(The Center Square) — New York regulators are cracking down on the illegal cannabis market by targeting unlicensed shops that have proliferated amid the state’s slow rollout of recreational pot sales.
The state Office of Cannabis Management and Department of Taxation and Finance says it has shut down unlicensed cannabis dispensaries in several upstate counties that were illegally selling cannabis to underage customers.
Regulators say they seized over 47 pounds of cannabis flower, 244 pounds of cannabis edibles, and 89 pounds of cannabis concentrate from eight storefront locations in Cayuga, Oswego and Wayne counties. State police sent undercover officers to make purchases in the stores, and no taxes were charged on the cannabis products, regulators said.
Regulators say the illegal sales are stunting the growth of New York’s recreational pot market and depriving the state government of much-needed tax revenue. Legal pot sales have only generated $33 million in the first six months since they were authorized, according to regulators, generating about $3.3 million in tax revenue through mid-May.
That’s well below the $4.7 million the Hochul administration had initially projected.
“As we work to build and expand the legal cannabis market, it’s critical to crack down on illegal operators who are breaking the law and undermining the success of entrepreneurs and consumers who follow the rules,” Gov. Kathy Hochul said in a statement.
The crackdown follows approval of legislation earlier this year increasing civil and tax penalties for unlicensed and illicit sales of cannabis in New York and expanding the enforcement powers of the state Office of Cannabis Management and the Department of Taxation and Finance to target unlicensed pot shops.
Under the new rules, unlicensed cannabis businesses face civil penalties, including fines of up to $20,000 per day. The law makes it a crime to sell cannabis products without a license. The state can also conduct regular inspections of cannabis businesses to ensure state taxes or fines have been paid.
New York legalized recreational pot in 2021 under legislation signed by then-Gov. Andrew Cuomo, allowing cultivation and retail sales to adults 21 and older and setting up a system of taxation and regulation for the new industry. To date, about 20 retail pot shops have opened across the state, many of them in New York City, officials say.
But the Empire State’s rollout of the recreational pot market was delayed, in part, by a lawsuit alleging that regulations illegally gave preference to New York residents for licenses.
A ruling by the 2nd U.S. Circuit Court of Appeals in May allowed New York to begin issuing operating licenses to qualifying pot businesses in most regions of the state.
New York City Mayor Eric Adams has estimated nearly 1,500 unlicensed dealers are selling illegal cannabis at retail stores across the Big Apple, which reopen as quickly as city police shut them down. He has urged the state to crack down on illegal dispensaries.
In April, Hochul unveiled a taxpayer-funded public education campaign calling on cannabis users to “buy legal” and urging them to avoid the blackmarket.
