California Poised to Crack Down Harder on Illicit Medical Cannabis Market

    On August 6, California Attorney General Xavier Becerra released a set of guidelines for the security and non-diversion of medical cannabis. It summarized state and federal laws, informed patients and caregivers of their rights, and advised law enforcement agencies that are prosecuting unlicensed businesses.

    The release focused on cannabis cooperatives and collectives—essentially nonprofit entities that must produce and sell cannabis only to their members. “[According to state law],” it reads, “medicinal cannabis cooperatives and collectives are required to obtain state licenses to operate as of January 10, 2019 … Unlicensed cannabis cooperatives and collectives are subject to enforcement action, in addition to criminal sanctions for failure to comply with legal requirements.”

    Some cannabis advocates are concerned that this heralds a more punitive approach. “This press release is somewhat ominous because it foreshadows an oncoming crackdown on the traditional [or illicit] cannabis market,” Adam Vine of Cage Free Cannabis told Filter. “It’s also troubling that it essentially asks police officers to act as public health officials in determining who is a valid medical cannabis patient.”

    The continuing strength of California’s illicit cannabis market is a cause of vexation for licensed businesses, lawmakers and police. This month Marijuana Business Daily reported a statistic from BDS Analytics that nearly 74 percent of cannabis purchased in California comes from the illicit market.

    High taxes, onerous regulations and other barriers have prevented or dissuaded many illicit businesses from getting licensed.

    Its persistence can be attributed to many factors, including marijuana’s continuing illegal status at the federal level. Cannabis grown in California can be sold all over the country, including in many states where it is still illegal, for higher prices, disincentivizing local supply. And the transition to a legal market in California has proceeded very slowly—with high taxes, onerous regulations and other barriers preventing or dissuading many illicit businesses from getting licensed. About two-thirds of the state’s cities and counties still ban cannabis sales.

    Acknowledging these struggles in building California’s legal market, Vine noted that “criminal enforcement of the traditional [illicit] market continues to inflict harm on the same communities who have been disproportionately impact by the War on Drugs.”

    “The main issue for medical cannabis patients,” he added, “is a lack of affordable legal cannabis. That’s what drives so much of the continuing traditional market.”

    Prior to January 2019, certain medical cannabis dispensaries were legally allowed to operate without licenses, as collectives or cooperatives. But the attorney general’s recent release refers to new legal guidelines for cooperatives and collectives developed by state cannabis regulators, stating that businesses that violate them are subject to arrest and seizure.

    Money is part of the state’s motivation: California massively overestimated how much cannabis tax revenue it would collect.

    Law enforcement and other state and local agencies have been conducting seizures and raids everywhere from Mendocino County to Los Angeles to Santa Barbara. Since the implementation of its adult-use legal cannabis market in January 2018, Californian authorities have seized $30 million worth of illicit cannabis.

    Governor Gavin Newsom is troubled enough that earlier this year he asked the Trump administration to help pay for more National Guard troops to destroy illicit cannabis farms. Money is part of the state’s motivation for these efforts: California massively overestimated how much cannabis tax revenue it would collect, expecting nearly $400 million more than was actually raised in 2018.


    Mixed Feelings in the Social Equity Movement

    Attitudes to the illicit market can be complicated. While many activists oppose enforcement and criminalization, disadvantaged entrepreneurs fighting to become legally licensed through state and local social equity programs have been angered by their counterparts who profit without going through legal channels. 

    Social equity programs are intended to create opportunity in legal cannabis for people and communities that suffered the most under prohibition. They administer benefits including financial, technical and business development assistance, prioritizing licensing. (Filter has reported on social equity programs in Portland, Oregon and Massachusetts, as well as controversies surrounding the planned program in Los Angeles.) 

    “If Social Equity Program applicants are lucky enough to find suitable locations to open for business, now they will be competing with unlicensed shops.”

    In June, the California Minority Alliance (CMA) sent a letter to Los Angeles City Attorney Mike Feuer urging the city to enforce more strictly against illicit businesses. “The unlicensed shops are consuming all of the retail real-estate, leaving no viable location space for [social equity] applicants,” it read. “If those Social Equity Program (SEP) Phase 3 applicants are lucky enough to find suitable locations to open for business, now they will be competing with unlicensed shops, which do not pay [any taxes or licensing fees].”

    Feuer’s office had filed a civil lawsuit against one such business in April. Feuer claims that his office filed 217 criminal cases in the past year against unlicensed businesses, closing at least 113 shops.

    Social equity applicants in Los Angeles have waited well over a year to be licensed and receive the support the city promised them. The city argues that its enforcement actions are supporting social equity: “Before we can create the stability in the legal market needed for social equity to work, we need to eliminate the illegal market,” said a spokesman for the LA mayor.

    Criminal enforcement may further harm vulnerable people.

    Yet many in the social equity movement don’t believe that criminal enforcement is the solution. In April, a coalition of cannabis and community activist leaders released a report on cannabis social equity in Los Angeles. Touching on illicit cannabis in the city, they urged against punitive measures as a first resort.

    “[We recommend] continued pathways for employment opportunities for those seeking a pathway out of the unregulated market,” the authors wrote, “such as through apprenticeship, workforce development programs and job placement programs. [The city can] integrate public education to help communities determine regulated shops and distinguish regulated products.”

    The report pointed out that criminal enforcement may further harm vulnerable people. “The last decade of shutting non-regulated shops down in what police and policymakers have often called ‘an expensive game of whack-a-mole’ also gives further pause,” it said.

    It included the story of one 18-year-old Latinx worker, Melinna, who worked at an unlicensed shop without even knowing its legal status. But since a licensed shop recruited her, she has become a passionate cannabis advocate and is pursuing a bachelor’s degree in plant medicine.

    Image via WikiMedia Commons.

    • Alexander is Filter’s staff writer. He writes about the movement to end the War on Drugs. He grew up in New Jersey and swears it’s actually alright. He’s also a musician hoping to change the world through the power of ledger lines and legislation. Alexander was previously Filter‘s editorial fellow.

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