Los Angeles Cannabis Businesses Urge Officials to Crack Down on Illicit Market

There is an ongoing battle in Los Angeles over the proliferation of illegal cannabis dispensaries, which many in the legal business community say is cutting sharply into their profits. Since illegal dispensaries don’t have to live up to the same guidelines and tax rates as regulated cannabis shops, they are able to provide marijuana to the consumer for a more affordable price. With the state’s marijuana revenue numbers clocking in much lower than had been anticipated, concerns are running high over the issue.

On Monday, cannabis entrepreneur group Southern California Coalition sent a letter to the city asking officials to get nastier with the illegal dispensaries. The communique counseled LA agencies to ramp up its raids on illegal dispensaries, and suggested that fining employees to discourage them from returning to their jobs could help to do the trick.

The letter also posited that if authorities seized cash and cannabis products on site at the businesses in question, it could prevent them from re-opening quickly. Other measures suggested included employing tax liens, and enlisting building inspectors to accompany officials on raids in order to close down any structurally unsound illegal dispensaries.

Should the city fail to take further action on the matter, the coalition says results could be disastrous for legal operators, who “cannot compete with illicit operators,” according to the letter.

One reason that the legal businesses are hurting in competition with the unlicensed shops are the taxes that the state government levies on cannabis. Policy makers have begun to respond to the industry’s concerns that such levies are too high. In January, a bill was introduced in the state assembly that would lower the excise tax from 11 to 15 percent.

One technique that the city has tried to combat illegal dispensaries has involved focusing on the fact that they are not beholden to the same strict testing processes as the rest of the industry. In April, a city attorney announced plans to sue the dispensary Kush Club 20. The lawsuit suggests that the business was selling cannabis good that had been found to be contaminated by paclobutrazol, a chemical used in the growing process to combat pests and regulate growth. The substance is not allowed for use with cannabis by California law.

The suit is demanding $20,000 a day from the business for every day that it operated without a license. Given the fact Kush Club 20 had been doing so for over a year at the time of the lawsuit’s announcement, that amounts to a considerable sum of money — certainly enough to give pause to other illegal dispensaries in the area. A TV news investigation found earlier this year that some 30 percent of unlicensed Los Angeles cannabis businesses were selling contaminated product.  

Concern over the operation of unlicensed dispensaries is understandable, but it is certainly worth noting that were it not for the efforts of “illegal” cannabis stores in California, we might be in a much different place when it comes to the worldwide marijuana legalization movement. Some regulation guidelines have even had the effect of shutting down the same kind of compassionate care organizations that pioneered easy and safe cannabis access for deserving patients.