New York cannabis board says businesses giving away marijuana are breaking the law
The head of the state’s Cannabis Control Board has declared that businesses that are giving away marijuana as a promotion with the purchase of an overpriced T-shirt, lighter or other item are breaking the law.
Tremaine Wright, the former state Assemblymember who chairs the regulatory body for New York’s newborn marijuana industry, addressed the increasingly common practice during a meeting last week.
“There is no gray market in New York state,” Wright said. “This conduct is not legal and must stop. Individuals who do not cease run the risk of severe financial penalties.”
His remarks did not elaborate on what grounds “severe financial penalties” could be leveled, but added that anyone selling marijuana products in unlicensed dispensaries, pop-up shops, or markets is not licensed, “nor are they selling safe, tested products.”
Last month, CITY published an article highlighting a Henrietta business, HempSol CBD, that was offering a “free” eighth of an ounce of marijuana with the purchase of a $65 T-shirt. The owner of the shop claimed the promotional “gift” was legal under the state’s recreational cannabis law, which allows for adults to give each other up to three ounces of cannabis without compensation.
Since the article’s publication, marijuana “gifting” arrangements have become commonplace at the city’s CBD and smoke shops.
HempSol CBD owner Jim Mackenzie said he’s seeking guidance from his attorney and declined comment for this story.
The state legalized the possession of marijuana by anyone over the age of 21 through the Marijuana Regulation and Taxation Act, which was signed into law on March 31. It also legalized regulated sales of cannabis, with “regulated” being the operative word.
The act specifies that legal, licensed, taxed sales can begin only after the state approves regulations governing those sales and the businesses making them. Dispensaries on Native American reservations are the only exception to that rule, and so far, the state has been slow to act.
Meanwhile, entrepreneurs are trying to get a jump on the new industry through “gifting.” Fully-branded weed companies have taken root throughout the state. Pop-up cannabis events have become weekly occurrences in Rochester, and across the state. Meanwhile, local governments have been looking for guidance.
Jason Klimek, who co-leads law firm Barclay Damon’s cannabis team, had long been skeptical of businesses “gifting.” He said the remarks from the head of the state’s Cannabis Control Board should end whatever uncertainty there had been around the practice.
“It was fairly predictable that this would be the outcome,” Klimek said. “Paramount is consumer safety, and the chair emphasized that. It was very good for them to say that, because there has been a huge question about this, we get calls almost daily.”
Klimek pointed specifically to the sale of unregulated concentrated marijuana cartridges as a point of concern over safety. In 2019, roughly 2,800 people were hospitalized and 68 died after consuming black market THC vape cartridges. Investigations pointed to vitamin E acetate, which had been found in some of the cartridges, as the culprit.
The outbreak prompted many states to adopt new laws restricting e-cigarettes, New York being one of them.
The laws legalizing weed gave the governor the responsibility to appoint staff to the state’s new Office of Cannabis Management and to appoint members to the Cannabis Control Board, which is charged with developing regulations for the new industry. Former Gov. Andrew Cuomo neglected to do that before he resigned amidst a sexual harassment scandal, leaving Gov. Kathy Hochul to begin that process in September.
In Chemung County, the district attorney’s office has acknowledged debating whether to raid a cannabis-gifting establishment in the city of Elmira practicing “gifting.”
In a phone interview Monday, Susan Rider-Ulacco, the executive assistant district attorney in Chemung, said no action has been taken yet, and getting guidance from the state has been near impossible.
“We’ve been trying to get a hold of that state board, and good luck,” Rider-Ulacco said.
Rider-Ulacco said guidance is critical to local governments dealing with the rapidly changing world of marijuana in New York.
“We just want to make sure we are doing the right thing,” Rider-Ulacco said.
Klimek sees law enforcement as being far more likely to crack down on marijuana gifting now that the state board has given a clear position. He said he would not be surprised to see authorities go after a larger player in the near future to make an example of it.
“Perhaps law enforcement is more likely to engage at this point, and if they were to do that, they would probably go after a sort of bigger operator to set an example,” Klimek said.
As a lawyer, Klimek says he takes a conservative approach to the law, meaning he doesn’t want to see people push the envelope at the risk of criminal charges, financial distress, or an inability to eventually legitimately participate in the legal cannabis market.
He offered a word of advice for businesses currently in the marijuana gifting game.
“Stop,” Klimek said. “That’s my advice.”
Gino Fanelli is a CITY staff writer. He can be reached at (585) 775-9692 or email@example.com.