When the state of New York legalized adult-use marijuana, thousands of retail outlets started selling the substance without first obtaining licenses. These illegal establishments defied the authorities and remained open for more than a year due to lax enforcement. However, their luck turned when the state enacted new regulations in April.
The office of the sheriff in New York City reveals that since the laws were strengthened in April, approximately 700 unlicensed cannabis shops have been closed. This success is largely attributed to the increased enforcement powers that local authorities were given in the new laws, and the opening of more licensed shops has given state residents closer outlets from which they can legally buy recreational marijuana.
According to estimates from city officials, the 60 state-sanctioned marijuana shops in New York City were eclipsed by the unlicensed outlets, which numbered about 2,900. However, the tide is changing, and entities licensed to sell recreational marijuana admit that the recent wave of enforcement has started producing visible results against the wanton operation of illegal retail outlets. Order is being restored to the industry.
Sasha Nutgent, retail director at Manhattan-based Housing Works Cannabis Company, says in the past, enforcement was a joke, but this is no longer the case. Housing Works Cannabis Company made history back in December 2022 when it opened and completed the first legally sanctioned sale of recreational marijuana in the state.
But, how did the state get swamped by these illegal sales outlets? The 2021 law that made adult-use marijuana legal didn’t give local authorities sufficient power to take action against unlicensed cannabis shops. Instead, enforcement powers were vested in the Office of Cannabis Management (OCM). This left local authorities with limited power to act against the proliferating unlicensed outlets.
To make matters worse, bureaucratic red-tape snagged the pace at which businesses could be licensed and allowed to start selling recreational marijuana. Given that demand for the substance was high, unlicensed shops popped up everywhere. The impunity with which they operated contributed to Governor Kathy Hochul describing the rolling out of legal adult-use sales as “a disaster.”
With new enforcement rules allowing local authorities to inspect and seize products, and even impose fines on illegal shops, some degree of sanity is returning to the industry. Enforcement raids on suspected illicit shops are now frequent, and many of them have had their products seized and shops shuttered as administrative hearings proceed. Since April, the sheriff’s office has managed to write up violations amounting to at least $57 million, although statistics aren’t available regarding how much of that money has been remitted to the state by the entities fined.
The legal industry now finally has a chance to take off as unlicensed sellers are weeded out one at a time. This positive turn in the direction of the legal cannabis industry in New York State is likely to be seen as a welcome development by licensed companies across the board, including entities such as Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) that operate in other legal marijuana markets.
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