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As pot sale regulation crawls on, NY sellers say illicit shops thrive

A trade group for cannabis enterprisers says New York has turned a blind eye to some 1,400 illegal storefronts while granting only a handful of licenses statewide.

ALBANY (CN) — New York leaders have not been shy about promoting the state’s newly minted legal marijuana dispensaries, but some would-be sellers say the process to get a license is slow, preferential and quickly getting eclipsed by illicit weed shops. 

In a lawsuit filed Thursday, a marijuana retail trade group accuses state cannabis regulators of having botched the process for establishing legitimate businesses, licensing only a handful — the fifth opened at 4:20 p.m. the day the suit was filed — while turning a blind eye to some 1,400 storefronts illegally selling the drug. 

Besides dominating the market with untaxed sales, the shops carry bootleg products tainted with E. coli, salmonella, pesticides and heavy metals, the lawsuit states. 

New York's efforts to crack down on illegal sales have been cosmetic, the suit alleges, citing examples of well-advertised but inadequate measures including a July 2022 announcement that regulators had sent 66 cease-and-desist letters to pot purveyors. 

“In each instance, headlines ensued heralding an imminent crackdown on New York’s illicit cannabis sellers,” the Coalition for Access to Regulated & Safe Cannabis says in its 37-page lawsuit. “But in reality, the number of stores selling untested, unregulated and potentially dangerous cannabis products persists unabated.” 

In addition, the trade group says, New York overreached its power by setting up the state’s license program for people convicted of pot-related offenses before March 2021, when former Governor Andrew Cuomo signed the Marihuana Regulation and Taxation Act

Applicants for those licenses were given a separate window to apply, counter to the act’s language that the process should open “for all applicants at the same time,” the suit states. 

“By arbitrarily and capriciously limiting the number of dispensaries, [regulators] have emboldened (rather than curtailed) the illicit market, putting all consumers at risk and undermining the ability of the legal market to generate much-needed tax revenue intended to benefit those disproportionately impacted by the War on Drugs," the complaint continues (parentheses in original).

New York set a goal of granting half of its cannabis licenses to “social and economic equity applicants,” including people from communities disproportionately affected by pot prosecution; minority- and women-owned businesses; distressed farmers; and veterans. 

But the trade group says the standards and process of choosing “qualifying businesses” remain murky, with priority going exclusively to “justice-involved individuals.” 

The aspiring legal pot sellers say the state’s procedures have been unfair to medical dispensaries that could quickly expand into the recreational game — and whose good name is sullied by illegal shops popping up by the hundreds — as well as hemp growers that spent millions preparing to get into the market. 

“All of this has inflicted immediate, tangible, and irreparable harm on coalition members’ businesses,” says the lawsuit, filed in Albany County Supreme Court. 

The New York Office of Cannabis Management did not respond to a request for comment.

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