The measure passed in both chambers of the state Legislature and was signed by Gov. Andrew Cuomo.
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The original 1976 law penalized loitering for the purpose of prostitution. But opponents said it was vague, and its enforcement used as a method of harassment and profiling.
The repeal legislation noted that between 2012 and 2015, 85% of the arrests under the law were Black or Latina people.
"This outdated, discriminatory statute has led to hundreds of unnecessary arrests of transgender women of color and a broader culture of fear and intimidation for transgender and gender nonconforming New Yorkers," state Sen. Brad Hoylman said in a statement celebrating the repeal.
Cuomo, a Democrat, said, "Repealing the archaic 'walking while trans' ban is a critical step toward reforming our policing system and reducing the harassment and criminalization transgender people face simply for being themselves."
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The Associated Press contributed to this report.
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