New York’s recreational marijuana market rollout has been beset by lawsuits from seemingly every direction, and the latest legal action has been months in the making. The high-profile Empire Cannabis Club, which has operated without state or city marijuana business permits since 2021, is taking officials to court over a crackdown that began in the spring, alleging that the basis for the new law enforcement push is unconstitutional.
If successful, the lawsuit could upend the progress that officials have made against the unlicensed market, which includes more than 1,300 stores shuttered.
Empire’s five locations in New York City were raided on Aug. 29, with law enforcement officials entering each shop within the same 30-minute timeframe, owner Jonathan Elfand told Green Market Report. The New York Sheriff’s Department ordered all five stores closed as part of New York City’s Operation Padlock.
The Empire stores have remained closed since the raids, but the chain is still doing business via delivery for its roughly 196,000 members, Elfand said Monday. Elfand and Empire have never shied away from the fact that the five clubs have been providing members with high-quality marijuana goods, but the legal argument they’re relying on is that the business model is fully compliant under the 2021 state law that legalized recreational cannabis, the Marihuana Regulation and Taxation Act (MRTA).
“I’m not unlawful or illegal,” Elfand said. “Maybe unlicensed … but I do it legally.”
And, he said, he’s gone to great lengths to ensure that legality, including investing millions of dollars into his operations.
“As long as you’re not profiting, you don’t need a license,” Elfand said. Empire has always operated as a not-for-profit organized under New York state law. “So at my club, all I do is I facilitate members to be able to acquire (cannabis goods).”
Details of how the club works are outlined on Empire’s website, but the basic business model revolves around a simple membership fee of $24.99 per month. With that monthly payment, Empire members can acquire cannabis from any of the clubs with zero markup.
That, Elfand said, is the key to Empire’s legality.
Apart from Empire’s status as a not-for-profit, the lawsuit argues that the raids on hundreds of unlicensed cannabis retailers were illegal because they were conducted under the guise of “regulatory inspections,” which meant that the New York Sheriff’s office and other law enforcement officials didn’t have to obtain official warrants to back up their searches and product seizures.
That, the suit maintains, is a violation of due process rights for every single store that was raided, not just Empire Cannabis Club.
“The regulatory schemes initiated and used by the Defendants violate the New York State Constitution’s prescription against unreasonable searches and seizures,” the suit states. “They attempt to say they are regulating businesses without licenses … In fact, they are attempting to regulate businesses that they know, or at least assume, are running unlawfully.”
‘Restarted the war on cannabis’
Under the MRTA, Empire’s lawsuit notes, the “safe harbor provisions” within the law allow for “the non-compensatory transfer of up to three ounces of marijuana and … the use of ‘property’ to facilitate such transactions.”
“Progressives in New York City added this safe harbor to the MRTA to prevent billion-dollar corporations and Russian oligarchs from dominating the industry,” the suit notes. “Pursuant to the newly enacted law, the definition of a sale of cannabis is limited to a transfer for ‘compensation.’”
The suit, filed Sept. 11 in the New York Supreme Court in New York County, lists Gov. Kathy Hochul, New York City Mayor Eric Adams, New York Sheriff Anthony Miranda, and the New York City Department of Finance as defendants. None of the defendants or their spokespeople responded to requests for comment as of Monday.
But the crackdown led by Hochul and Adams, the suit alleges, has “restarted the war on cannabis” with an official stamp of government approval.
The suit seeks a temporary restraining order to halt the ongoing New York City Operation Padlock, as well as a preliminary and permanent injunction overturning the crackdown. It also requests restitution for those who had cannabis goods seized and possibly destroyed.
Elfand said that the lawsuit was only filed after his shops were targeted directly, in part because Empire has paid lobbyists on retainer who have been negotiating with state officials on the organization’s behalf for more than a year.
