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New York City still has 2,600 unlicensed operational cannabis shops, only 79 legal ones

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A months-long crackdown in New York City and across the rest of the state on unlicensed cannabis shops has resulted in more than 1,300 closures, but at least 2,600 such rogue shops remain operational while the city is home to a mere 79 fully legal dispensaries. And the vast majority of the $104 million in fines issued thus far by authorities have gone unpaid.

Sheriff Anthony Miranda shared those details during his testimony at a New York City Council committee hearing on Tuesday, where council members were trying to get a handle on the overall situation.

“Operation Padlock to Protect has been able to shut down illegal shops and unlicensed cannabis dispensaries in every city district. On a weekly basis, we are inspecting hundreds of locations,” Miranda told the council. “This is only the beginning. The operation will continue to change and expand as the industry continues to evolve.”

Dissatisfaction in the ranks

The operation – which launched in the spring after state law was amended to aid in the quest to close down thousands of unlicensed marijuana sellers – has shuttered 1,078 stores within New York City, following 5,059 inspections, Miranda told the council.

When pressed by Councilwoman Gale Brewer as to why only about $200,000 of the $104 million in fines – roughly 3% of penalties issued – have thus far been paid, Miranda noted that Operation Padlock was designed primarily to shut the shops down, not to collect on fines.

“The increased fines are meant as a deterrent. By and large, shops that are padlocked go out of business, and it is very difficult to collect fines from often untraceable LLCs that are no longer in operation,” Miranda said.

In addition, Miranda said, his office doesn’t have the legal power to collect on fines until at least 120 days after they’ve been issued, and there are a number of ways the shops can evade such deadlines, via extension requests or other legal means.

“The sheriff’s office is working around the clock to inspect unlicensed stores in the city,” Miranda said.

That didn’t completely satisfy the council.

“You have sealed a thousand shops. That could be $10 million in revenue. I know you mentioned this is not revenue-generating, but if people are breaking the law, they should pay a fine,” Brewer said.

The sheriff also said his office supports a proposal from the council to add a new tweak to the city’s 311 call center to offer residents a direct way to report suspected illegal cannabis shops, but he opposed an idea to increase mandated progress reporting from the task force, which he said would be “overly burdensome.”

Miranda also fielded a number of concerns raised by city council members, including reports that some of the illegal retailers simply moved their operations out to the sidewalk in front of their now-locked stores, and others that only open for business after dark in an attempt to avoid the crackdown. Some of the targeted shops have brazenly cut the padlocks and restarted their unlicensed cannabis shops, and even added food services, including grilling hamburgers for customers, one council member said.

“There are some retailers where you have closed, and then the operation continues right outside the door, with a locked, gated store behind them,” Brewer told Miranda. “Some of the illegal cannabis shops I’ve seen, they close during the day, they open at night, in order to evade you, because they think the sheriff only comes during the day.”

Miranda said that unlicensed marijuana sellers that deal on the street fall under the purview of the New York Police Department, not the sheriff’s office, but said his deputies have been coordinating with NYPD on some of those cases. He also said his deputies have been keeping a close eye on locations that were shuttered in case owners try to reopen.

“We also get calls when people break the locks and try to re-enter … that also makes it a priority for us,” Miranda said. “That’s why it’s imperative we stay vigilant.”

The sheriff’s office has been prioritizing reports of illegal cannabis sales from locations that are nearby public youth centers, schools and churches, along with reported cases of illnesses caused by narcotics sold by some of the shops in question.

However, Miranda pushed back when Brewer requested a list of the suspected shops, and said that information likely won’t be made public because the shops are technically not yet convicted of any wrongdoing.

‘Power corrupts’

Some speakers, including council members, also raised concerns about potential “due process violations,” which were also raised recently in a new lawsuit by Empire Cannabis Club, which is attempting to have the entire enforcement push declared unconstitutional.

To that point, Miranda acknowledged that attorneys representing many of the rogue shops have gotten “creative,” and said, “We’re adjusting. The law is something that is developing.”

A deeper problem within the sheriff’s office is undercutting the crackdown, alleged Ingrid Simonovic, the president of the New York City Deputy Sheriff’s Association labor union. Simonovic said that during Miranda’s tenure, more deputies have quit the job than have been onboarded, and she asserted that even more unlicensed cannabis shops have opened for business, despite the ongoing crackdown. She blamed Miranda, who she said has engaged in “retaliation” against his own deputies.

“In a nutshell, many stores are reopening after being shut down,” Simonovic said. “We have lost approximately 43 deputies in the last two years, while onboarding about 26. Some of those deputies have left because of the toll of seizing marijuana, which is being stored unsafely.”

