New York Enacts First-in-Nation Cannabis Anti-Inversion Law

ALBANY, N.Y. — Gov. Kathy Hochul signed legislation on June 2, 2026, that makes New York the first state with a specific law aimed at stopping illicit cannabis from entering the legal market. The Cannabis Supply Chain Integrity and Anti-Inversion Act gives regulators clearer authority and stronger penalties to address the issue.

Cannabis inversion happens when unregulated or out-of-state product is disguised as legal cannabis and moved into licensed supply chains. This can involve falsified records, untested product, or broken documentation that hides the real source. Much of this product has come from states such as Oregon, Washington and Oklahoma without going through New York’s required testing.

The law sets penalties of up to $10,000 per day for violations. Additional fines can apply based on the amount of illegal sales or inventory. Regulators can also seize and destroy products connected to inversion activity.

Several practical requirements support enforcement. Licensees must keep detailed records that show the full chain of custody for every product. During an investigation, the state can suspend a license for up to 30 days. Licenses may be revoked if regulators discover fraudulent certificates of analysis linked to inversion.

The bill gained support after New York’s traceability system faced significant delays. The state selected BioTrack as its tracking platform in 2022, but full implementation did not occur until early this year. That gap left openings for product to move without proper oversight in a market now valued at more than $1.5 billion.

Consumer advocacy group Empire State Green Standard Alliance helped bring attention to the problem. The organization released a white paper that outlined how inversion was affecting the regulated market and proposed a legislative response. Their work contributed to the final version of the bill.

A wide range of industry organizations backed the measure. These include the New York Cannabis Industry Association, the Cannabis Association of New York, the Association of New York Cannabis Processors, the Cannabis Farmers Alliance and the Black Cannabis Industry Association. Assemblymember Landon Dais sponsored the legislation in the Assembly.

Supporters say the law helps create a more level playing field. Licensed operators in New York follow strict testing and safety rules. Inversion allows some product to bypass those standards, which can affect both consumer safety and fair competition for businesses that invest in compliance.

The new rules also give regulators better tools to use track-and-trace data during investigations. This should make it easier to identify and address cases where product has been moved through deceptive means.

With the traceability system now active and these enforcement provisions in place, New York is strengthening oversight of its regulated cannabis market. The law takes effect immediately, and state agencies are expected to begin applying the new authority in ongoing compliance work.

The measure passed with broad support in both houses of the Legislature before reaching the governor. It represents one of the more direct efforts by any state to define and penalize this specific type of supply chain issue in the cannabis industry.