Those hoping to get an early start as players in New York’s forthcoming adult-use cannabis market may have shot themselves in the foot for future licenses. 

The state’s Office of Cannabis Management (OCM) sent out letters Tuesday ordering businesses suspected of illegally selling or gifting cannabis to cease and desist those activities. Failure to do so would threaten their ability to legally participate the state’s adult-use market under the Marijuana Regulation and Taxation Act (MRTA), enacted in March 2021, the letter states.

“You are hereby directed to cease any, and all, illegal activity immediately,” the letter states. “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.”

While former New York Gov. Andrew Cuomo signed MRTA into law March 31, 2021, it wasn’t until September 2021 that the state’s regulatory authority got off and running through current Gov. Kathy Hochul’s nominations of Chris Alexander, for the executive director role at OCM, and Tremaine Wright for chair of the office’s Cannabis Control Board.

Under MRTA, legal, licensed and taxed sales of adult-use cannabis can begin only after the state approves regulations set forth by the five-member control board.

“We have an obligation to protect New Yorkers from known risks and to strengthen the foundation of the legal, regulated market we are building,” Wright said in a statement.  “We will meet the goals of the MRTA to build an inclusive, equitable and safe industry. Therefore, these violators must stop their activity immediately, or face the consequences.”

With the former governor’s delay in nominating regulatory heads, Wright said in late-October that New York’s first adult-use cannabis licenses will not be issued until 2023.

As written in the legislation, MRTA originally laid out an April 1, 2022, timeline for a possible launch date for the adult-use market.

But through an initial investigation, OCM officials identified more than two dozen alleged violators and sent letters to each of them, Local News 10, an ABC affiliate, reported.

OCM spokesperson Freeman Klopott told the news station he could not release the names of the businesses in question because investigations are ongoing.

The letter also states, “Unlicensed sales undermine the legal market that is being built by introducing products that are not lab-tested and potentially threaten public health and safety.”

Illegal cannabis sales are not only defined by in-person transactions at a retail location, but also online, via delivery, at an event and the like, the letter states.

OCM officials also warned the businesses in question that “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, is also illegal.

In addition, landlords hosting illegal activity on their premises are also jeopardizing their ability to house a licensed retail dispensary or on-site consumption lounge in the future, OCM officials warned in the letter.

“New York State is building a legal, regulated cannabis market that will ensure products are tested and safe for consumers while providing opportunities for those from communities most impacted by the over criminalization of the cannabis prohibition, and illegal operations undermine our ability to do that,” Alexander said in a statement

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