New York's Anti-Inversion Act is now law ✅

NY
New York’s Anti-Inversion Act is now law ✅

Governor Kathy Hochul signed the Cannabis Supply Chain Integrity and Anti-Inversion Act yesterday, making New York the first state to formally codify and penalize "cannabis inversion." 

The Senate passed it 60-1.

What happened: The law defines cannabis inversion as any act involving illicit cannabis, including product sourced from unlicensed operators, imported out-of-state cannabis, or anything with a falsified or broken chain of custody. 

It targets a specific and rampant form of cheating: bad actors using legitimate licenses as a cover to move illicit-market products, often backed by fraudulent lab testing certificates.

Why it matters: This is the enforcement teeth the Office of Cannabis Management has been missing. 

Penalties are steep: up to $10,000 per day, plus up to five times the revenue from any prohibited sale. Labs that issue fraudulent certificates of analysis face presumptive license revocation. 

Operators who can't document a complete chain of custody carry the burden of proof. There's also a new whistleblower protection clause. The law takes effect in 180 days.

What's next: The OCM has to build out the investigative infrastructure to use it. 

New York's illicit market remains enormous. Licensees have been asking for this kind of statutory authority for years. Now it exists. Whether that changes the economics on the ground is a different question.

What they're saying: "Closing loopholes that allow bad actors to undermine the legal market is essential to protecting licensed operators and creating confidence in the system," said Empire Cannabis Manufacturers Alliance President Mack Hueber.

Go deeper: The bill's Assembly sponsor is Landon Dais, who we interviewed last month about his work on the anti-inversion bill and securing $10 million in the state budget to offset costs associated with Metrc’s track-and-trace. We reported extensively on the supply chain issues this caused for operators. 

The two efforts are linked: inversion and diversion are exactly what Metrc is supposed to catch, and now there's statutory backup when it does.

Also moving in Albany: A separate bill that would create a Cannabis Industry Wage Board empowered to set minimum wages, benefits, and scheduling rules statewide, with a floor tied to the highest rates in any existing union contract. But not everyone is on board.

"Those of us in the industry certainly support ensuring our workers earn a livable wage, but this legislation ignores the economic reality facing New York's legal cannabis businesses," said Cannabis Retail Alliance of New York President and Terp Bros NYC co-founder Jeremy Rivera. 

"If lawmakers want to protect workers, they also need to ensure there are businesses left to employ them."

The legislative session ends today. 

-JB

“There’s lots of sellers,” Darin Dalborn, a property appraiser who works with cannabis firms, told the Oklahoma Watch about the downfall of the state’s Wild West medical cannabis industry. “A lot of sellers out there, very few buyers.”

Gov. Kevin Stitt has called to shutter the industry entirely, as the hands-off, regulatory free-for-all policy appears to have failed to build a sustainable industry. 

The full story is worth your time.

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