This post was originally published on this site.
Join NY Cannabis Insider for its first event of the year in NYC on April 2 at Madam Mikette’s. Details and tickets available here.
In the three years since New York legalized adult-use cannabis, the explosion in unlicensed cannabis shops has drawn the most ire among legislators, law enforcement and residents.
The subject has galvanized lawmakers of both major parties, Governor Kathy Hochul and stakeholders in the state’s legal cannabis industry, prompting public outcry, new legislation proposals and the governor calling the whole thing a “disaster.”
But as the application process for general licensing moves forward, some stores that have been allegedly operating illegally for a significant period of time have received higher priority for licensure, as well as proximity protection.
This means that applicants who followed the rules but happened to find themselves lower on the licensing queue are now being blocked from applying for retail licenses at locations within 1,000 feet of the illicit shops (or 2,000 feet in less densely populated areas).
“It’s not fair, it’s a slap to our face,” said Freddy Herrera, whose business – Got Your Six Dispensary – is applying for a retail license.
Herrera had spent over $200,000 in rent and legal fees to secure a legal cannabis dispensary storefront in Manhattan before state regulators at the Office of Cannabis Management told him the location is off limits.
That’s because another applicant had already claimed a location about 500 feet from Hererra’s – even though that applicant, Free Thinkers LLC, has been raided by the OCM at least twice for allegedly selling cannabis without a license.
“I honestly think any location that has been raided more than once needs to be taken off the map completely,” Herrera said.
NY Cannabis Insider was unable to reach anyone from Free Thinkers for comment.
According to the OCM, those who have participated in illicit cannabis sales since the Marijuana Regulation and Taxation Act passed in 2021 are not eligible for licenses.
“Applicants found to participate in the operation of illicit, illegal cannabis dispensaries will not be recommended to the Cannabis Control Board for licensure,” an OCM spokesperson told NY Cannabis Insider.
The OCM says that a regulatory review of an applicants’ proposed location is done separately from a review of the full application, and proximity protection does not guarantee an applicant will receive a license – as is the case with Free Thinkers.
But the idea that stores that have operated illegally are never actually granted a license is of little comfort to licensees and applicants who say they’ve been fastidious in obeying OCM rules, and to others who have endured huge losses to stay on the right side of regulators.
“The people who did the right thing should have been rewarded, and I’m not sure that’s what happened,” said Jason Ambrosino, owner of licensed processing company Veterans Holdings, which also runs a licensed CBD store outside of Albany called Veterans Hemp Market. “I just think it sends the wrong message to people who have done the right thing.”
When his company was applying for a processing license in the summer of 2022, OCM officials told Ambrosino that he had to remove all delta-8 THC and hemp-derived THC products from the store’s shelves, he said. Regulators started raising the prospect of banning hemp-derived cannabinoids such as Delta-8 THC less than two months after New York legalized adult-use cannabis in 2021.
The Cannabis Control Board set strict rules for cannabinoid hemp via emergency regulation in July of 2023 then by full regulation in November.
Ambrosino told NY Cannabis Insider that he complied, removing products that accounted for about 80% of the store’s sales, and as a result, Veterans Holdings is currently operating the store at a loss. However, he added that the company is earning revenue from processing edibles, vapes and other products to make up for that loss.
Meanwhile, Ambrosino said a hemp store in his region has continued to sell the same intoxicating cannabinoids that the CCB banned. The store is an applicant for a retail license, and currently enjoys proximity protection.
NY Cannabis Insider is not naming the store because the hemp-derived products they sold were legal until the OCM banned them via regulation, and we found no evidence the store has continued selling these products since January.
Ambrosino said he holds no ill will toward the people who operate the store, and that its proximity protection doesn’t affect him, since his company isn’t seeking a retail license.
But it does feel unfair to those who have sacrificed sales in order to comply with regulations, and it’s odd that the OCM isn’t enforcing its standards evenly, he said.
Issues surrounding enforcement are nothing new for the OCM. According to leaked audio, which NY Cannabis Insider reported in November, OCM officials have been aware of out-of-state companies breaking regulations but have declined to enforce their own rules.
Licensed brands have been selling cannabis through both legal and illegal channels, sourcing products illegally from other states, and offering overly generous terms to dispensaries – all actions that fly in the face of regulations.
Damian Fagon, OCM’s chief equity officer, acknowledged in a recording obtained by NY Cannabis Insider that the agency is aware of brands illegally sourcing product (known as “inversion”) and offering dispensaries unlimited time to pay back their invoices..
Following a NY Cannabis Insider investigation into allegations of Fagon retaliating against critics, the chief equity officer is currently on administrative leave at the OCM.
Herrera, who is trying to open a legal dispensary in Manhattan, said he thinks OCM officials should review whether locations have a history of alleged illegal activity and community support before providing proximity protection.
During a meeting on Dec. 12, Manhattan Community Board 1 opposed a motion to recommend Free Thinkers for a dispensary license. In addition to concerns about the building, the board wrote, “The current location has been raided and closed down due to illegal cannabis and tobacco sales and the landlord has allowed the business to operate there for over a year,” according to meeting minutes.
During the same meeting, board members approved Herrera’s Got Your Six Dispensary, and noted, “The Community Board found no significant objection to the application.”
Philip Bolen, director of public policy at Albany-based lobbying firm Shenker Russo & Clark, said it’s bad optics for the OCM to protect locations for applicants with a history of alleged illegal sales.
It’s even worse, Bolen said, that regulators won’t allow Herrera to apply with his location – approved by a community board – because the agency provided proximity protection to another dispensary, which the same community board rejected.
“It’s not a great look to elevate someone who continues to do a run-around of the law,” said Bolen, who represents Herrera. However, he acknowledged that it’s challenging for regulators to create a fool-proof method to completely avoid alleged illegal shops from advancing through the licensing process.
“It’s complicated, there are thousands of people who put in applications, and there are certainly going to be some bad actors,” Bolen said. “People are going to slip through the cracks.”
Bolen is optimistic that Herrera’s situation will eventually work out in his favor, but he and Herrera both expressed frustration that a store that has experienced multiple raids was given proximity protection in the first place.
Herrera said that he’s not interested in battling unlicensed shops. He just doesn’t want his application blocked by one.
“I don’t care if OCM turns around to them and says, ‘go find a different location,’” Hererra said. “But it’s not fair to me, and it’s not fair to other applicants who are doing the right thing.”