NEW YORK – July 8, 2022 – The Office of Cannabis Management (“OCM”) recently issued “Cease and Desist” letters to 52 businesses that have been allegedly engaged in “gifting” or “bartering” schemes to disguise illegal cannabis sales. The letters warn those operators that such illegal sales may result in being permanently barred from obtaining a cannabis license in New York. OCM reasoned that such action was necessary to prevent undermining of the (yet to be established) legal cannabis market as well preserving public health by preventing distribution of untested and unregulated cannabis.
What constitutes “selling” as compared to “gifting” cannabis, is not well defined by New York’s statute. Under the Marihuana Regulation and Taxation Act (“MRTA”), right now it is lawful to possess and “gift” up to 3 ounces of cannabis to another person – even if that cannabis has not been tested or otherwise regulated by New York. OCM’s cease and desist letters fail to shed greater clarification on the terms, instead obtusely suggesting that if a gift is given inside a commercial establishment then it is illegal, whereas a gift given immediately outside the shop would not be illegal as long as there has been no exchange of any item of value at the time of the gift. This enigma of the law has caused the proliferation of New York’s “gray market” of shop owners like those 52 recipients who are trying to navigate the law and celebration of cannabis legalization.
Our team of highly skilled cannabis attorneys notes that these purported unlawful sales do not present any greater public health threat than the gifting of cannabis between individuals which is specifically allowed under the MRTA. Further, since there is no legal market or licensed vendors, such activities undertaken by the 52 letter recipients and other gray market operators cannot appreciably undermine any unestablished regulated market. Last, many of those businesses that have been accused of illegal sales are licensed operations that pay sales tax on those items and goods sold regardless of whether accompanied by a lawful gift or not.
Prince Lobel & Tye LLP applauds New York’s cannabis program, but believes that the issuance of cease and desist letters threatening a permanent ban of unregulated operators into the legalized marketplace is short sighted. The existing unregulated legacy market must be assimilated and not excluded from the newly emerging legal market. This ensures that the state will reduce its competition by creating clear and accessible pathways to legalized market from which New York will experience the rich diversity of the cannabis market and receive vastly larger sales tax revenue generated by the nation’s largest cannabis consumer market. As such, based on our expertise and experience, inclusion of these 52 operators will be a far greater benefit to New York than preclusion and exclusion.
If you have received a Cease and Desist letter from the Office of Cannabis Management or otherwise are in need of legal guidance concerning the cannabis laws in New York, please reach out to our team of experts who can assist you in that regard.
Contact Our New York Team:
David C. Holland, Esq., 212-842-2480
James K. Landau, Esq. 917-318-0888
Doug S. Trokie, Esq. 917-589-4881
