New York cannabis industry faces new regulation and tax reform

New York's legal cannabis industry is facing significant regulatory and fiscal shifts. The state legislature has passed a bill aimed at preventing “cannabis inversion,” which refers to the entry of illicit cannabis into the licensed supply chain. The proposed law would penalize licensed operators, permit holders, and testing laboratories for using fraudulent certificates of analysis or falsifying inventory and chain-of-custody records. Violations could result in civil penalties of up to $10,000 per day, along with additional fines based on the revenue from prohibited sales.

Curaleaf Holdings, Inc. has publicly urged Governor Kathy Hochul to sign the legislation. Meanwhile, state lawmakers and regulators are evaluating potential reforms to the cannabis tax structure. Currently, New York imposes a 9% tax on wholesale transfers between distributors and retailers, plus a 13% retail tax (comprising 9% for the state and 4% for local governments). As the market matures, officials are weighing whether these taxes allow licensed dispensaries to remain competitive against the illicit market while keeping products affordable for consumers.