New York Lays Down the Law on Illicit Cannabis Operations

Mar 09, 2022
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By: Andrew P. Cooper, Esq., LL.M. and Terran Cooper

Senate Bill S8511, sponsored by Senator Diane Savino, was introduced yesterday. The bill further addresses and specifically criminalizes the ongoing “gifting” schemes employed throughout New York. These “gifting” practices consist of operators artificially inflating the price of a low-value item (such as a sticker, t-shirt, etc.) which is then sold alongside “free” cannabis.

Last month, the Office of Cannabis Management (OCM) sent cease and desist letters to more than two dozen illicit cannabis businesses utilizing “gifting schemes.” This came after the OCM specified that the “gifting” schemes were not permitted under current law. Still, after this clarification and subsequent cease and desist letters, many such operations continued.

S8511 criminalizes knowingly and unlawfully selling, transferring, gifting, or trading cannabis without the appropriate licensure or authority. The Bill is broadly applicable to any person operating or employed by a commercial establishment, store, club, or facility.

Most notably, anyone convicted of these activities shall be precluded from seeking, qualifying or receiving any permit, license or authority to perform any activities under New York’s forthcoming cannabis regulations. The severity of conviction depends on the number of illicit sales or transfers. Transferring under 3 ounces would constitute a class A misdemeanor, while transferring between 3-15 ounces would constitute a class E felony. Transferring 16 or more ounces carries the most severe punishment and would constitute a class D felony.

The Bill is currently in the Senate Codes Committee and must pass both the NY Senate and Assembly before Governor Kathy Hochul will have a chance to sign it. If the Bill passes as written, the law would take effect on November 1st of this year.

While we are wary of further criminalization of non-violent cannabis operations, the timetable for S8511 allows for the release of draft licensure regulations prior to the new law taking effect, according to Executive Director Chris Alexander (see Executive Director Gives Update on New York Adult-Use Licensure Timeline). This is critical in that it will allow legacy operators to see what the licensed New York cannabis market will look like prior to having to shut down their own operations. Chris Alexander has acknowledged that in order for New York to be successful, it will have to successfully incorporate the legacy market. Allowing time for legacy operators to obtain the necessary information and make informed choices, as opposed to prosecuting them while legal cannabis operations are still not allowed, is the first step in their successful incorporation.'

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.

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