New York crackdown on illicit stores is swift

The New York adult-use licensed cannabis program has struggled for success, in large part because of the explosion of unlicensed stores selling cheaper products with no sales tax. Angry residents and frustrated licensees begged for a change, and Gov. Kathy Hochul pushed for enforcement to expand beyond the OCM.

The Office of Cannabis Management originally chose to take on the enforcement of unlicensed stores themselves, but with only 11 employees assigned to the task and thousands of stores to inspect, the effort was a failure.

Sheriffs come to town

New York City Mayor Eric Adams announced at the beginning of May that the city would begin a crackdown on unlicensed cannabis stores – and it looks like the effort is working. Operation Padlock to Protect brought together the New York City Sherriff’s Joint Compliance Task Force, made up of members from the Sheriff’s Office; the New York City Police Department; and the New York City Department of Consumer and Worker Protection. As of May 24, the group completed 329 inspections.

As of May 24, the inspections resulted in:  

• 77 cease-and-desist orders and 224 shops sealed.  
• 370 notices of violations holding 3,878 counts of violations across NYPD, DCWP, and the Sheriff’s Office.  
• Nearly $6 million in civil penalties were issued.

The padlocked storefronts have also caused many nearby unlicensed stores to close. It’s hard to say whether those stores are just waiting for the heat to die down with plans to reopen or have no plans on returning. Many still have visible products on the shelves, despite the security gates being lowered and the lights turned off. One illicit store looked to be operating, but the door was locked even though all the lights were on.

While Green Market Report only observed a couple neighborhoods, it was a swift reaction to the padlocks. Especially from the stores that hadn’t been padlocked.

The group also busted a Brooklyn warehouse this week filled with millions of dollars worth of illegal cannabis. This included odd-colored cannabis flower in shades of blue and pink, edibles, and pre-rolls.

Pivot

However, New Yorkers are gonna New York. Parked on the street across the sidewalk from one padlocked store was a minivan from delivery company KushJet that was set up to sell unlicensed cannabis. The cheapest eighths were $20, and it came with a free pre-roll.

The salesman said the product was from California, and he was doing a steady business. There were even lighters from licensed operator The Travel Agency.

Presumably, a minivan could make a quick getaway, although with New York traffic that might be easier said than done.

Success

Jennifer Tzar CEO of Dagmar Cannabis located in the Soho neighborhood said, “I have noticed a huge uptick in numbers over the last few weeks. It’s hard to know how much is the weather and how much is the illicits getting shut down. I suspect both!”

Jordan Isenstadt of Marino PR agreed saying, “The majority of our cannabis dispensary clients in New York saw an immediate bump when nearby illicit stores started closing over the last weeks. One retailer said business is up 25%. Another store has had lines out the door since illicit stores started being padlocked. And another dispensary had their best day the Friday of Memorial Day weekend. Things are looking up for sure.”

StupidDOPE.com said on X that licensed stores reported an increase in revenue almost immediately. While that hasn’t been confirmed, if the illicit shops aren’t open and a licensed store is nearby, it would seem business would improve.