Attorney Lance Lazzaro, who represents many of the shops that have been targeted for closure and cited with fines, also said the new laws which launched the crackdown have given the sheriff too much power. Lazzaro said Miranda has become “judge, jury and executioner” for bodegas and smoke shops, many of which he said are innocent of the allegations made.

Lazzaro said that even if a civil summons for supposedly selling illegal cannabis is dismissed by the city’s Office of Administrative Trials and Hearings (OATH), Miranda can ignore that finding and keep any of the shops closed for up to a year without evidence of criminal activity.

“Power corrupts, and the way the statute is written has not really dealt with the cannabis stores,” Lazzaro said.

Another attorney who spoke said Miranda was not being truthful when he told the council that the task force had not been seizing cash from smoke shops that have been raided, and said she’s got numerous clients who reported tens of thousands of dollars in cash and certified checks that were seized by deputies.

“The way to solve the problem is to give a conditional license to the bodegas,” she said.

David McPonski, who runs the licensed dispensary Freshly Baked NYC in the Bronx, also said the crackdown has thus far been “alarmingly insufficient.”

“Nearly all of the unlicensed stores near us that were previously padlocked immediately reopened within three days. And there are actually more unlicensed operators around our legal dispensary now than there were four months ago when we began reporting them,” McPonski told the city council.

Miranda report to NYC Council



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Florida’s Fluent responds to Reddit whistleblowers

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Cansortium Inc.’s (CSE: TIUM.U) (OTCQB: CNTMF) Fluent brand is facing fallout after an employee and others shared videos and images on social media allegedly showing poor growing conditions at its Tampa, Florida, cultivation facility, in addition to labor accusations.

A video, posted last week on Reddit’s r/FLMedicalTrees forum, appeared to show withering cannabis plants infested with aphids. The post quickly gained traction, bringing in more than 500 upvotes and nearly 300 comments.

“Ma’am this is an aphid farm, we feed our aphids live cannabis to keep them happy healthy and thriving!” the self-identified employee who uses the handle “Old_Length4214” wrote sarcastically in the comments section.

In response, Fluent CEO Robert Beasley confirmed that the video came from the company’s facility, but noted said there are quality control measures to address them.

“As preventing pests and pathogens entirely is not possible, we rely on our quality control program to catch these issues and eliminate them before they move on to the next stage of processing,” Beasley said in an email to Green Market Report on Tuesday.

Beasley outlined a multistep quality assurance process, including daily plant inspections, maintenance trimming and pre-harvest quality grading. He said that plants not meeting quality standards are removed or sent for extraction.

The CEO also addressed the challenges of growing cannabis in Florida’s climate.

“Cannabis does not like excess moisture in soil or in air, and Florida has both,” he explained, noting that these difficulties are factored into pricing and margins.

Another self-identified former employee, who said they worked at Fluent from October 2020 to May 2021, painted a wider picture.

Speaking on condition of anonymity, the former employee, who later worked in compliance for a cannabis testing lab, told GMR that these types of issues are problems for many operators in the state – but called out Fluent as one of the worst offenders.

“Every cultivation has issues … I remember swabbing MedMen’s (before Sunburn bought it) air vents, I remember Curaleaf had a huge issue with mold, Trulieve kept failing for pesticides even though their grow is indoors.”

The Florida Department of Health, which oversees the state’s medical marijuana program, did not respond to GMR’s requests for comment, but Beasley confirmed the agency conducted a routine quarterly inspection on Sept. 12.

“All Department inspections of medical marijuana treatment center facilities are unscheduled,” he said. That the inspection resulted in “one finding regarding waste logs, which the site team has corrected.”

While Beasley downplayed the issue to Green Market Report, the situation appears to have escalated internally. A self-described current Fluent employee, posting anonymously on Reddit as “smokechecklafleur,” described a tense work environment last Friday, two days after the original post.

“A large amount of my coworkers and myself included are considering leaving the company due to how bad things have gotten,” the employee wrote. They detailed new restrictions, including a ban on phones “whatsoever” at work and prohibitions on discussing the grow issues or a “random” visit from the state’s health department the day before.

“Morale is through the floor while management is scrambling to do damage control,” the employee added, “and we’ve been threatened with being terminated every day since the first post for more reasons than I can remember.”

The user also reported that four people had been terminated within an hour of their post.

“These are not new but rather an existing policy that was not being strictly enforced,” Beasley said about allegations that management is trying to stem information flow in response to the increased scrutiny.

He added, “The rationale is that it allows for greater efficiency and safety in the workplace environment. It also prevents incidents such as this where a former employee took pictures of plants being trimmed or disposed of and are claiming they represent the final product output.”

