New York Senate Passes Gray Market Cannabis Bill

The New York Senate voted this week to approve a bill to crack down on the state’s cannabis gray market, giving regulators the authority to seize illicit weed and increasing fines for unlicensed operators. State Senator Liz Krueger introduced the measure on Sunday and by Wednesday, the Senate had voted to approve the bill, offering an indication of the legislature’s interest in addressing New York’s unregulated pot market before legal sales of recreational cannabis begin later this year.

Justin Flagg, a spokesperson for Krueger, said that the bill is designed to empower the New York Office of Cannabis Management (OCM) and the Department of Taxation and Finance to address unregulated cannabis retailers, which have become brazenly ubiquitous in Manhattan and other areas since state lawmakers legalized adult-use cannabis last year. The OCM is currently working to establish rules for the regulated market, which should begin licensed recreational cannabis sales by the end of 2022.

“This bill is aimed at gray market operators such as retail cannabis stores that have emerged during the period after legalization but before licensed businesses begin operating,” Flagg said in an email quoted by Syracuse.com. 

Flagg added that Krueger drafted the legislation with cooperation from OCM and the tax and finance department, noting that their action was “prompted by the difficulty of enforcement against several illegal cannabis stores that have been hard to shut down under the existing statute.”

The bill gives the OCM the authority to seize illicit cannabis and expands the authority of the Taxation and Finance Department to assess fines against unlicensed cannabis operators. The measure also doubles civil penalties for anyone who knowingly possesses illicit pot, which is defined as taxable cannabis products for which no tax has been paid. Flagg clarified that the legislation applies to any cannabis product that was not grown by or purchased from a cannabis business licensed by the state.

Fines for Illicit Weed Doubled in New York

Fines for illicit cannabis would be increased from $200 per ounce of flower to $400 per ounce. Fines for other cannabis products would also be doubled, with edibles rising to $10 per milligram of THC and concentrates to $100 per gram, while the fine for each illicit cannabis plant would jump to $1,000. The bill also allows the Taxation and Finance Department to revoke certificates of registration for businesses that sell or possess illicit cannabis.

Flagg said that restraining the illicit market is in part a safety issue because unlicensed operators do not follow packaging rules and other regulations designed to curtail cannabis use by children.

“Addressing these illegal operators will help ensure that licensed equity operators have the opportunity to succeed and also help ensure that cannabis products are sold in a responsible way,” Flagg said.

Joshua Waterman, a cannabis grower and the co-founder of the Legacy Growers Association, told local media that Krueger’s bill was drafted with good intentions, but he does not support the legislation.

“Although the idea of shutting down dispensaries that are flooding the market with … products from other states is something we would support, we just don’t see that in this bill,” he said. “I’m afraid this will end up being another way for the state to fine and penalize lower-class individuals, especially minorities.”

Waterman added that the bill will strengthen legacy growers’ mistrust of legalization and make them less likely to join the ranks of the regulated market, which has been a goal advanced by lawmakers and regulators.

“The state and the OCM keep saying they want to include and incentivize legacy people to enter the legal market,” Waterman said. “Putting out a bill to stop legacy operations before releasing applications for licensing is disgraceful, and truly shows where lawmakers stand when it comes to the legends that created the cannabis industry without ever asking for their support.”