As soon as former Gov. Andrew Cuomo signed the Marihuana Regulation and Taxation Act (MRTA) on March 31, 2021, several shops and street vendors popped up all around the state to sell cannabis products. These businesses continue to rise despite the fact that regulators informed the public that any existing cannabis businesses would be considered illicit until regulators issued regulations for licenses that would shape the industry.
The issue of regulations has since been delayed due to the COVID-19 pandemic and the resignation of Gov. Cuomo in August 2021 following sexual harassment allegations.
In September 2021 when Gov. Kathy Hochul took Cuomo's place, she appointed Tremaine Wright as chair of New York's Cannabis Control Board (CCB) and Christopher Alexander as executive director of the Office of Cannabis Management (OCM).
In the meantime, unlicensed businesses in New York are positioning themselves in the market, operating in a gray area amid a lack of regulation and control. Several of them began "gifting" cannabis to consumers who bought T-shirts or purchased services such as club memberships.
Such an unlawful phenomenon led the OCM to send out over two dozen letters in early February 2022 ordering businesses suspected of illegally selling or gifting cannabis to cease and desist.
According to the letters, failure to cease and desist these unlawful activities would threaten the business's ability to participate in the state's adult-use market under the MRTA.
"Unlicensed sales undermine the legal market that is being built by introducing products that are not lab-tested and potentially threaten public health and safety. Illegal sales include the sale of cannabis products in-person at a retail location, online, via delivery, or at an event; and include so-called 'gifting' where consumers purchase non-cannabis items or services, such as a membership in a club, and are then provided cannabis as part of the sale," the letter read.
Furthermore, the letter directed non-licensed businesses to cease all illegal activities immediately and warned them that failure to cease would put their ability to get a license in the legal cannabis market at substantial risk. "The unlicensed sale of cannabis is illegal and subjects you to substantial fines and possible criminal penalties," the letter concluded.
"We have an obligation to protect New Yorkers from known risks and to strengthen the foundation of the legal, regulated market we are building. We will meet the goals of the MRTA to build an inclusive, equitable, and safe industry," said Cannabis Control Board Chair Tremaine Wright in a press statement.
"Therefore, these violators must stop their activity immediately, or face the consequences," she added.
OCM Executive Director Chris Alexander said that he would fully expect unlawful businesses to cease and desist from such activities.
"New York State is building a legal, regulated cannabis market that will ensure products are tested and safe for consumers while providing opportunities for those from communities most impacted by the over criminalization of the cannabis prohibition, and illegal operations undermine our ability to do that. We encourage New Yorkers to not partake in illicit sales where products may not be safe and we will continue to work to ensure that New Yorkers have a pathway to sell legally in the new industry," he explained in the same press statement.
However, non-licensed businesses have continued to sell or gift cannabis products despite the independent agencies' warnings, confident they will not be prosecuted.
In February 2022, the Tioga County Sheriff's Office seized cannabis-based products from an unlicensed business that owned a quantity of cannabis in excess of what MRTA allowed. The sheriff's office reported that evidence was still being processed and stated that charges were anticipated in the investigation.
This is just one example of how starting an unlicensed cannabis business may result in legal consequences under the current legislation, as it currently doesn't recognize any cannabis-related companies due to the absence of regulations. In MRTA's current state, all possession of cannabis is treated as personal possession.
But the OCM and BCC's concern over illegal activities of unlicensed businesses doesn't pertain only to the rule of law of New York's cannabis industry, which has yet to come to light. Gifting cannabis without regulation can also pose a public health concern.
Although cannabis consumers in New York bought it from the underground market before legalization in March 2021, this doesn't mean the illegal market always offers safe products.
Since non-licensed businesses have popped up all over the state, consumers have reported purchasing low-grade products, fake cannabis, and unsafe products containing novel cannabinoids banned in New York, including delta-8 THC.
These products cannot be considered safe, as they do not comply with any state or federal regulations.
For instance, delta-8 THC products, which are not federally illegal but also not regulated, have not yet been evaluated or approved by the Food and Drug Administration (FDA) for safe use. The federal agency has, in fact, received adverse event reports involving delta-8 THC products, as they often involve the use of potentially harmful chemicals.
Considering this wider context, the letters sent out by New York's OCM represent a guarantee to safeguard both unlicensed businesses and consumers.
New York's independent cannabis agencies want to make sure that the MRTA can avoid mistakes by stamping out a parallel market that is counterproductive to implementing legislation and holds the potential to harm the legal market by selling unsafe products.