Unlicensed Manhattan Dispensary Raided

Tuesday morning NY enforcement teams took action on Empire Cannabis Club — one of the city’s biggest operators of unlicensed dispensaries. to conduct a "routine inspection" on Empire Cannabis' Chelsea and Lower East Side locations. Tax agents were seen taking seized products out of the dispensary on Eighth Avenue in Chelsea and loading them into a red van.

At the Lower East Side store on Allen Street, Lenore Elfand, one of four co-owners including her brother, told the NY Times that the authorities refrained from raiding her store after she recorded a video saying she would not consent to a warrantless search. However she said tax agents gave her and the store manager tickets ordering them to appear in court on a charge of obstruction.

The state’s decision to go after Empire marked a significant escalation in its efforts to clamp down on the hundreds of unlicensed dispensaries that have popped up in NYC since legalization was announced in 2021. A closely watched court battle will ensue over whether businesses like Empire have legal standing under the cannabis law. Ms Elfand added, “We’ve known this was coming for a long time, and we’ve been waiting for it,”.

Many of NYC's unlicensed dispensaries and weed delivery services have operated under creative work arounds to skirt legalization laws, including running as private clubs whereby membership fees are paid and the weed simply a benefit of membership. Others have sold very expensive stickers or T-shirts and given weed and edibles to the their customers as an apparent thank you gift. The State called bullshit. Lawmakers disagreed and passed legislation this year saying paid membership or ancillary purchases for access to cannabis still amounted to illegal sales.

Empire Cannabis, whose patrons pay a membership fee to access its cannabis supply, had received multiple warnings from State regulators that its business model was not legal, however the unlicensed dispensary argued that it was a concierge service and not a retailer.

Empire’s lawyer, Steve Zissou, criticized the enforcement actions on Tuesday suggesting his client was doing nothing wrong and explaining State agents were not permitted entry after they arrived “without warning and without a warrant.”

NY officials have been under fire for the slow rollout of regulation and dispensaries- as of the the date of this article the state has only 19 legally permitted and operating dispensaries. On the other hand there are hundreds of unlicensed dispensaries in NYC alone. A slow legal rollout coupled with a lack of enforcement on unlicensed operators has been a disastrous combination. Cannabis industry stakeholders have pointed to the troubled California market as an example of a non-sustainable model for legally permitted dispensaries and deliver services. This dynamic forces compliant dispensaries to compete with illicit shops who pay no taxes and sell untested product. The result has been devastating for both legal operators in California, and the legal California cannabis market, which has failed to grow and achieve the promised tax base for the state.

The raid of Empire Cannabis is one of the first enforcement actions since Gov. Kathy Hochul signed a measure in June, stiffening fines and giving regulators the ability to bring criminal tax fraud charges for violators. New York officials are betting this new measure and its' enforcement will help protect compliant New York dispensaries and delivery services, and city tax coffers.

Meanwhile, within moments of enforcement officials departure, the Empire Cannabis location in Chelsea was back up and running with steady stream of customers lined up at the door.