Hemp Shops Caught In The Crossfire, New York City Vendors Claim Unfair Shutdowns

New York City’s hemp shops are under fire as state regulators intensify efforts to combat illegal cannabis sales. Licensed hemp retailers report being unfairly targeted by Operation Padlock, a statewide initiative focused on shutting down unlicensed cannabis stores.

“They're shutting down unlicensed marijuana stores, but my hemp clients are collateral damage,” said Joshua Bauchner, a NYC-based attorney representing 12 hemp merchants affected by the crackdown, reported MJBiz.

Many licensed hemp retailers argue they operate legally under federal laws but find themselves caught in the crosshairs of state regulators combating illicit cannabis.

Operation Padlock Vs. The Big Apple’s Hemp Merchants

In early 2024, Governor Kathy Hochul and NYC Mayor Eric Adams launched Operation Padlock to address the widespread issue of illegal cannabis sales. The operation has led to the closure of over 1,000 stores and the seizure of millions of dollars’ worth of cannabinoid products.

However, the crackdown has also impacted licensed New York City hemp merchants who legally sell products under the loophole created by 2018 federal Farm Bill. In some cases, enforcement actions have wrongfully detained hemp shop employees. Arrests of workers during raids have became normal. Just recently a female employee at a New York City hemp store was arrested and held overnight for possessing mushrooms that were later confirmed not to contain psilocybin, according to Times Union.

Read Also: Despite 90% Application Failure, New York’s Weed Sales Reach $530M —Governor Hochul Reacts

Legal Battles

The Office of Cannabis Management (OCM) noted that nearly 40% of the state's legal cannabis sales occurred after the crackdown began, and that legal cannabis retailers have reported a 72% increase in sales over the past months. Nevertheless, these aggressive tactics have not gone unchallenged by those negatively impacted. Unlicensed NYC cannabis sellers are filing lawsuits against the city, arguing that the crackdown violates their constitutional rights.

In a recent case, a New York judge ruled in favor of a closed cannabis shop, raising questions about the legality of the raids and the broader enforcement strategy.

The outcome of the dispute is huge, given that New York’s legal cannabis market recently recorded over $530 million in sales since December 2022, with $370 million reported in 2024. Despite these figures, regulatory delays and ongoing legal challenges are stifling the market's potential. The OCM remains understaffed, with only 180 employees and is facing over 20 active lawsuits, further slowing down the licensing process.

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Hemp vs. Cannabis: The NYC Chapter

The conflict between New York City hemp merchants and the state’s regulated cannabis industry is part of a larger national debate. The 2018 federal Farm Bill legalized hemp-derived products containing less than 0.3% THC, but the rise of products like Delta-8 THC has blurred the lines between hemp and cannabis, complicating state-level regulations and forcing states to provide specific laws to regulate or ban hemp derivatives.

In 2021, New York banned Delta 8. But the city allows the production and sale of CBD products derived from hemp, including oils, tinctures, edibles, and topicals, and the hemp flower, that must contain no more than 0.3% THC. Producers and distributors of this products are actually law abiding.

But politics might be getting in the way of fairness, "The governor and the mayor, because it polls well … they don't give a damn," said Bauchner.

• Read Next: NY Judge Rules In Favor Of Shuttered Illicit Cannabis Shop On Procedural Grounds, Calling Into Question Mayor Adams’ Enforcement Policy

Photo: Courtesy of Colton Duke on Unsplash