New York Governor: Licensed Entrepreneurs ‘Under Attack’ by ‘Illegal Pot Shops’

In a live broadcast dedicated solely to addressing unlicensed cannabis operations in New York, Gov. Kathy Hochul indicated Feb. 28 that she will only be upping her enforcement effort to dismantle the state’s unregulated marketplace.  

Specifically, Hochul said she’s renewing her call for “stronger measures” and wants to work with state lawmakers to give New York and its localities the means to padlock doors and shut down “flagrant violators.”

This comes at a time when there are only 65 dispensaries and 12 delivery-only operators serving New York’s licensed marketplace, as of Feb. 28, yet the proliferation of thousands of cannabis stores continues as unregulated and untested products bypass the state’s rigorous industry standards.

Hochul was joined on stage—where a podium stood with the words “Shutting Down Illegal Stores: Strengthening Our Cannabis Industry”—by several industry entrepreneurs, including Black, Latino, women, immigrant, military and veteran business owners who have staked their futures on the licensed cannabis industry, she said.

“They’ve done everything by the book, and they’ve waited a long time to fill their dreams of being part of a new emerging, exciting industry here in the state of New York,” Hochul said. “But right now, their businesses, their very existence is under attack by illegal pot shops that seem to line every block, sometimes every other building, in neighborhoods in this city and across the state of New York.

“These illicit vendors flagrantly violate our laws by selling to kids, evading our taxes and engaging in fraudulent advertising about their products. … Every day that these shops are open, they endanger public health and hurt people like those standing here with me today.”

Alfredo Anguiera, co-founder of ConBud LLC, and Osbert Orduña, CEO of The Cannabis Place—both licensed and opened cannabis retailers—also spoke at the press conference, as did Sandra Jáquez, vice president of the Latino Cannabis Association.

The governor’s press conference came two days after five industry groups sent her a letter claiming that unlicensed cannabis businesses throughout the state are actively listing themselves on “various social media platforms” and utilizing paid advertising space to promote their untested products and services.

RELATED: Social Media Platforms ‘Fueling’ New York’s Unlicensed Cannabis Market, Stakeholders Say

While the signees stated there were multiple social media companies “fueling the flooding of our communities by unlicensed stores,” and urged Hochul to take legal action, they only named one company: Google.

On Wednesday, Hochul specifically called attention to Google Maps and Yelp, holding up a phone that showed all the business listings of unlicensed cannabis shops in a region of New York.

“This is what we have to stop,” she said. “This gives the [impression] of being legal and legitimate when you see this, and that is false.”

The governor went on to suggest that social platforms allow New York state officials to provide them with a list of licensed businesses so that they stop posting the locations of unlicensed shops.

Following the press conference, a Google spokesperson did not indicate to Cannabis Business Times that the company would be utilizing such a list.

“We display places that people can visit or interact with in the real world by using a variety of sources, including third-party information and feedback from our community,” the spokesperson said. “If we can confirm that a business has closed for any reason—including license issues—we’ll reflect that it’s closed in the listing. We also prohibit cannabis ads in New York and remove them upon detection, often before they ever run.”

Throughout 2023, inspectors from the New York Office of Cannabis Management (OCM) and Department of Taxation and Finance (DTF) dispatched to 381 locations, including 105 follow-up inspections, yielding more than 11,8000 pounds of seized cannabis worth more than $57 million, according to a January press release from the governor’s office.

OCM and DTF are continuing their inspections in 2024, but, as the only two agencies in power to enforce the state’s cannabis laws, they’ve only touched on a fraction of the state’s unlicensed cannabis stores, including an estimated 8,000 smoke shops in New York City alone, according to New York City Council.

Anguiera said during Wednesday’s press conference that ConBud’s dispensary on the lower eastside is surrounded by “approximately 71 illicit storefronts” within 1,200 feet that continue to siphon money from not only licensed retail facilities but also New York’s farmers who grew cannabis last summer to supply the market.

“How is the state losing out on their tax revenue?” he asked. “This money was supposed to go back to the local communities in which these dispensaries were situated.”

Anguiera also said that it was essential to recognize that addressing these challenges posed by the unlicensed market “does not mean returning to the failed policies” of cannabis prohibition.

“No one wants to see a return to the war on drugs or the war on cannabis, which disproportionately targeted communities of color and exacerbated social inequities,” he said. “We have all seen firsthand the harm mass incarceration has caused on our communities, and no one on this stage wants to return to that.”

Instead, Anguiera said he is backing a multifaceted approach of robust regulatory enforcement that:

• targets landlords and padlocks unlicensed shops;
• targets media platforms that allow unlicensed shops to advertise and be found on search engines;
• increases consumer education to reinforce to the public the impact of unlicensed shops; and
• supports programs for current farmers and dispensaries whose owners and employees are in dire straits.
  

Orduña said while some New Yorkers don’t know the difference between his licensed The Cannabis Place retail operation in Queens and the unlicensed shops that he competes against, there is a distinct difference. 

“We as a New York state licensed cannabis business are not the same as the unlicensed storefronts that litter our streets,” he said. “This is not merely a matter of legality. It is a matter of public health, safety and the wellbeing of our society as a whole. Unlicensed storefront operators and those who facilitate their operations, like the unscrupulous landlords that lease to them, and the social media companies that are fueling the growth of unlicensed storefronts and directly causing adverse effects to New Yorkers in every part of the state, must be held accountable.”

Hochul also addressed various lawsuits that slowed down industry growth last year, as OCM regulators remained focused on rolling out an equitable retail program throughout most of 2023 only to be faced with a court order that left them at a monthslong licensing standstill.

As days turned to weeks, and weeks turned to months, until a settlement agreement was finally reached, people started to wonder, “is this dream now dead in the state of New York?” Hochul said during the Feb. 28 press conference.

With the legal battles now behind state regulators, who have picked up licensing momentum in 2024, progress on New York’s adult-use market is back in full swing, she said.

“But as this young industry takes steps, another threat looms that I mentioned: the illicit shops that blatantly ignore the rules and undermine our efforts to support legitimate, approved business owners,” Hochul said, adding that she she’s renewing her call for stronger measures to “enforce our cannabis laws.”

“We’re not kicking in doors and hauling off people in handcuffs,” she said. “We’re talking about stronger civil enforcement, which all businesses are subjected to if they don’t operate [within] the law.”

Editorial Director Noelle Skodzinski contributed to this report.