Regarding personnel changes, Beasley said, “We are not able to disclose the details of employment matters, however, we can confirm that if an individual violates Company policy by posting misleading and derogatory information about the Company online, it can lead to termination.”

The CEO said management’s planning a town hall meeting to discuss working conditions “in a professional and respectful setting.”



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Missouri issues yet another cannabis recall, rolls back hemp ban

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Missouri cannabis regulators continued their scrutiny of the industry’s compliance this week with their fifth recall since the adult-use marijuana market launched – this time recalling more than 23,000 goods for improper safety testing – while also announcing that many intoxicating hemp goods will be exempt from a new law that initially banned most of the products.

The state Division of Cannabis Regulation issued the recall on Tuesday after discovering the relevant products “were not compliantly mandatory tested” by ClearWater Science, one of the state’s cannabis testing labs, according to the press release issued on Tuesday by the state Department of Health and Senior Services.

“DCR cannot verify compliance with health and safety requirements,” the agency said, in justifying the recall. There have been no adverse health incidents connected to the products in question, the DCR clarified.

The goods affected by the recall include a wide range of brands and products, including pre-rolled joints, flower, concentrates, vape cartridges and edibles.

It was not immediately clear if the goods in question will be allowed to undergo retesting in order to be legally sold at dispensaries, since there’s no immediate evidence that the products themselves were tainted in any way.

The latest recall follows several earlier parallel moves by the DCR, which ramped up its oversight on the adult-use and medical cannabis industry over the past year. The total of goods recalled is now near 200,000.

Also this week, an attorney for DHSS wrote in a letter to a hemp trade association that an executive order from Gov. Mike Parsons last month that attempted to ban intoxicating hemp goods would not apply to hemp-based products with THC.

“In regard to psychoactive cannabis products, the department will focus its efforts on the identification of  ‘misbranded’ products,’” Richard Moore wrote to the Missouri Hemp Trade Association, which filed suit against the state last month over the ban.

“I trust that you understand that the consumption of these products may be dangerous,” Moore wrote to the hemp companies, “and that under no circumstances should they end up in the hands of Missouri’s children.”

Moore said his office would be only targeting goods that are “misbranded” to target kids, “for potential enforcement under the State’s Merchandising Practices Act,” the Independent reported.

“The department has no intention at this time to embargo additional psychoactive cannabis products as adulterated,” Moore wrote. “Further, within 30 days after referral to the attorney general’s office, the department will release all currently embargoed products and remove all embargo tags.”

The Missouri Hemp Trade Association reacted favorably to the news, which seems to settle for now what had been a legal tug-of-war between the governor and hemp businesses. A spokesperson told the Independent it wholeheartedly supports Moore’s move “to prosecute bad actors marketing counterfeit and misbranded hemp products to children.”

In other words, “Hemp sales are back on,” said an attorney for the trade group.



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The Daily Hit: September 18, 2024

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News from: Missouri, California, C3, European Union and more.

The Daily Hit is a recap of the top financial news stories for Wednesday, September 18, 2024.

On the Site

Missouri issues yet another cannabis recall, rolls back hemp ban

The state’s Department of Health and Senior Services will focus its efforts on “misbranded” products rather than intoxicating ones.

Read more here.

Proposed California intoxicating hemp ban may wind up in court

Advocates say the new emergency rules will eliminate access to high-CBD products.

Read more here.

Banned C3 team has new IPO for Canadian markets

The IPO was announced the day after the executives filed an appeal regarding the ban and accompanying fines.

Read more here.

Washington DC moves toward gray market cannabis crackdown

City leaders want to ramp up enforcement on so-called I-71 shops.

Read more here.

EU initiative begins bid to open access to psychedelic therapies

The initiative must collect 1 million signatures within a year to trigger the European Commission to take action.

Read more here.

In Other News

Cannabis Cured

One week after Maine regulators recalled a handful of cannabis products for failing mold and yeast tests, it remains unclear how the contaminated products made it to the market. The recall, announced last week, impacts one strain of cannabis flower and three strains of pre-rolls, all of which were produced by Cannabis Cured, a cultivator and retailer headquartered in Fairfield.

Read more here.

Flora Growth Corp.

Flora Growth Corp. entered into a strategic supply agreement with Blossom Genetics to bring Colombian medical cannabis to the German market.

Read more here.

Tilray

Tilray Medical, a division of Tilray Brands, announced on Wednesday that several Redecan EU-GMP certified medical cannabis products are now available for medical cannabis patients in Australia.

Read more here.



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