New Yorkâs 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.
Empireâs 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 Sheriffâs Department ordered all five stores closed as part of New York Cityâs 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 theyâre 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).
âIâm not unlawful or illegal,â Elfand said. âMaybe unlicensed ⊠but I do it legally.â
And, he said, heâs gone to great lengths to ensure that legality, including investing millions of dollars into his operations.
âAs long as youâre not profiting, you donât need a license,â Elfand said. Empire has always operated as a not-for-profit organized under New York state law. âSo at my club, all I do is I facilitate members to be able to acquire (cannabis goods).â
Details of how the club works are outlined on Empireâs 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 Empireâs legality.
Apart from Empireâs 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 âregulatory inspections,â which meant that the New York Sheriffâs office and other law enforcement officials didnât 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.
âThe regulatory schemes initiated and used by the Defendants violate the New York State Constitutionâs prescription against unreasonable searches and seizures,â the suit states. âThey 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.â
âRestarted the war on cannabisâ
Under the MRTA, Empireâs lawsuit notes, the âsafe harbor provisionsâ within the law allow for âthe non-compensatory transfer of up to three ounces of marijuana and ⊠the use of âpropertyâ to facilitate such transactions.â
âProgressives in New York City added this safe harbor to the MRTA to prevent billion-dollar corporations and Russian oligarchs from dominating the industry,â the suit notes. âPursuant to the newly enacted law, the definition of a sale of cannabis is limited to a transfer for âcompensation.’â
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 ârestarted the war on cannabisâ 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 organizationâs behalf for more than a year.
In late August, Elfand said, he was told by his lobbyists that there was a renewed offer heâd already rejected a year ago: If he closed down all but three of his clubs, heâd be allowed the state maximum of three retail locations per company.
âAbout two days before they did the big raid, I got from my lobbyists, with this supposed thing, âThe best youâre 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,’â Elfand said. âI got pissed off, and I said, no, screw them.â
âTwo days later I got raided,â Elfand said. âThey came like 100 officers deep, they sent like 12-15 officers at each of my locations.â
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 Empireâs model under the MRTA, authorities backed off.
âThe state felt it was fine to wait several years to react to ECC claims of legality,â the suit asserts. âUnless 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.â
Since its founding, Empire has paid âmillionsâ 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 Empireâs employees, a manager who was working at the companyâs Greenpoint location in Brooklyn on Aug. 29, who described a female sheriffâs deputy who âscreamed at me to open the doors â never announcing themselves or presenting a warrant,â before other sheriffâs deputies reportedly lied and said they had a warrant.
âA warrant was not obtained until well after the illegal search began around 1 a.m. the next day, August 30,â the suit claims.
The manager was then interrogated by another deputy who wanted codes to open the Empire Cannabis Club safe and who became âenragedâ when told the manager remembered him from previous times that he tried to infiltrate Empire by posing as a potential member of the club.
â(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 âwould not make it home that nightâ and asked me if I âhad any family to think about,’â the manager said, according to the suit.
The manager also asserted that several law enforcement officials during the raid âstated 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.â
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 âabsolutely despicableâ and a âhorrendous experience.â
End of negotiations?
Since negotiations with state officials have broken down, Elfand said heâs more than happy to take the state and the city to court, because heâll be able to have Empire grandfathered into the legal cannabis market under another portion of state law.
âI went to them kindly ⊠my statement to them was, you either take my offer, or I win anyway,â Elfand said. âThe Constitution of New York says you canât do the raids youâre doing. The Constitution of New York says you have to go get a warrant to come in.â
Elfand added: âIâve already got eight more locations ready to go. Iâll have 14 locations open in New York City before they change the law.â
Itâs not yet clear how fast the case will move through the courts, but Elfand said the New York City district attorneyâs 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 courtâs microscope, and if he wins, the city and state could be forced to compensate all of those targeted by the raids.
âAll unconstitutional. Everything you did, shutting these smoke shops, from day one, was illegal,â Elfand said.
âAll this big burning of stuff, now theyâve got to pay for it,â 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 Â