A range of lawmakers said that the unlicensed marijuana businesses in New York State are still a big obstacle for legislators who wish to replace these with licensed companies and licensees attempting to set up legal firms. This was revealed during a Wednesday budget hearing. What can be done is not fully known.
Felicia Reid (Acting Executive Director of the New York Office of Cannabis Management) testified at a hearing on the budget of the joint legislative committee. She agreed that there was “certainly room for more” in terms of enforcing laws against unlicensed marijuana sellers.
However, the civil penalties have proven to be effective in deterring criminals, according to her.
Liz Krueger of Washington State, who is one of principal authors of 2021 Marijuana Regulation and Taxation Act, replied, “I don’t know, to be fair.” I believe that there are some big warehouses who deliver without a license and do it through the mail. “I’m not certain we have all the tools to shut these down.”
Reid confirmed that OCM is not authorized to take action against unlicensed companies that are operating in remote locations or as mobile delivery businesses, only those “bricks-and mortar” stores that do not possess permits. She said that the agency was looking at all possible ways to clamp down on illegal sales.
‘Doesn’t seem to be a lot of compliance’
Krueger said that the OCM could use civil forfeiture to punish those found guilty of selling marijuana illegally. And other legislators have received complaints from mobile cannabis dealers operating out of vans.
Reid stated that OCM is continuing to enforce its laws and has closed around 500 cannabis shops without a license in the state. Reid also pointed out that separate enforcement actions are also being carried out by cities, such as in New York City where Operation Padlock to Protect reportedly closed down over 1,000 unlicensed cannabis sellers last autumn.
Reid said that the efforts made by lawmakers were insufficient. Their offices continue to be flooded with angry calls from constituents demanding more action against marijuana entrepreneurs who break laws.
“In New York City, there still is a problem, and some of the ones that were actually shut down … have somehow popped back open and with a hemp license,” said State Assembly Majority Leader Crystal Peoples-Stokes while she questioned Reid. There has to be an opportunity to see who holds a hemp licence and what they are doing with it.
Peoples Stokes told the audience that last year, a task force set up by Gov. Kathy Hochul shutting down illegal cannabis shops temporarily “worked”. The policy is no longer effective.
Thomas O’Mara, a state senator from New York said that he’d heard of estimates that as many as 10 000 unlicensed marijuana sellers could operate in the entire state.
O’Mara replied, saying that “300 doesn’t seem like much” referring the the number of shops Reid had initially claimed OCM to have closed. Reid later clarified the claim and corrected the figure to say it was more than 500. There doesn’t appear to be much compliance.
Reid told legislators that the enforcement of laws is continuing. Her office also coordinates with local law enforcement agencies in New York and is helping them any way they can.
“There are many opportunities to ensure that these operators don’t think New York is a place where it’s okay to operate … because it’s not,” Reid said.
Challenges in the supply chain
Reid has also told legislators that OCM and the state Cannabis Control Board will not issue an unlimited number business licenses. But it is still unclear how many growers or retailers as well as other permits types are going to get approved.
The industry has reached a point where it is cooking with gas. Reid added that because the gas is flammable we must balance our supply chain with extreme care. We’ve observed in Michigan, California and other states with legal schemes that there is an oversaturation, resulting in licenses not being active. In New York, I would not like to see that. This is not only a fundamental waste but it also would do a disservice to market goals.
Reid was not only concerned about these issues. Sen. Jeremy Cooney said he has heard from farmers who are “worried” about the lack of supply to maintain a fully stocked legal cannabis market.
How will we meet demand if this is a New York based market? Cooney asked Reid.
Reid responded that OCM was actively monitoring the supply chains and is working with BioTrack to set up the tracking system from seed-to sale. The bottom line is that it’s a game of wait and see this year to determine how much inventory outdoor licensed growers produce. And how much Curaleaf, or other medically “registered” organizations, will be able to grow indoors.
Reid seemed to indicate in her answer that she too is a cannabis grower.
Last year, I had a fantastic growing year. It was an amazing year for me as someone who is a grower. Reid added that every year was different. We want to know what the yield will be this year.
Problematic social equity fund
Krueger, along with several other legislators, also attempted to ask Reid questions about the Dormitory Authority of the State of New York and the State’s Social Equity Fund. Both of these entities received bad publicity this week from a New York Times piece. Krueger revealed that she recently learned Social Equity Impact Ventures (the Los Angeles firm hired by DASNY as the fund’s manager) has been lobbying for more contracts from New York State. Krueger wants to ensure that this doesn’t occur, calling the work of the fund so far a disaster.
“The cannabis company that DASNY contracted with, that did 24 or 25 stores, that all I hear was ‘disaster,’ they showed up in my office the other day and said they want to do another 25. Krueger replied, “I said no” and then asked Reid if he knew if this was going to happen.
Reid replied, “As far as I know, this is not the case.” He deferred any other questions regarding DASNY.
According to an October legislative report, the fund was only able to help pay for twenty of these shops. It had originally been intended to cover up to 200 dispensaries for social equity.
When asked by one lawmaker for advice to small business owners, Reid replied, “Don’t plan for the cannabis industry that exists today. Plan for the cannabis industry that may exist one year from now, in five years and ten years. “The best way to achieve this is by looking at other jurisdictions.”
It’s not easy to open a business in cannabis, she says. “It takes a great deal of work and research just to keep up with the pace of business.” It takes incredible diligence to stay on top of the business.