A state Supreme Court decision has upheld the Office of Cannabis Management’s ability to search and seize weed from unlicensed dispensaries as constitutional.
The Wednesday ruling bolsters the state’s efforts to shut down cannabis shops without a license through what the agency calls “inspections.”
The state has been actively performing inspections — which include undercover purchases and the seizure of products found in unlicensed operations — for years. OCM carries out those actions through its enforcement and investigations arm, usually in collaboration with local law enforcement.
“This ruling is a powerful affirmation of the work of OCM’s efforts across the State in tackling the illicit market,” Felicia Reid, OCM’s acting executive director, said in a statement. “Though enforcement, OCM furthers its obligation to support lawful cannabusinesses, safeguard New Yorkers’ health and safety, and mitigate the criminalizing harms of past cannabis prohibition."
The court case was brought by the Elfand Organization, which operated six unlicensed private membership clubs in New York City under the banner of Empire Cannabis Clubs.
Those clubs were not licensed to sell cannabis and didn’t outright do so. Instead, people could pay a fee to become a club member. Members would be given access to cannabis sold at cost, meaning the clubs didn’t claim to make a profit. In turn, the organization argued, the transactions did not meet the legal definition of a “sale,” according to court filings.
The first of its clubs opened in 2021, shortly after the passage of the Marihuana Regulation and Taxation Act, which legalized recreational cannabis in New York, and prior to any licensed dispensaries opening in the state.
Such tactics were common in New York in the early days of cannabis legalization. Some businesses offered paid memberships to access weed products, while others would sell overpriced items, like a T-shirt or stickers, and include cannabis as a “gift.” All were meant to skirt the state law through loopholes in the law.
OCM began inspection of the Empire Cannabis Clubs in 2023, leading to the seizure of their cannabis products and $1,653 in cash, and the arrest of eight employees, according to police reports provided in court filings. Five of the locations were ultimately subjected to inspections.
The operators of the clubs sued, arguing the inspections were tantamount to a warrantless search and seizure, and a violation of the Fourth Amendment of the U.S. Constitution.
“These raids caused near-total destruction of an otherwise law abiding business under the guise of a ‘regulatory inspection’ or an ‘administrative search’ or whatever benign sounding euphemism rather than what it was and still is: armed raids on businesses aiming to search and seek contraband in order to shut it down, even one that has always openly maintained the legality of its business,” the complaint reads.
But in her ruling, Judge Inga O’Neale concluded that the inspections were not unconstitutional. Rather, the OCM was able to perform the searches as part of its legal duties as a regulatory body.
“Even assuming a given search was constitutionally infirm, this would have no bearing on the facial validity of the entire statutory/regulatory scheme and certainly have no bearing on whether the statutes and regulations themselves have proper limits on scope and discretion,” O’Neale’s decision reads.
The Elfand case is not the only challenge to OCM's inspections. Another case in Albany filed by a company called Super Smoke-n-Save charges that the state’s enforcement actions are unjustly harming companies selling licensed hemp products.
That case is ongoing.
