New York’s recent crackdown on illicit cannabis retailers is achieving its goal of aiding legal cannabis operators, but those being targeted are saying the state is violating their right to due process and killing legitimate underlying businesses, too.
As of July 31, more than 750 shops selling illicit cannabis products had been closed down in New York City alone.(1) In addition, 22 shops within Central New York had been shuttered.(2) Reportedly, more than 41,000 violations have been issued, amounting to $65,671,487 in penalties, with NYC having already seized a total value of $41,443,792 in illegal products.(3)
The state’s enforcement initiative is deemed to be largely successful. Governor Kathy Hochul announced: “We are committed to building the strongest, most equitable cannabis market in the nation. In order to advance that goal, we promised to expedite the closure of unlicensed cannabis storefronts, and I’m here to say: we’re getting it done.”(4)
Hochul created a Cannabis Enforcement Task Force, led by New York State Police Commissioner Jeanette Moy and First Deputy Superintendent Chris West, that deployed teams of investigators and analysts all over the state for the purpose of closing down as many illegal operations as possible within the first 90 days.(5)
One goal behind the rampant enforcement efforts is to keep untested illicit cannabis products out of the hands of children throughout New York, where unregulated cannabis products with “candy-like packaging” are being seized in the illicit stores. The enforcement effort was great and fast: NewsChannel 9 performed a ride-a-long with OCM’s Dan Haughney, where Mr. Haughney stated, “[w]e go out looking to padlock illegal, unlicensed businesses.” During the NewsChannel 9 ride-along with OCM, OCM padlocked three different shops that were found that day to be selling illicit cannabis product in or around Syracuse, New York. Further, it has been said that “[t]he swift closings of unlicensed cannabis shops has become one of [NYC] Mayor Eric Adam’s proudest accomplishments.”
Legal retail dispensary owners are benefitting from the aggressive efforts, with several legal operators in New York City reporting “strong sales increases between 100% and 3,000% since the recent enforcement effort began this year.”(6) Most legal shops within areas of enforcement “have reported a 72% sales increase on average in New York City, with a third reporting sales increases of 100% or more since the crackdown began.”
Prior to the changes in the law brought on by Governor Hochul’s increased enforcement efforts, the sealing of a business “previously required multiple inspections and months long legal proceedings, if it worked at all.”(7) The state’s recent aggressive tactics have been challenged by 27 business owners whose shops were sealed by New York City agencies and who filed a class action lawsuit against those agencies. The owners claim harm to their legitimate underlying businesses – in all cases, they do more than sell cannabis — based upon the mere accusation that they made unlicensed cannabis sales.(8)
So far, they’ve had little luck in pleading their case. U.S. District Judge J. Paul Oetken of the United States District Court for the Southern District of New York found the operators were given notice and opportunity to cure, as well as a path to appeal the closings through state hearings and hearings before the New York City Office of Administrative Trials and Hearings.
New York’s attempt to boost the legal cannabis industry by shutting down illegal operations has resulted in targeted communities reporting safer neighborhoods and less unregulated, illicit products accessible to minors. Further, licensed retailers report increased sales in record-breaking numbers. But do these important benefits outweigh the harm incurred by business owners closed out of their underlying legitimate businesses? Only time, and the courts, will tell.
Harris Beach’s New York Cannabis lawyers can help with both licensing and enforcement defense matters. If you have questions for our Cannabis Industry Team or need help on cannabis-related matters, please reach out to attorney Francis L. Gorman, III at (585) 419-8628 and flgorman@harrisbeachmurtha.com, attorney Julia C. Evans at (315) 214-2035 and jevans@harrisbeachmurtha.com, or the Harris Beach attorney with whom you most frequently work.
This alert is not a substitute for advice of counsel on specific legal issues.
Harris Beach has offices throughout New York state, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as Washington D.C., New Haven, Connecticut and Newark, New Jersey.
[1] See NYC City Hall, Mayor Adams Celebrates Shut Down of More Than 750 Illegal Cannabis Shops Since Launch of “Operation Padlock to Protect,” dated July 31, 2024.
[2] See Rachel Polansky, ‘We go out looking to padlock illegal, unlicensed businesses’ │ State officials shut down 22 pot shops in CNY, LocalSYR.com, dated August 14, 2024.
[3] See Janice Yu, 750+ illegal pot shops shut down in New York City since April, ABC7 Eyewitness News, dated July 31, 2024.
[4] See NYS Governor’s Press Office, Governor Hochul Announces Hundreds of Illicit Storefronts Shut Down by the New York State Task Force, Leading to a Surge in Sales for Legal Retailers, dated June 18, 2024.
[5] See Press Release, New York State Governor Kathy Hochul Directs Operational Overhaul of the Office of Cannabis Management, dated May 10, 2024.
[6] See John Schroyer, New York enforcement push closes 1,000 illegal cannabis shops, officials announce, Green Market Report, dated July 31, 2024.
[7] See Ashley Southall, Judge Finds Flaw in New York City’s Cannabis Enforcement Efforts, The New York Times, dated August 15, 2024.
[8] See Caroline Lewis, Lawsuit aims to stop NYC’s mass crackdown on marijuana shops, says it’s unconstitutional, Gothamist, dated June 13, 2024.
