Illegal Smoke Shop Ecosystem in NYC
While many celebrated the decriminalization of cannabis here in New York, the infrastructure to license, sell and monetize via tax revenue has been an abject failure for our city and state (not unlike what’s transpired in others states).
As of June 1, 2023 there are just four shops in NYC that safely and legally sell cannabis products. And yet, New York City Council has compiled a list of 1,500 other ‘smoke shops’ in operation without a license and without consumer confidence that they are selling a product that is safe.
While many get the gist of what is going on; even the news coverage doesn’t paint a clear enough picture of how these businesses are operating and how communities can take action to address.
In fact, in February 2023, Mayor Adams and District Attorney Alvin Bragg committed to using the Real Property Actions and Proceedings Law § 715(1) to force landlords to evict tenants operating illegally (see below what ‘illegal’ means in this context). The promise was to take on the eviction process themselves if landlords did not act swiftly. Governor Hochul has also signed legislation to make the fines against landlords more onerous; but these do not come into play until 2024.
We can all demand more and at the bottom of this post there is an opportunity for you to send a letter to the mayor and local DAs to ask that they deliver on their promise of action. As we enter the Summer months and fear an escalation of this mayhem, below are more details about what is happening and what New Yorkers can do >>
What does ‘Illegal’ Even Mean?
Because cannabis is legal now in New York, it may be hard to understand what is meant when the phrase ‘illegal smoke shops’ is thrown around— but the distinction is very important to addressing the problem.
Shops that are boldly and blatantly marketed as dispensaries — There are only four businesses in the city that have a license to dispense. So outside those four, any shop promoting themselves as a licensed business is, in fact, ‘illegal.’ And, note, this is not just a technicality — to ensure a safe product the The New York Office of Cannabis Management needs to go through the proper steps. Safety is a key factor here.
Shops that were grocers, tobacco shops, etc. that now sell cannabis — Still illegal. You can’t add a new product that you don’t have a license to sell. In some cases businesses are ‘selling’ another product and then giving away ‘for free’ weed. One of the rare wins here was a shop in Hell’s Kitchen that was sued by the landlord for this reason and the landlord prevailed.
Finally, one that has escaped as much mention, there are shops popping up (exploiting the continued decline in the commercial real estate market in the city) marketing themselves as ‘smoke shops’ and selling primarily tobacco, e-cigarettes and the odd bit of cannabis paraphernalia. The way in which these shops fly under the radar is that they are more discrete in their weed sales and act as if they are just ‘any old place to buy cigarettes,’ etc. But… you need to have a license to sell tobacco and a separate one to sell e-cigarettes and there are caps per district on how many can operate. So many of these also aren’t licensed to operate. On top of this, many sell flavored tobacco too which is illegal in New York. It makes these type of shops quite insidious as you don’t know unless you know.
Why it Matters
Outside of just any personal issue or annoyance, what are the risks ? Well, as mentioned earlier, there is the very real risk of an unregulated product that makes a customer sick or worse. But there are other issues:
Crime. There has been enough news about unlicensed shops being crime magnets to know it’s a problem. Because, of course, revenue that’s off the books is a lot easier to steal. So is product. This is why our neighbors fear what unlicensed shops may bring.
Children. These shops are not only densely located in some neighborhoods they are often close to schools and/or use cartoon characters and other ‘fun’ signifiers to lure in kids in to buy product.
Insurance Liability. You’d be hard-pressed to find an insurance company willing to cover any damage that resulted from illegal activity (most have it stated clearly in their policies). And to be clear — this ‘illegality’ could be as simple as not having a license to sell tobacco. From a broken door to a devastating fire, the implications for this could seriously impact the quality of life for anyone living above or around one of these shops.
Mortgage Lending. If you are a lucky condo or co-op owner who has found that their commercial property neighbors signed a lease for one of these businesses, you might find selling your property an issue. There is also some suggestion that even a licensed dispensary may be reason for a lender to avoid your home as marijuana sales are still federally prohibited.
How is This Happening
The commercial property market in New York City has not rebounded like other similar metropolises. And so the prospect of getting full rent (and then some) and getting away with not asking all the right questions upfront is very appealing. And New York makes it so easy:
LLCs can help shield owners who don’t want to be called out for not doing the work to ensure an illegal business does not pop up.
The city-to-date has levied paltry fines that make it worth taking the rents and paying the fines in short term.
Most New Yorkers haven’t dug into this level of detail enough to cause a fuss.
So, as we like to say, it’s the perfect ecosystem for those breaking the law and those with enough money to be above the law. And, in this case, the law is in absolute disarray. And, if not for our safety and quality of life, it’s been a major hit to what would have been lucrative source of tax revenue for the city and state.
So, let’s tell our representatives that enough-is-enough. Click below to send a note to the Mayor and each of the DAs in New York City to ask they make good on their promise. And after you do that, if you know of a particular shop, please log it with 311.