In late August, Elfand said, he was told by his lobbyists that there was a renewed offer he’d already rejected a year ago: If he closed down all but three of his clubs, he’d be allowed the state maximum of three retail locations per company.
“About two days before they did the big raid, I got from my lobbyists, with this supposed thing, ‘The best you’re going to get is three, and if you want to do three, we can probably do a deal closed right now, to get you three like a regular license, and the rest you have to close,’” Elfand said. “I got pissed off, and I said, no, screw them.”
“Two days later I got raided,” Elfand said. “They came like 100 officers deep, they sent like 12-15 officers at each of my locations.”
The lawsuit notes that the recent raids are far from the first attempt by officials to shutter Empire Cannabis Club. New York City District Attorney Alvin Bragg in 2022 sent a cease-and-desist letter to Elfand. After his attorney explained the legal reasoning for Empire’s model under the MRTA, authorities backed off.
“The state felt it was fine to wait several years to react to ECC claims of legality,” the suit asserts. “Unless the state can establish probable cause to believe plaintiffs are receiving compensation on any of these exchanges/transfers, then it cannot be defined as a sale under New York State law.”
Since its founding, Empire has paid “millions” in taxes to the state and city, the suit asserts, and had a payroll of $3.2 million last year for roughly 75 employees. Gross sales at Empire reached $2.5 million in the second quarter of 2024, according to court records.
Inside the raid
The suit also includes testimony from one of Empire’s employees, a manager who was working at the company’s Greenpoint location in Brooklyn on Aug. 29, who described a female sheriff’s deputy who “screamed at me to open the doors – never announcing themselves or presenting a warrant,” before other sheriff’s deputies reportedly lied and said they had a warrant.
“A warrant was not obtained until well after the illegal search began around 1 a.m. the next day, August 30,” the suit claims.
The manager was then interrogated by another deputy who wanted codes to open the Empire Cannabis Club safe and who became “enraged” when told the manager remembered him from previous times that he tried to infiltrate Empire by posing as a potential member of the club.
“(The deputy) did not like my response, or my memory, and was visibly enraged. At this point, he told me that he would make sure I ‘would not make it home that night’ and asked me if I ‘had any family to think about,’” the manager said, according to the suit.
The manager also asserted that several law enforcement officials during the raid “stated how they wanted to try some of the products. An employee standing outside later advised me they saw some officers place items into their pockets.”
The manager was detained from roughly 6:20 p.m. on Aug. 29 until after 4 a.m. the next morning, and said that despite her suffering from several medical conditions, including endometriosis and ovarian cysts, she was only allowed to use the restroom twice during that time period. The manager called her treatment by law enforcement during the raid “absolutely despicable” and a “horrendous experience.”
End of negotiations?
Since negotiations with state officials have broken down, Elfand said he’s more than happy to take the state and the city to court, because he’ll be able to have Empire grandfathered into the legal cannabis market under another portion of state law.
“I went to them kindly … my statement to them was, you either take my offer, or I win anyway,” Elfand said. “The Constitution of New York says you can’t do the raids you’re doing. The Constitution of New York says you have to go get a warrant to come in.”
Elfand added: “I’ve already got eight more locations ready to go. I’ll have 14 locations open in New York City before they change the law.”
It’s not yet clear how fast the case will move through the courts, but Elfand said the New York City district attorney’s office has already been notified, and he expects news on his restraining order request this week or next.
The bottom line, Elfand said, is that all of the raids will now be under the court’s microscope, and if he wins, the city and state could be forced to compensate all of those targeted by the raids.
“All unconstitutional. Everything you did, shutting these smoke shops, from day one, was illegal,” Elfand said.
“All this big burning of stuff, now they’ve got to pay for it,” referring to the incineration of four tons of illicit cannabis under the watch of Mayor Adams.
Depending on how the court rules, that could cost the city and the state a pretty penny.
Empire’s owner said the company’s not-for-profit model allows it to operate without a license under the MRTA. Read More