicants with low-level marijuana offenses and/or their family members to enter the legal industry.

Changes include:

  • The Dormitory Authority of New York (DASNY) identifying new locations with lower rent and renovations costs for CAURD licensees. Under the original plan, a $200 million social equity fund managed through DASNY was supposed to fund startup costs, find rental properties for entrepreneurs and establish “turnkey dispensaries.”
  • DASNY capping build-out expenses at $1.3 million in New York City and $1.1 million upstate.
  • A CAURD licensee that secures its own location can apply for up to a $100,000 low-interest loan from DASNY (with an anticipated 5% interest rate) to cover build-out costs. The fund will provide a “reimbursement” loan to cover up to $100,000 in capital costs after the retailer has a permanent license, a financed build-out and opens.
  • A new search tool for licensees designed to determine whether proposed locations meet OCM barrier restrictions near schools, churches and other dispensaries.

The changes follow news that regulators and lawmakers are paving a path for multistate operators to enter the recreational market by year’s end – two years before originally planned – in an effort to stabilize the shaky rollout of New York’s adult-use marijuana program and energize a supply chain that currently offers limited business opportunities.

The OCM also announced that Stage One Cannabis in Rensselaer and Half Island Flavors in the Bronx will launch delivery services in June.

Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.