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February 8, 2022

Cannabis Control Board Issues Cease and Desist Letters to Establishments Engaged in Unlicensed Sale of Cannabis Products in New York State

The Cannabis Control Board (CCB) has addressed the gifting of cannabis in connection with a commercial transaction several times in CCB meetings as well as various community events. However, the problem has persisted in a very public manner, with many towns and law enforcement officials confused on the legality of the transactions and how best to enforce the law in these circumstances.

The CCB has now taken its first real step in reining in the unlicensed sale of cannabis in New York State. The Office of Cannabis Management (OCM) has sent a cease and desist letter to more than two dozen businesses engaged in commercial transactions that purport to gift cannabis. The OCM letter stated, “Unlicensed sales . . . are not lab-tested and potentially threaten public health and safety.” Clarifying further, the OCM stated that “Illegal sales include the sale of cannabis products in-person at a retail location, online, via delivery, or at an event; and include so-called ‘gifting’ where consumers purchase non-cannabis items or services, such as a membership in a club, and are then provided cannabis as part of the sale.”

There have been countless stories published about businesses believing, sometimes under the advice of counsel, they have found a loophole in the law that allows for unlicensed, but legal, sales of adult-use cannabis. The OCM Enforcement Unit—relatively unknown until now but one that will likely feature prominently in the future—has brought absolute certainty to the industry by clearly stating that these transactions are illegal.

The OCM further warned the businesses that received the letter that “failure to cease this activity puts your ability to obtain a license in the legal cannabis market at substantial risk. The unlicensed sale of cannabis is illegal and subjects you to substantial fines and possible criminal penalties.”

Lastly, the letter indicates that landlords that host these types of illegal cannabis activities are jeopardizing their ability to lease to adult-use dispensaries and on-site consumption lounges in the future.

People with questions or concerns about illicit cannabis transactions are encouraged to reach out to the OCM Enforcement Unit at enforcement@ocm.ny.gov.

This is an important step for New York State’s nascent cannabis industry. The protection of public health and establishment of a fully regulated and legal cannabis market can be jeopardized by the illicit sale of cannabis purporting to be legal. Consumers can be misled into believing the illicit cannabis has been tested and is safe to consume, which can lead to an erosion of trust in the adult-use market.

Barclay Damon’s Cannabis Team will continue to closely monitor developments pertaining to the MRTA’s rules and regulations. If you have questions about the MRTA, please contact one of Barclay Damon’s cannabis attorneys. 

If you have questions regarding the content of this alert, please contact Jason Klimek, Cannabis Team co-leader, at jklimek@barclaydamon.com, or another member of the firm’s Cannabis Team.

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