State-level cannabis regulation continues to evolve in 2025–2026, with material developments in California and New York affecting licensed operators, distributors, and retailers.

On February 11th, California lawmakers introduced Assembly Bill 1826 (AB 1826), which addresses recall, embargo, and product destruction procedures. And, in New York, Governor Kathy Hochul signed two bills, Assembly Bill 10140 (A10140) and Senate Bill 9155 (S9155), to protect more than 150 licensed dispensaries from potential closure due to a zoning technicality. The following day, February 12th, separately in New York, state assembly lawmakers filed bill A10191, proposing a new retail permit category for low-potency cannabis beverages.

Here’s what operators need to know.

Key Takeaways

  • California AB 1826 proposes process-level changes to recalls, embargoes, and the destruction of cannabis products, requiring notifications to operators include certain documentation supporting the finding of adulteration or misbranding, or the probable cause to issue an embargo.
  • New York’s zoning fix protects 150+ licensed dispensaries from potential closure by codifying the "door-to-door" policy that required licensee sites to be 500 feet or more from a school, or 200 feet from a place of worship.
  • NY A10191 would allow certain liquor and wine stores to sell low-potency (≤5 mg THC) cannabis beverages manufactured by licensed adult-use operators.
  • Together, these developments impact compliance risk, inventory continuity, beverage distribution strategy, and retail channel dynamics.

California: AB 1826 and Recall Process Refinement

California’s AB 1826 (2025–2026 session) focuses on the Department of Cannabis Control’s authority and process for product recalls, embargo procedures, and the destruction of cannabis goods.

In more mature markets like California, refinements to enforcement processes are part of ongoing regulatory evolution and a testament to the fact that cannabis legalization enables iterative rulemaking.

What AB 1826 Addresses

The bill proposes procedural and operational adjustments tied to enforcement actions, including how recalls are initiated, documented, and resolved.

When the Department of Cannabis Control (DCC) notifies a licensee that a product is adulterated, misbranded, or subject to embargo, it would include supporting documentation and evidence for that finding.

Before a voluntary recall proceeds, and within 5 business days of notification,  DCC would need to offer the licensee a meet-and-confer, rather than the current informal proceedings, to discuss why the product is considered adulterated or misbranded.

AB 1826 also requires the department to “work diligently” toward a final decision on embargoed products and to remove embargo tags within 24 hours if the product is found compliant.

Lastly, the bill requires the DCC to initiate condemnation proceedings within 10 days of rejecting a corrective action plan or, if no plan is submitted, within 10 days of an embargo. For perishable agricultural products, hearings must be scheduled within five business days, and administrative law judges must issue a decision within 48 hours of the hearing’s conclusion, helping protect time-sensitive inventory such as flower from spoilage caused by administrative delay.

Why it Matters

Recall and embargo mechanics directly influence inventory availability, fulfillment continuity, documentation requirements, cost exposure during compliance events, and brand reputation and risk management.

For operators, including retailers, manufacturers, and distributors, clarity around recall procedures can reduce operational uncertainty and improve response planning.

What to Monitor Next

  • Committee hearings and amendments
  • Clarification of destruction vs. remediation standards
  • Implementation timeline if passed
  • Updated DCC guidance or rulemaking

Operators should review internal recall protocols now to ensure readiness should procedural standards change.

New York: Zoning Reform Protects 150+ Dispensaries

New York enacted legislation correcting a zoning technicality that had placed more than 150 state-licensed dispensaries, or nearly a third of all cannabis retailers in the state, at risk of closure.

A legal interpretation of the zoning regulatory language created uncertainty for licensed dispensaries operating in good faith.

Without legislative correction, those businesses faced shuttering despite state approval. 

Ultimately, the amendment codified the "door-to-door" zoning policy that had been in place at the Office of Cannabis Management (OCM) prior to July 28, 2025, and grandfathered in licenses already granted and certain applications previously submitted.

This is a positive stabilization step that protects operational continuity, preserves consumer access to safe and regulated cannabis products, and supports equity licensees and early-stage operators.

What to Monitor Next

Retail operators should monitor local enforcement updates and confirm municipal alignment with the updated state clarification.

New York: A10191 and Low-Potency Beverage Retail Permits

Assembly Bill A10191, sponsored by John Zaccaro Jr., D-NY,  proposes creating a new permit allowing licensed off-premises liquor and wine stores to sell single-use low-potency cannabis beverages containing no more than 5 mg of THC.

The bill authorizes liquor and wine stores to sell these cannabis beverages for off-premises consumption under a new permit structure. It does not allow the sale of other cannabis products.

Interestingly, a low-potency cannabis beverage is defined as a single-use container containing no more than 5 mg of total THC. Multi-serving or higher-potency products would not qualify under this framework. This could be a product definition that the industry sees as having ripple effects beyond the state.

This cannabis beverages category would need to be stored in a separate, clearly marked area distinct from alcoholic beverages. Retailers would be required to maintain inventory records using a software system determined by the Office of Cannabis Management, with enforcement coordinated between the State Liquor Authority and OCM.

The bill creates separate taxation for this product category, including a 9% distributor-level tax and a 13% retail-level tax. Revenue would be allocated across administrative costs, social equity funding, illicit market enforcement, local municipalities, and the state cannabis revenue fund.

Why A10191 Matters

If advanced, this proposed bill could expand beverage distribution channels, introduce new and complex retail competition dynamics, and affect beverage manufacturers' go-to-market strategies, all while creating a hybrid alcohol-cannabis retail environment.

While not yet enacted, the bill signals a willingness to continue experimenting with retail channel expansion in New York.

What to Monitor Next

  • Committee movement and vote scheduling
  • Amendments clarifying “low potency” definitions
  • Tax allocation and revenue treatment changes
  • Stakeholder feedback from dispensaries and liquor retailers

Beverage manufacturers should evaluate channel strategy scenarios if the bill gains traction.

Broader Industry Implications

These policy developments reinforce a structural truth that regulated cannabis enforcement infrastructure is an iterative process, even in mature markets, and emerging markets often play catch-up to stabilize rollout friction and are open to testing new supply chain channels.

For cannabis operators, politics is business, shaping everything from inventory planning and fulfillment timelines to compliance workflows, retail channel strategy, and risk management.

It’s imperative that, as founders and executives in our nascent industry, we understand what every mainstream industry does: that legislative engagement isn’t for passive observation, but a core fiduciary duty.