Calling Cannabis Rollout a ‘Disaster,’ Hochul Blames Law for Rampant Illegal Sales

  Last modified on February 8th, 2024

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Governor calls unlicensed dealing in “every other storefront” “insane” while her officials struggle to get legal retailers launched.

In stunning remarks published Wednesday, Gov. Kathy Hochul called the rollout of New York’s cannabis program a “disaster” and said that it was unlikely the program could be fixed without significant changes to the state’s cannabis legalization law itself.

The governor made her comments in response to questions from the editorial board of the Buffalo News and referenced the proliferation of illegal retailers in New York City, with multiple storefronts on a single block in some areas as recently documented by THE CITY and New York Magazine.

“It’s not every street corner,” said the governor. “It is every other storefront. It is insane.”

Nearly three years since the state legalized cannabis under former Gov. Andrew Cuomo, only about 50 state-licensed stores are open across New York. Delays have resulted from legal challenges to the license programs as well as regulatory hurdles.

Hochul made her unusually critical public statements one week after the Cannabis Control Board abruptly canceled a meeting at which it had been scheduled to approve licenses for three new retail shops.

Relying on an internal government email, THE CITY reported that the meeting had been called off at Hochul’s request. A Hochul spokesperson denied at the time that Hochul had canceled the meeting. But the governor subsequently confirmed in other remarks in Buffalo last week that she had intervened to call off the vote, after learning that just a handful out of hundreds of applicants for retail licenses were on the agenda.

“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,” she said. “They only had three new retail locations approved.”

The governor added, “My team got involved and says, “No, go back to the drawing board, work harder, get this done.” And no, I’m not satisfied with the pace.”

The Office of Cannabis Management, the state agency that manages the retail sales system, declined to comment on Hochul’s remarks.

‘Not Poised for Success’

Hochul blamed some of the problems in the rollout with the law itself, including a lack of enforcement mechanisms to curb illegal stores while not offering fast enough paths to legal sales. “You have to go back to the very beginning. Prior to my time [as governor], the legislation was crafted in a way that was not poised for success,” Hochul told the Buffalo News.

Multiple lawsuits have targeted the law’s priority of certain groups for the first licenses, including a suit that challenged the legality of awarding licenses to people affected by marijuana convictions and took several months to settle. New lawsuits continue to be filed.

Former Gov. Andrew Cuomo signed the Marijuana Regulation and Taxation Act on March 31, 2021, just months before his resignation in a sexual harassment scandal. As lieutenant governor, Hochul succeeded him before winning reelection in 2022.

It was Hochul who constituted the Office of Cannabis Management. She also nominated executive director Chris Alexander and Cannabis Control Board chair Tremaine Wright on one of her first days of office and has overseen the entirety of the state’s implementation of the law.

Hochul told the Buffalo News it was a “bad idea” to put the Dormitory Authority in charge of finding retail locations for dispensaries and that it took too much time for an agency that’s traditionally been in charge of construction and financing public buildings.

Last September, THE CITY reported that there had been little communication between the Office of Cannabis Management and the governor’s office following Hochul’s initial appointments to the Office of Cannabis Management, according to seven people in the offices at the time.

Office of Cannabis Management Director Chris Alexander testifies at a State Senate hearing in Albany.

Office of Cannabis Management Director Chris Alexander testifies at a State Senate hearing in Albany, Oct. 30 2023. Credit: Rosalind Adams/THE CITY

In her first State of the State address in January 2022, Hochul announced the $200 million public private social equity fund to finance the first dispensaries to support the state’s social equity goals. A couple weeks later, Reuben McDaniel, a member of the Cannabis Control Board and the Chief Executive of the Dormitory Authority of the State of New York said at a Cannabis Control Board meeting that his authority would assist in finding locations.

The fund had trouble getting financing from private partners and it took more than a year to secure financing from a firm called Chicago Atlantic.

McDaniel resigned from both of his positions — first at the Cannabis Control Board and then as head of DASNY. Last November, THE CITY reported how the loans from the $200 million social equity fund actually loaded licensees with steep costs and little control over the locations.

The Dormitory Authority declined to comment on Hochul’s comments.

Rich Azzopardi, a senior official in Cuomo’s administration, dismissed Hochul pointing to the law as the problem, saying compromises are usual when getting a bill passed. “She’s essentially been the manager of a Pottery Barn for three years,” Appozardi told THE CITY. “You break it, you buy it.”

Holding Out Hope

Hochul said she would continue to seek more enforcement powers from the state legislature.

After illegal sales surged, Hochul responded with enforcement campaigns. Since last June, the Office of Cannabis Management and state Tax Department have been doing inspections of unlicensed stores. Hochul herself has touted the results of these raids and how much cannabis has been seized.

Assembly Majority Leader Crystal Peoples-Stokes (D-Buffalo) said in a statement to THE CITY that “The legislature is ready to work with the Governor in order to build upon laws enacted last year to provide enhanced enforcement authority.”

Added Peoples-Stokes: “New York’s cannabis industry has definitely faced an inordinate amount of challenges and delays, but that should not stop us from creating the most equitable industry in the country.”

The Office Cannabis Management seized marijuana product from an unlicensed smoke shop on Avenue A, Oct. 26, 2023. Credit: Ben Fractenberg/THE CITY

Benjamin Rattner, a cannabis lawyer who represents license applicants, acknowledged that legislative fixes could help legal stores compete fairly with the unlicensed ones, but also said that it was in the purview of the state agencies to improve the rollout.

“Part of what’s really needed is to get as many legal dispensaries open as possible. That’s within the purview within OCM,” said Rattner. “I do think that OCM recognizes this and is working hard on this.”

Joe Rossi, a cannabis lobbyist who represents both applicants and licensees, said that while it was partly validating to read the governor’s remarks acknowledging the rollout problems so far, he was disappointed that Hochul suggested there was little that could be done and denied that there was no fix to the problems.

“We have to find a solution, we can’t just toss our hands up,” said Rossi. “And I still believe Gov. Hochul will find a way to do that. I really do.”

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  1. t-bo February 7, 2024

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