Governor Hochul Announces Results of First Enforcement Actions Under New Law Against Unlicensed Cannabis Businesses

Osbert Orduña, I know you're going to be hearing from him in a couple minutes to talk about the story of his experience and this is a veteran who has stepped up to be one of the very first. Someone that we're going to look back on and say, "He figured it out and he was successful." And want to make sure that we're doing everything we can to make sure as we're talking about cannabis, that we're doing everything we can do to ensure that the sales of legal products are happening in a way that is equitable. And that has been the ambition behind the law changes a few years ago that allowed this new industry to be unleashed.

Everyone knows back in 2021, March of 2021, the legislature passed really groundbreaking legislation to allow the sale of adult use cannabis here in the State of New York. And when I took office a few months later in August, not a lot had been done. The office had not been stood up. There were not the resources behind it, and I knew that we are missing too much time. We needed to jumpstart this and get it moving again. So we put a team in place.

And as we stood up this brand-new industry, knowing that there'd be challenges. You look at every state that has done this. There are always some, some hurdlesand roadblocks. But my number one objective was to get it right and to make sure we do it in an equitable way. So, we launched the Seeding Opportunity Initiative, the first of its kind in the nation. Something we all should be proud of.

And what this does is an attempt to right the wrongs of the past and that positions people with prior cannabis-related criminal offenses or their immediate family members, to make the first sales of the adult use cannabis with products grown by our local farmers. And as I mentioned, we're proud to have one of those individuals here today.

Osbert Orduña, who's the CEO of Cannabis Place, and he's the first service-disabled veteran to open a cannabis business right here in the State of New York. And I want to thank him for his past service to our country as well.

Sometimes it takes a while to get it right, and the process has not been easy. It's not been easy. It's not on the pace we would want to see. But sometimes the things worth doing are not on an easy path. And to ensure that we have a thriving and equitable cannabis industry here, we want to make sure we do everything possible to just make it a lot easier.

And I want to recognize that there's a way to do this. And what has been a barrier has been the proliferation of illegal unlicensed shops throughout the State. And they are driven by individuals who are flagrantly violating the law. They are creating competition where there should be none. And we recognize this is a serious problem for the success of this new industry.

And also we have no assurances that the products are even safe. And that is something consumers need to know that this does not have the New York State seal of approval, that you do not know what product could possibly be laced with or have other contaminants and that is a risk that people should not be able to take.

So we're making sure that anything we sell is going to be properly tested for safety and quality. And that is absolutely not what you can guarantee with the products sold at these illegal stores. And they have been found to have toxic chemicals, e-coli, other ingredients that you just do not want to ingest.

And also these products are being marketed to kids with the bright colors and the candy flavors and the other side of it other than impact on people's health, it is denying the State of New York the tax revenue that we were anticipating that would be generated from legitimate dispensaries.

And the reason this is so important, the way this was set up was that 40 percent of the revenue goes to the community reinvestment fund. Which helps communities that were impacted the most by the heavy enforcement of cannabis sales in the past. So we also want to use the rest of the money for public education, safety, protect our kids. So illegal sales aren't just unfair and unsafe, they're also unjust.

And doing nothing about this was not an option. You know, we saw the proliferation, we saw the arrogance associated with this, figuring no one's going to stop me. And for us to be able to keep centering on social and economic equity, we knew we had to take some strong steps. So, we had to do it right away. And that meant aggressively enforcing the law for those who are hiding behind their operations and many types of businesses as we know, require licenses to operate. You have nail salons, bars, everybody's used to having licenses to operate.

But before May 3rd of this year, New York State didn't even have all the tools we needed to shutter the unlicensed shops, and that was a problem. But now, thanks to our efforts and the legislature and changing the law just recently, now we have three more powerful tools at our disposal. First, significantly higher fines. Businesses that sell cannabis without a license are now subject to fines of $10,000 a day. They can also double the $20,000 a day if they continue to sell once a notice of violation has been affixed to their window. As you can see, we have a very nice sign on the far right - the far left. You're right. You can't miss that. And we want people to be aware of this and know that that is a warning danger sign. If you walk into those premises, you're entering in a legal facility and there could be consequences to your own health.

But also, that operation is operating absolutely 100 percent in violation of New York State law. And I want to - and the tax department can levy fines on top of that. And that is the enhancement that was so necessary because we have dedicated public servants here at the Department of Tax and Finance who want to just do the right thing to ensure that everyone is treated fairly. There's no advantage to someone because they're able to escape the law to the detriment of those who are law abiding. That's what the premise behind this agency is all about, and they don't get the credit they deserve.

