NY Gov. Hochul Blames Law for Excess Illegal Sales

It’s no secret that of all the states that have recently rolled out recreational marijuana laws, New York has had the most challenging time getting their program off the ground. Not since the early days of cannabis legalization has it been so hard for a state to get a functioning recreational program up and running. From a botched initial rollout to licensing problems and lawsuits, it seems that New York’s adult-use marijuana program has had its fair share of turmoil, including the rise of illegal pot shops selling weed without a valid New York license.

Now, New York Governor Kathy Hochul is calling out the state law that legalized recreational marijuana, saying the law itself has led to the proliferation of illegal pot retailers across New York. Is New York’s cannabis program an unmitigated disaster? Does the new Governor have ideas to help get the program back on track and curb the growth of illegal marijuana operations in the state?

New York: What’s the Problem Here?

It has been almost three years since former New York Governor Andrew Cuomo signed legislation legalizing adult-use marijuana in the state. At the time, New York was the 15th state to legalize recreational marijuana use and sales and was poised to become one of the largest legal cannabis markets on the East Coast and perhaps the county. However, that is not exactly how things played out in the state. Thanks to legal challenges, a slow rollout, regulatory hurdles, and licensing issues, nearly three years later, there are only 50 state-licensed recreational marijuana retailers open across New York.

Yet, looking across the New York landscape, you’d think there were hundreds of legal pot shops operating in the state today. On the Lower East Side alone, there are 34 open cannabis shops. Only one is licensed and legally allowed to sell marijuana. Licensing couldn’t keep up with the popularity of weed, and in place of legal shops, illegal marijuana retailers opened their doors to weed-hungry New Yorkers. Governor Kathy Hochul says, “It’s not on every street corner. It is every other storefront. It is insane.” Previous estimates suggest there may be as many as 1,500 or more unlicensed cannabis operations in New York.

Gov. Hochul made her frustrated statement nearly one week after the Cannabis Control Board canceled a meeting where they were to approve additional licenses for three more retail cannabis shops. One local news organization says the meeting angered Gov. Hochul because only a handful of applicants were on the agenda for license approval at the meeting when hundreds of applicants are still waiting in the wings. Hochul says, “I’m very fed up with how long it’s taken to get some of these approvals. My understanding is that the board was supposed to consider 400 applicants. They only had three new retail locations approved.” 

Despite the governor’s growing displeasure and increasingly critical rhetoric, the Office of Cannabis Management has not commented on the governor’s remarks. 

Is It the Law or the Execution? 

So, what is the underlying problem causing all the problems in New York that states in similar positions did not experience? Governor Kathy Hochul has a few ideas. She claims that New York law itself may be to blame for the poor recreational marijuana rollout in New York. The main issue? Within the law, there is a lack of enforcement mechanisms to curb the explosive growth of illegal marijuana shops. This issue, combined with the massively slow pathway to legal sales and approval of licensed marijuana retailers, means illegal shops have the space and ability to thrive. In contrast, legal retailers get left in the dust. 

Another criticism from the Governor? She says it was a “bad idea” to allow the Dormitory Authority to find retail spaces and locations for dispensaries in New York. The agency took too much time finding space and was not adequately equipped to handle the task, seeing as how the agency is typically in charge of construction and financing public buildings instead. The Dormitory Authority has declined to comment on Hochul’s comments. 

On the flip side of the coin, officials say there has been little communication between the Governor and the Office of Cannabis Management apart from her initial nomination of the board’s executive director and a Cannabis Control Board chair. In her first State of the State address in 2022, Governor Hochul announced $200 million in public-private social equity funds to help finance the first marijuana dispensaries. These funds were to support the State’s social equity goals. However, there were issues getting financing to the fund from private partners. It took over a year to secure financing from Chicago Atlantic Admin LLC. Some reports suggest that the loans from the $200 social equity fund didn’t help but may have hurt cannabis retailers, claiming the loans were highly restrictive and came with steep costs, further slowing down the rise of the legal cannabis market in New York. 

Is Governor Hochul to blame or the law itself? The answer lies somewhere in the middle. For her part, Gov. Hochul says she plans to seek more enforcement power from the state legislature to fight back against illegal pot shops in the State. State officials say the legislature will work with the Governor to strengthen laws and enhance enforcement authority. Others believe that the key to pushing out illegal shops is to fast-track as many legal dispensaries as possible. Benjamin Rattner, a cannabis lawyer representing license applicants, believes the Office of Cannabis Management understands this and is working to resolve some issues. 

In the end, state officials, Governor Hochul, and the Office of Cannabis Management must work together to create solutions that bolster the legal marijuana industry, not hinder its growth or potential. New Yorkers want recreational marijuana. It’s up to state leaders to give it to them legally. 

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