Crackdown proposed for illegal pot shops in New York

New York authorities would be given expanded power to shut down illegal pot shops and levy fines of up to $200,000 under legislation proposed Wednesday by Gov. Kathy Hochul, who's seeking to protect the state's fledgling legal market for recreational marijuana.

New York is trying to get its potentially massive adult legal market into high gear, but has just three shops opened so far in New York City, two in upstate New York and more shops planned. Legal operations in the city are being undermined by a proliferation of unlicensed stores.

City officials have already gone after landlords who have allowed illicit shops to operate. The new bill before Legislature would give the state Office of Cannabis Management and state tax officials new powers to crack down on unlicensed activity.

The bill would give the cannabis office expanded authority to seize illicit products and establish procedures for the government to shut down unlicensed businesses. Violations could lead to fines of $200,000 for illicit cannabis plants or products and businesses could be fined $10,000 a day for selling cannabis without a license, according to the Hochul administration.

Pop-up marijuana store

A pop-up cannabis dispensary advertises some of its products, sold out of a mobile camper van, on November 24, 2022 in the Red Hook neighborhood of Brooklyn, New York. (Photo by Andrew Lichtenstein/Corbis via Getty Images)

"The continued existence of illegal dispensaries is unacceptable, and we need additional enforcement tools to protect New Yorkers from dangerous products and support our equity initiatives," Hochul said in prepared statement.

New York has moved slowly since legalizing recreational marijuana use in March 2021.

Unlike many other states, New York has reserved its first round of retail licenses for nonprofits, applicants with marijuana convictions and their relatives. The steps are designed to address inequities produced by the country’s war on drugs.

However, a federal judge has temporarily blocked the state from issuing recreational marijuana dispensary licenses in Brooklyn and parts of upstate New York while a legal challenge to the state’s selection process is being considered. The company Variscite NY One is arguing that the state’s selection process favors New York residents over out-of-state residents in violation of constitutional interstate commerce protections.

Veteran cannabis investor Emily Paxhia credits New York with good intentions on social equity but said the state was shortsighted about the need to set up enforcement early on against illegal shops. Paxhia, a co-founder and managing partner of Poseidon Investment Management, sees the legalization rollout so far as "a disaster," but not a lost cause.

"I’m still hopeful that the New York market turns around," said Paxhia, who grew up in Buffalo.