So, the fines used to be considered as the cost of doing business for these operators. You know, they didn't worry about it. They didn't think it was much of a deterrent, and they kept operating. But now, instead of just being a cost of doing business, these fines now have the power to put these shops out of business. And the second tool we've instituted now is that if a business continues to sell cannabis after they've already gotten a violation, the State can now pursue a court order and shut them down and padlock the store. Believe it or not, that was not the case before. So, we've got a new process to shut down illegal operators and to keep them shut until the fines are paid. And if it continues, the Office of Cannabis Management will work with the State Attorney General's office in issue restraining orders and issues of closure.

So, there's different layers here now that were not in place when this industry first was born. And so, these proceedings cannot just be brought against the store owner, but the property itself, the building owner. So, that's a warning to all the landlords out there saying, "Do you really want to risk this?" Not just your reputation, but this is going to hit you monetarily as well. That's what we didn't have. That's what we now have. So, obviously this will be following a hearing, and there could be a permanent injunction pad locking the premises for up to one year. That ought to get their attention, that ought to get their attention.

And third, the enhanced criminal penalties for business owners engaging in unlicensed cannabis sales. It was already selling without a license is already illegal. But we focus new penalties on top of the true owner of the business, not the employee who happens to be the person behind the counter during an inspection, but the person who is the owner of the business. So, we're going to be penalizing the business owners, not their customers and not their employees. I want to be very clear on that as well.

So, we are trying to move forward, in addition to these tools I've given the Office of Cannabis Management and Department of Finance and Tax. I want to be aggressive; I want to get this done. I want to send a message loud and clear across this state that if you're operating illegally, you will be caught and you will be stopped. So, it is just not worth it. So, we're going to work together and enforce the law quickly and aggressively and shut these bad actors down because too much time has passed in my opinion.

And again, I'm grateful that we got the legislature to change this. We worked together, we got it signed very quickly, and literally we put more resources behind enforcement. Our State Budget provides $5 million to hire an additional 37 full-time staff to carry out enforcement activities. That'll help as well.

And we've wasted no time. So, over the last two weeks, just since the law was signed, the State's been conducting inspections and today I'm proud to announce the results so far. And thank you everyone who had a role in this extraordinary effort that you've undertaken. Illegal cannabis was seized from 31 businesses in New York, Albany, Ithaca, Binghamton.

I literally got phone calls and letters from elected officials and some of the Upstate communities, grateful that this is finally happening, and the estimated value of the seized cannabis over a two-week period is $9 to $11 million. The tax department is still tabulating the full amount seized, but at least 1,000 pounds of product as you can see in the photo over here.

By taking that decisive action, we're cracking down on unlawful businesses that jeopardizes the integrity of our cannabis market. We're building an equitable system like no other, something we all seem proud of, but let people know we have zero tolerance for the bad actors who are standing in our way of full success.

And one more thing I want to highlight. I've heard from New Yorkers it's sometimes difficult to tell which cannabis businesses are legitimate and which aren't. Okay, if that's your excuse. We're going to make it very clear. We'll make it really clear. I want to remind everybody. It's very simple. Every legal dispensary will have a sign like this near the entrance. It's visible, it's obvious, and this is the sign. This is where you can legally buy legitimate, clean, safe cannabis, or you could actually scan the QR code and verify that it is licensed if you have any questions. So, the work continues, much more to do. Had to make up for a lot of lost time, but we will look back and say, "Yes, there were growing pains." There always are.

But within a fair amount of time, a short time, I hope we will be able to say that because of this enforcement action, the action by the legislature and our work to get these new licenses issued and facilities stood up, that it'll be a different dynamic the next time we gather and talk about the success of this and how this can still be a national model, in my opinion, of how we focus on social equity, righting the wrongs of past, opening up a whole new industry, a dynamic industry that'll help farmers and small businesses and people that have the dream of having their own place. And also, the customers who will also know that this is a legitimate and safe product for them. So, I believe there's great potential here.

I'm always an optimist. We're going to get it right, but if people stand in our way, if there are bad actors out there trying to thwart our efforts to do the right thing? Don't bother. You will be caught. You'll be stopped. And that is exactly what this launching here today is, to talk about the success of the last two weeks. And where we're going next. And I want to thank everyone who has been involved in this and I want to give my gratitude to Chris Alexander for leading the charge here.

It's been a tough haul. It's always tough to be the first. It's always tough to be the first, to have to go in and literally build something from the ground up. But I want to thank you and know that you have the full support of the Governor of the State of New York, our entire administration, because we're all invested in the success of this brand-new industry, which again, I know we're going to be proud of. So, with that, let me introduce the Executive Director of the Office of Cannabis Management, Chris Alexander.

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