Gifting Cannabis Lands NY Retailers in Hot Water

Gifting Cannabis Lands NY Retailers in Hot Water

New York’s Office of Cannabis Management (OCM) is warning businesses looking to enter the state’s new legal cannabis market to be patient or risk being shut out...

New York’s Office of Cannabis Management (OCM) is warning businesses looking to enter the state’s new legal cannabis market to be patient or risk being shut out. Last month, OCM issued cease and desist letters to dozens of companies suspected of illegally selling cannabis without a license. Many of the letters addressed the practice of “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.

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

Gifting Cannabis Under the MRTA

On March 31, 2021, former New York Gov. Andrew Cuomo legalized recreational cannabis by signing the New York Marijuana Regulation and Taxation Act (MRTA) into law. The legislation also expanded New York State’s existing medical marijuana and cannabinoid hemp programs and established the Office of Cannabis Management to oversee all three industries.

Under the MRTA, possession and consumption of cannabis by adults 21 and older is now legal. Gifting is also lawful between adults 21 and older under the MRTA. The law provides that adults may gift or “transfer,” without compensation, up to three ounces of cannabis and up to twenty-four grams of concentrated cannabis to other adults.

Licensed sales of recreational cannabis are not yet legal. The CCB is still working to establish a regulatory structure to govern the cannabis market, and no adult-use licenses have been issued in New York State to date.

OCM Cease and Desist Letters

According to the OCM, its investigation was promoted by media reports of cannabis being “gifted” for free by businesses selling other products and services. The agency identified over two dozen alleged violators and sent letters to each educating them on the law and directing them to stop their illegal activity immediately.

The OCM cease and desist letters inform recipients that it has come to its attention that they are engaging in unlicensed cannabis sales, or that unlicensed sales are occurring on their property. It goes on to state that all illegal cannabis sales, which may include the sale of cannabis products in-person at a retail location, online, via delivery, or at an event, as well as “gifting,” must cease immediately.

“You are hereby directed to cease any, and all, illegal activity immediately. 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,” the letters state. “If you are a landlord hosting illegal activity on your premises, you are jeopardizing your ability to house a licensed retail dispensary or on-site consumption lounge in the future.”

Key Takeaway

While the practice of “gifting” may seem like an easy way to get your cannabis business up and running, it will likely lead to legal headaches and could hurt your chances of obtaining a license once OCM adopts and implements a legal framework for cannabis operations. To start your preparations the right way, we encourage you to contact a member of the Scarinci Hollenbeck Cannabis Law Practice Group.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.

This article is a part of a series pertaining to cannabis legalization in New Jersey and the United States at large. Prior articles in this series are below:

• Can SAFE Banking Act Finally Cross the Finish Line?
• Year in Review: Top Cannabis Legal Developments for 2021
• Can Latest Cannabis Legalization Bill Bridge the Partisan Divide?

Disclaimer: Possession, use, distribution, and/or sale of cannabis is a Federal crime and is subject to related Federal policy. Legal advice provided by Scarinci Hollenbeck, LLC is designed to counsel clients regarding the validity, scope, meaning, and application of existing and/or proposed cannabis law. Scarinci Hollenbeck, LLC will not provide assistance in circumventing Federal or state cannabis law or policy, and advice provided by our office should not be construed as such.