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:
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.
Navigating Director and Officer Liability in Times of Financial Distress
Director and officer liability increases sharply when a company is in financial distress. Decisions that would draw little attention in a healthy business can later be challenged by creditors, shareholders, bankruptcy trustees, and regulators as breaches of fiduciary duty, fraudulent transfers, or oversight failures. Understanding where that exposure comes from, and how to manage it, […]
Before You Buy: Managing Real Estate and Permitting Risk for BESS Projects in New York and New Jersey
For developers pursuing battery energy storage system (BESS) projects, finding the right property is only the beginning. BESS site selection is as much a legal and transactional exercise as a real estate decision, with risk analysis central to the project’s ultimate success. Key Takeaways The core questions for BESS site selection in New York and […]
What Business Owners Get Wrong Before Meeting a Litigation Attorney
What should you expect when meeting a litigation attorney about a business dispute? You should expect to describe the dispute in your own words, hand over the most important documents, flag any deadlines or immediate threats, and leave with a clearer picture of the problem, what information is still needed, and the likely next steps. […]
Arbitration vs. Litigation vs. Mediation: What New Jersey Businesses Should Know Before Signing a Contract
Arbitration resolves disputes privately before an arbitrator whose decision is usually final, while litigation resolves them in court with full rights of appeal. Whether a business ends up in arbitration or litigation is often decided when it signs the contract, long before any dispute arises. Key Takeaways When facing a contract dispute, carefully consider your […]
Can You Own Part of a New Jersey Business Without a Written Agreement?
Can you own part of a business in New Jersey without a written agreement? Yes, it is possible. Under New Jersey’s Uniform Partnership Act, a partnership can arise when two or more people carry on a business as co-owners for profit, whether or not they ever intended to form one. Ownership doesn’t necessarily depend on […]
Crisis-Proofing Your New Jersey Business: Building a Crisis Response Plan Before You Need One
For New Jersey businesses, crisis preparedness should be viewed as a legal and operational function, not simply an emergency-management exercise. A well-designed crisis response plan can help preserve evidence, protect confidential communications, meet reporting obligations, limit unnecessary exposure, and prevent an already difficult situation from becoming a larger legal problem. Key Takeaways A serious crisis […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
