New York’s gray market crackdown begins in Brooklyn with two arrests
A shop called Big Chief is accused of selling illegal cannabis and tobacco products. With the state’s first dispensary licenses going out next week, this is only the beginning.
A raid in Bay Ridge, Brooklyn yesterday could signal the beginning of the end of New York’s gray market era, and a transition towards a fully licensed and regulated retail cannabis market.
The joint operation between the NYC Sheriff’s office, the Department of Consumer and Worker Protection, the Office of Cannabis Management (OCM), and NYPD resulted in the arrest of two individuals accused of operating an illegal cannabis and tobacco shop called Big Chief, out of a storefront on 4th Avenue and 74th Street in Bay Ridge.
Last month, FOX 5 NY visited the Big Chief shop. Their report featured Big Chief’s owners telling cameras, “we are not hiding anything.”
At the time, Tank Denory told FOX 5 reporters he was the shop’s owner. Denory added that Big Chief submitted a dispensary license application to the state and was waiting to hear back about its status. It is not clear if the owners who spoke to FOX 5 last month are the same individuals arrested Wednesday.
A video of the raid captured by LLN NYC, shows authorities in NYPD, Sheriff’s office, and OCM gear seizing boxes and plastic bags from the shop, including highly-coveted products by out-of-state brands like Jungle Boys and Alien Labs.
Last night, Brooklyn City Council member Justin Brannan told FOX 5 NY the raid was justified. “If I sell untaxed cigarettes—that’s illegal. If I sell liquor or I serve liquor or wine without a liquor license—that’s illegal. Right now (if) you’re selling recreational marijuana in a retail setting, that’s illegal,” Brannan said.
A wake up call for the gray market
The raid is a wake-up call for many sellers and buyers across the state. Expect stronger and more widespread crackdowns once the first dispensary licenses go out next week. The participation of the Office of Cannabis Management, and the multi-agency coordination, indicates that the Brooklyn action wasn’t merely a one-off raid ordered by a local precinct captain.
OCM Chief Equity Officer Damian Fagon told FOX 5 NY last night that gray market sellers had fair warning that their actions will exclude them from future license opportunities. “Unfortunately, it’s very shortsighted,” Fagon said of gray market operations like Big Chief.
“This industry is going towards legality. Towards regulation. It will be a multi-billion dollar industry that they will not be a part of because of mistakes that they’re making right now.”
Damian Fagon, New York Office of Cannabis Management
What happened to wrist slaps?
In June, Mayor Adams told the Javits Center crowd that he doesn’t want to approach the state’s budding cash crop—New York expects to collect $1.25 billion from legal weed in the next six years—with heavy hands. He said he intends to give warnings and wrist-slaps to those bending the rules. Instead of fines and arrests, he said he wants to help all non-licensed dealers take steps towards starting legitimate cannabis businesses.
“‘Listen, you can’t do this,’ give them a warning,” Adams, a former NYPD cop, said of his plans for dealing with unlicensed dealers.
Why does New York have a gray market?
In March 2021, New York legalized cannabis possession and use, but not sales. In the year and change since, state officials have mostly looked the other way as a “gray market” of pot shops, trucks, and private clubs bloomed to fill the state’s massive appetite for Mary Jane.
“I believe that the location is known for selling the illegal cannabis that they’re selling currently. They sold a host of other illegal products as well. This is a danger to the community, right? When you start selling these products and have these areas that are attractive to both children and normal residents when they’re walking around, nobody really wants that in their neighborhood.”
New York City Sheriff Anthony Miranda
The Office of Cannabis Management has not responded to Leafly’s request for comment. This story will be updated as new details emerge.
Why is New York cracking down on gray market weed providers?
In order to decriminalize cannabis, you have to tax and regulate it like any other product.
The state’s first adult-use dispensaries will be announced Monday (November 21), at the public Office of Cannabis Management (OCM) board meeting. License applicants and potential investors have pressured the OCM to address the gray market more directly. CAURD applicants have told Leafly the lack of regulation scares away serious investors and makes financial projections difficult to forecast.
The OCM board’s next meeting will also bring final regulations for the new market. The final regulations will include a strict two-tier model that forbids anyone with ownership in the global cannabis supply chain from investing in New York’s retail locations, which will be fashioned to operate like wine and liquor stores in New York. As a result, shops won’t be able to sell shelf space to the highest bidder.
The OCM believes this two-tier model will curate the best products for consumers, and a healthy, competitive market that is free of undue influence.
Here’s what NYC Sheriff’s office said about cannabis raid
What will happen to the individuals who were arrested?
The NYC Sheriff said, “The investigations into the two individuals that were apprehended inside are going to be ongoing. So we’re gonna be doing background investigations on both of them. We’re also gonna be looking at the financial records of this institution and ensuring, to what level, they were following the rules of the law.”
A Staten Island raid earlier this month foreshadowed this one. Although the shop in Staten Island was only selling illegal tobacco products, not cannabis, the raid was also a collaboration between multiple state and city agencies that claim to be addressing quality of life complaints from residents.
In a statement to FOX 5 last month, the state’s Office of Cannabis Management said Big Chief and other gray market businesses are breaking the law and that the office has begun investigating “unlicensed shops in their municipalities.”
“Simply put: you need a license to sell cannabis in New York. If you do not have one, you are not selling cannabis legally,” the office said in the statement. “The Office of Cannabis Management added that it implores all illegal store operators, including stores pretending to be legal operations, to stop selling cannabis products immediately or risk facing additional consequences.”
A YouTube viewer named Spiro Panagiotakis commented on LLN NYC‘s breaking coverage of the story, quipping: “The 90s called: They want their pot raid back.” A new era in New York cannabis is officially underway. Do your best to stay out of the gray.