Business
New York Governor Signs Legislation To Reign In Illicit Weed Market
New York’s governor has signed legislation to address the state’s illicit cannabis industry, giving regulators new powers to assess civil penalties.
New York Governor Kathy Hochul on Wednesday signed legislation to reign in the state’s illicit marijuana market that includes penalties for unlicensed cannabis retailers of up to $20,000 per day. The legislation, which increases civil and tax penalties for the illicit sale of cannabis in New York, was signed into law as part of the state budget for the 2024 fiscal year.
Hochul first proposed the new measures to address New York’s underground cannabis market in March as a way to prop up the emerging industry for recreational marijuana, which was legalized by state lawmakers in 2021. Regulated sales of adult-use cannabis began in the closing days of 2022, but so far, only a handful of licensed dispensaries have opened statewide. Meanwhile, free from the threat of criminal penalties, unlicensed dispensaries have proliferated, with a law enforcement task force study conducted earlier this year identifying at least 1,200 illicit pot shops in New York City.
“As New York State continues to roll out a nation-leading model to establish its cannabis industry, these critical enforcement measures will protect New Yorkers from illicit, unregulated sales,” Hochul said in a statement on May 3. “Unlicensed dispensaries violate our laws, put public health at risk, and undermine the legal cannabis market. With these enforcement tools, we’re paving the way for safer products, reinvestment in communities that endured years of disproportionate enforcement, and greater opportunities for New Yorkers.”
Law Gives New Enforcement Powers
The new legislation provides additional enforcement power to the New York Office of Cannabis Management (OCM) and the state Department of Taxation and Finance (DTF) to enforce regulatory requirements and close stores engaged in the illegal sale of cannabis. The new law allows the OCM to assess civil penalties against unlicensed cannabis businesses, with the “most egregious” illicit operators facing fines of up to $20,000 per day. The law also makes it a crime to sell cannabis or cannabis products without a license.
The legislation also gives the OCM new powers to conduct regulatory inspections of businesses selling cannabis and cannabis products, including so-called gifting shops that provide cannabis in return for inconsequential merchandise. The agency will have the power to seize untested cannabis products from unlicensed businesses and will seek court orders to close unlicensed shops and evict commercial tenants engaged in selling cannabis without a license.
Additionally, the DTF is now empowered to conduct regulatory inspections of businesses selling cannabis to determine if the appropriate taxes have been paid and levy civil penalties on businesses not paying taxes. The legislation also establishes a new tax fraud crime for businesses that willfully fail to collect or remit required cannabis taxes, or knowingly possess for sale any cannabis on which tax was required to be paid but was not.
“Strengthening tax laws as they pertain to the cannabis industry and providing for robust and fair enforcement will help the industry to be successful over the long term,” said New York State Acting Commissioner of Taxation and Finance Amanda Hiller.
Elliot Choi, counsel and chief knowledge officer at the cannabis and psychedelics law firm Vicente LLP, said that while the new measures passed into law are good news for the regulated cannabis industry, some of the governor’s measures will likely not have an immediate effect on illicit operators.
“Illegal dispensaries continue to proliferate in New York, especially in the City, so any movement on enforcement is welcome,” Choi wrote in an email to High Times. “The enforcement legislation in the state’s budget includes the ability for the Department of Tax and Finance to levy some hefty fines. We suspect those fines will have a deterrent effect on new illegal dispensaries. However, the tax department is going to need time to staff up and the Office of Cannabis Management will need to draft some regulations before there is a crackdown on existing ones.”
Hochul’s efforts to protect licensed cannabis retailers also include measures to lessen the demand for illicit marijuana. Last month, she unveiled a consumer ad campaign to encourage consumers to purchase cannabis from licensed dispensaries.
Source: https://hightimes.com/news/new-york-governor-signs-legislation-to-reign-in-illicit-weed-market/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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