NYC weed war heats up as state marijuana sales rules loom

A pair of unlicensed Manhattan marijuana outlets targeted by the state are bracing for a weed war as New York prepares to tightly regulate the potentially lucrative pot selling business.

The Empire Cannabis Clubs were ordered in a letter from the state Office of Cannabis Management to cease their dealings with its members, although an attorney representing the businesses insists they were operating fully under the law.

“Do I expect to go to war?” asked lawyer Steve Zissou. “Yeah, I do. And we’re ready for a fight.”

The letter sent to Empire Cannabis was also sent to 65 other weed purveyors across the state — including at least 14 New York City operations. It cited “so-called gifting where consumers purchase … a membership in a club and are then provided cannabis as part of the sale.”

But that number seems to be a drop in the bucket of the universe of openly operating weed-selling operations that have sprouted across the city and are run out of storefronts and trucks.

Marijuana is being sold in a gray market that offers weed to people who make “donations” to sellers, or buy memberships in businesses like the Empire Cannabis Club.

Another operation, Paint Puff ‘N’ Peace received letters at four stores in Manhattan, the Bronx and Queens. Employees at a fifth shop on Frederick Douglass Blvd. near W. 115th gave a Daily News reporter the boot when he asked about the notes.

“We don’t know anything about that, we have no comment,” said one store employee.

The state legalized marijuana in March 2021. Under the statute, sales remain illegal until the state establishes regulations.

Longtime pot lawyer Stanley Cohen says the letters sent to cannabis sellers mean the gray market businesses or those operating without an official state license may resist in court — but he sees their days as numbered. Failure to adhere to the state’s demands could trigger huge fines.

“It’s really the beginning of the end,” Cohen said. “I don’t know what the defense is. There’s been very public and strict notice. I assume they will lose in state court, in appellate court and they don’t have standing to go into federal court because it’s a state issue.”

On Aug. 25, the state opened the portal to allow people to apply for licenses to open retail pot outlets, a process that is supposed to be weighted toward applicants with a prior marijuana conviction or those otherwise harmed by the war on drugs.

Zissou disputes the idea that the Empire clubs, which provide less than three ounces per transaction to customers who buy a membership rather than the weed itself, is somehow in violation of state legalization created with the Marijuana Regulation and Taxation Act (MRTA).

Cannabis Clubs members can purchase a $35 monthly membership or a $15 daily pass, and the club’s locations in Chelsea and the Lower East Side provide the small amount of weed legally allowed under the law, said Zissou.

Paying for pot via the membership fees means there is no compensation for the “transfer of cannabis,” Zissou said.

“We are running the classiest operation in Manhattan,” said Zissou. “This should be a model for others. Under the new law, the legislature carved out a place for this safe haven of not-for-profit clubs like Empire.”

State officials disagreed in the letter earlier this year ordering the Cannabis Clubs “to cease any and all illegal activity immediately,” tagging on the threat that the clubs forfeit a shot at a legitimate cannabis license if they don’t comply.

Other businesses are more blatantly “gifting” — calling the pot a gift and the cash paid as “donation.”

Still other spots that may be operating legally also received letters. One of those is Brooklyn Smokes, which has had an outlet in Mill Basin for 10 years and another in Bay Ridge for about a year.

Co-owner Cameron Kakuk said the shops sell only federally approved CBD products, which are legal. He and his partners have been trying through lawyers to get the letter removed.

“We don’t do any of this illegal gray area nonsense,” he said. “It’s very clear. We’re not hiding anything. The letter didn’t scare us because we haven’t done anything wrong and we have the proof.”

An email to the state office for comment on the flap was not returned. But Zissou said the two Manhattan outlets would continue to stay open and were planning to apply for a retail license as well.