New York’s Efforts to Rectify Cannabis Industry Challenges

May 28, 2024 | Business Law, News

New York's Efforts to Rectify Cannabis Industry Challenges

New York State’s recreational cannabis program is plagued with problems: lawsuits against the state alleging discrimination in the licensing process, an equity fund – meant to help minority, women, and justice-involved licensees open stores – instead mostly benefiting its private lender, an agonizingly slow rollout of licenses, and illegal stores that vastly outnumber legal ones.

As of early May 2024, there were only 122 legal dispensaries up and running statewide. The number of illegal shops in New York City alone is now estimated to be as high as 2,900. There’s a backlog of more than 5,600 applications for licenses, some submitted nearly two years ago, that have not yet been reviewed.

Attempts to Fix the Problems

According to Gov. Hochul, the fewer illegal cannabis shops there are, the more room there will be for licensed stores. In April 2024, she announced a plan, as part of the state budget, to shut down the illegal shops. It gives OCM and New York county and city governments the authority to padlock unlicensed shops that pose an imminent threat to health and safety, for example, by selling to minors or selling products that have made people sick.

The plan also provides for steep fines for landlords who knowingly rent to illegal shops. It gives cities and counties the authority to enact their own local enforcement laws and to bring emergency proceedings against both businesses and landlords.

The governor was also determined to deal with the licensing backlog. In March 2024, calling the licensing rollout a “disaster,” she ordered a complete review of the Office of Cannabis Management (OCM), with the goal of finding ways to shorten the application process, open more licensed businesses, and restore trust in the OCM.

On May 10, a report of the findings was made public and, in a press conference, the Governor announced a series of reforms based on the report:

  • Streamline the application process to unclog the licensing bottleneck
  • Improve communications with the entrepreneurs trying to gain entry into the recreational marijuana industry
  • Issue regulatory bulletins to inform the public about policy changes
  • Transform OCM from a start-up mode to a fully operational regulatory agency
  • Empower a task force to go after illegal suppliers and close as many illicit stores as possible over the next 90 days

She also mentioned some recent successes:

  • 101 recreational cannabis licenses approved in April 2024
  • 122 more licenses approved on May 10
  • A total of more than 541 licenses approved so far this year


As part of the governor’s enforcement initiatives, the New York City Administrative Code was amended to allow the city to take immediate action against unlicensed cannabis shops. On May 7, 2024, in a dramatic action dubbed “Operation Padlock to Protect,” the NYPD shut down 20 unlicensed marijuana stores throughout the city. Mayor Adams said the crackdown would accelerate in the coming weeks.

Shakeup of the State’s Cannabis Agency

Gov. Hochul announced in her May 10, 2024, press conference that Chris Alexander, the first ever executive director of OCM, who helped write the state’s recreational marijuana laws, will be stepping down when his term ends in September.

Impact of These Reforms

There’s been a lot of highly visible activity against illegal shops during the first half of May: the beginning of New York City’s crackdown, the governor’s press conference, the start of the statewide task force, and the announcement of an upcoming leadership change in OCM. If the level of law enforcement intensity continues, it could put a dent in the 2,900 illegal shops in the city and the unknown number in the rest of the state – but that’s a lot of shops to deal with.

The same seems to be true for changes in the licensing application process. There has been a recent flurry of activity, with more than 100 licenses approved in a single day, but there is still a backlog of more than 5,600 applications. Sustained effort will be key.

Effects and Reactions

Increasing the number of legal recreational cannabis shops will advance the state’s goals in two main ways – increasing state tax revenue and providing opportunities for individuals and communities disproportionately harmed by the war on drugs. It will also benefit New York farmers. Legal shops must use New York-grown products, while the illegal shops often get their cannabis from California and other states.

There was wide political support for the Governor’s enforcement initiatives. Top Democrats in the State Assembly, however, opposed a similar plan on the basis of not wanting to put policy items in the budget.

Cannabis consumers will be better protected from potentially harmful unregulated products sold from unlicensed stores. However, the cost to buy cannabis will go up because legal shops have higher expenses, which they will pass on to customers. If the crackdown is successful, the convenience or blight, depending on one’s point of view, of having multiple pot shops per block in many New York City neighborhoods will be over.

If the city and state manage to shut down large numbers of the illegal dispensaries, demand could overwhelm supply. It seems unlikely that the state will be able to approve and open enough legal businesses to fill in the gap. In that case, illegal shops could pop up again to meet the existing need.

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