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New York Strengthens Enforcement Against Unlicensed Cannabis Operators

Cannabis / Marijuana

Governor Kathy Hochul recently signed legislation aimed at curbing the illicit cannabis market in New York State. The new law, part of the FY 2024 Budget, provides increased enforcement power to the Office of Cannabis Management (OCM) and the Department of Taxation and Finance (DTF) to crack down on unlicensed dispensaries. This blog will explain what the new law entails, why it was necessary, who has been given new powers, what those powers are, and how they will contribute to a more regulated cannabis industry in the state.

From a policy perspective, the legalization of cannabis in New York State brings numerous benefits, such as safer products, reinvestment in communities, significant tax revenues, and increased opportunities for New Yorkers. But, from the State’s perspective, the presence of unlicensed dispensaries undermines these efforts, violates laws, reduces the tax benefits, and poses risks to public health. The new law described herein aims to address these concerns by establishing stricter enforcement measures.

Included in the approval of the FY 2024 Budget, the Office of Cannabis Management and the Department of Taxation and Finance are the two agencies given additional powers to enforce the regulatory requirements and shut down illegal cannabis businesses. The law creates new civil and criminal penalties related to illegal operations.

From the civil side, the law allows the Office of Cannabis Management to impose civil penalties on unlicensed cannabis businesses. The most serious offenders may face fines of up to $20,000 per day, discouraging unlicensed operators from undercutting the legal market. From the criminal side, the law
makes it a crime to sell cannabis and cannabis products without a license, further deterring illegal activities.

The new legislation also strengthens the Office of Cannabis Management’s ability to conduct regulatory inspections of cannabis businesses, including indirect sellers like so-called “sticker shops.” Unlicensed businesses found selling cannabis will have their untested products seized. The Office can also seek court orders to close these businesses and remove tenants who violate licensing requirements.

The law also empowers the Department of Taxation and Finance to inspect cannabis businesses to ensure appropriate taxes have been paid. Civil penalties can be levied against businesses that fail to fulfill tax obligations. And the law also establishes a new tax fraud crime for businesses intentionally evading cannabis tax requirements.

The new law highlights the importance of having an experienced attorney for cannabis businesses. Navigating the complex web of regulations and ensuring compliance are essential to avoid penalties and legal issues. A knowledgeable attorney can provide guidance on licensing, permitting, and other regulatory requirements, protecting businesses from potential risks.

If you have questions about the NYS MRTA, local enforcement authority, or regulatory or statutory compliance, contact an experienced attorney for help. The Zoghlin Group offers a range of legal services relevant to the emerging cannabis industry.

For inquiries related to Cannabis/Marijuana Law, and other Municipal Law issues, please contact Jacob H. Zoghlin, Esq. at The Zoghlin Group, PLLC.

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