The truth about cannabis enforcement comes to light. Now what? (Guest Column)

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This guest column is from Paula Collins, EA, Esq., a tax attorney dedicated to the cannabis industry, a co-founder of the NY Consortium of Cannabis Accountants, and an adjunct professor at Pace University’s Elisabeth Haub School of Law, where she teaches Cannabis Law and Policy. The views and opinions expressed in this article are those of the author, and do not necessarily reflect the views or positions of NY Cannabis Insider.

New York’s current application period for cannabis licenses will close on Dec. 18, 2023. We don’t know how many general and social and economic equity (SEE) candidates will apply.

We have some idea about the number of licenses the OCM will award. (Hint: it’s really not a lot, considering the level of interest that has built up since the MRTA was approved in the nascent months of the new decade. If you’re counting, Dec. 18′s due date will be the 993rd day since the MRTA was signed into law.)

And of course, it isn’t as if the license awardees will be announced on Dec. 19, 2023. OCM has said that they will begin issuing licenses in January or February of 2024. That’s assuming there are no lawsuits that result in injunctions.

That’s also assuming that community boards and municipalities have processed all of the applications for review, which is its own circle of frustration.

In case you aren’t aware, the community boards can comment, but it seems that they don’t have the same authority granted to them under the State Liquor Authority (SLA) to influence a license application. In meetings held thus far, more than one community board member has debated whether NY should have “legalized” in the first instance – regardless of the fact that the MRTA passed and now there is a business owner with an address in their district seeking the thumbs up.

But let’s assume all goes well. We won’t see shops actually open before Q2 2024. And even then, the numbers will be few, largely dictated by who has control of real estate. Sorry farmers. Sorry, too, that the Cannabis Growers Showcases will come to a halt on Dec. 30, 2023. That was a recent bright spot, feel-good-for-NY-cannabis thing we had going, starting in late summer 2023.

In other words, January, February, and March 2024 will be bleak.

OCM has been quoted as saying they will issue as many as 1500 retail dispensary licenses. Even if combined with the 470-something CAURD licenses that still hang in the balance, those numbers pale by comparison to the number of unlicensed shops that dot the state.

Okay, they don’t just dot the state. They are a cluster-f*#@! throughout the state. Yes – even I can admit that.

The enforcement hearings are on temporary pause, but we don’t know for how long. Apparently enforcement raids continue, though nobody can really say how the procedural due process rights of business owners will be preserved, pursuant to SAPA §301.

Regardless of what you personally might think of the unlicensed shops, the owners of those businesses really do have rights. Can New York really bust into a shop in full tactical gear, bag up thousands of dollars of product, paste a garish sign on the window designed to deter business, and not grant a hearing?

Going back to the numbers: the 1500 new licensees, even if combined with the 470-something CAURD licensees (let’s just call it 2,000 retail dispensaries statewide) will pale by comparison to the some 9,660 unlicensed shops in NYC alone.  (My math: one shop for each of the 2300 city blocks in Manhattan + [2300 x 4 x 80% for Brooklyn, Bronx, Queens and Staten Island] = 9,660).

And the disparity in the numbers is even more mind-boggling if you take that 9,660 number and scatter it across the state. Not every town has the density of shops that NYC has, but several semi-rural areas have 3-4 shops in towns of fewer than 20,000 people.

So – roughly 30,000 unlicensed shops compared to approximately 2,000 licensed shops? How is that supposed to work?

“I want to be very clear that the strategy has not worked,” said OCM’s Chris Alexander when discussing the pause on enforcement hearings.

Alexander went on to state that enforcement is not in “OCM’s mission.” NYC Councilmember Gale Brewer, who has aggressively advocated for enforcement, saw the number of unlicensed shops increase from 63 to 65 during the same January-to-September 2023 time period in which she was out literally riding with the sheriffs on raids, and pounding podiums across the state with cries to shut them down.

Queens District Attorney Melinda Katz, who mobilized her district merely two days after the state granted enhanced enforcement capabilities, saw a pot shop open in October literally across from the courthouse and borough hall. And that’s after the media and the governor’s office had blasted us with headlines about seizing 8,500 pounds of illegal product valued at an estimated $42 million. (Easy there, Guv. Your Tax Police toss the heavy-weight gummies into the same garbage bag with the lightweight flower and heavyweight bongs. Based on evidence I have seen presented at OCM hearings, we have no earthly idea how much weight in weed was whisked from the shelves.)

New York City Public Advocate Jumaane D. Williams has called for a transition license. “One other consideration in addressing this growing issue could be the legitimization of certain unlicensed retailers via transitional licenses, which would ultimately place them under state regulation and ensure health and safety guidelines are followed, and of course, that there are no sales to underage individuals,” Williams said.

“This expansion could be in collaboration with those who have been part of the legacy cannabis market, with a goal of directing profits and funds back into the hands of individuals and communities harmed by the so-called War on Drugs,” he said.

The binary, in or out, licensed v unlicensed, model is just not working.

The state has encountered a “lack of resources” for enforcement hearings, with no clear date to restart the labor-intensive trials.

Moreover – did I mention? Enforcement does not work. Chris Alexander and I see eye-to-eye on this point. Yay, Chris!

In the best interests of New York’s nascent cannabis entrepreneurs, the public health needs of the citizens, and the ever-growing need for tax revenues, we need to have a serious talk about a transition license.

Or – does somebody else have a better idea?

Paula Collins can be contacted at paula@paulacollinslaw.com.