Despite being the proud owner of one of the world’s biggest weed markets, the legalization of recreational pot early this year still took officials in Los Angeles completely by surprise. Because of this, unlicensed, illegal weed dispensaries have been spreading at an alarming rate throughout the city and, in fact, now way outnumber their licensed counterparts.
According to one dispensary owner in the city, “We were being railroaded by kangaroo courts.” This was his description of the laborious licensing process for medical pot dispensaries back in 2009 already. “They were just denying them out of hand,” he continued anonymously. “Obviously their intent was just to close everyone down.”
Fast forward nine years and the state of pot deals in the city are both notably different and precisely the same. Even after recreational cannabis went legal in January this year, weed dispensaries are still complaining about an inhospitable regulatory environment, one they believe makes it near impossible for licensed shops to operate within the confines of the law.
Rise of the Illegal Weed Dispensary
Currently, only 169 pot shops have operating licenses and authorization to sell weed legally, according to the City of Los Angeles Department of Cannabis Regulation. However, according toa report by Curbed, there are approximately 1,700 illegal dispensaries servicing the city. Even WeedMaps shows dozens of stores in downtown L.A., despite the city’s own website only showing five.
To the surprise of no one, police crackdowns have become normal. Since the start of September, police charged 515 folks with marijuana-related crimes already, and those from raids on a whopping 105 illegally operating businesses. These people are now facing as much as six months in jail, along with fines totaling a thousand dollars each.
Even with all the raids, the illegal weed dispensary is thriving. One possible reason for this rampancy is that the city made it too difficult for anyone opening store after 2007 to qualify for a license. The impossibility is also a result of the city’s long history of mostly unsuccessful legislation, primarily that which tries to severely restrict the number of dispensaries that can operate legally in Los Angeles.
According to some advocates, this legacy is proving an unfair benefit for white people with money. As Lynne Lyman, former state director of the Drug Policy Alliance, told Curbed, “When I see the word ‘grandfathered,’ I think of poll taxes and literacy tests and I know white people are getting something special.” Policies are in place to favor previously targeted people of non-color in the industry.
Furthermore, a system of overlapping and confusing authorities, including 100 neighborhood councils, the mayor’s office, the City Council, the Department of Cannabis Regulation, the Los Angeles Police Department, and the City Attorney’s Office, the Department of City Planning, and the Department of Building and Safety, make it difficult for any dispensary to operate legally. All have agency to prevent a store from selling weed in the legal marketplace.
This patchwork jurisdictional conflict has its roots in the legalization of medical cannabis back in 1996. Then, California legalized medical use, but failed to allow its sale or purchase. The effect of this was to force legitimate patients to break the law. That inconsistency started a decades-long series of legal gray areas that persist in Los Angeles to this day.
California only updated its laws in 2003, when it made allowance for collectives to cultivate cannabis for large numbers of patients. This was the first time, the tipping point, that dispensaries felt welcome operating in the city. By 2006, only 98 dispensaries were operating dubiously. By the next year, there were hundreds, setting the playing field for the illegal weed dispensary to flourish.
To rein in the number of illegally operating L.A. marijuana dispensaries the city had nourished, council passed a 2007 law forcing dispensaries to register with the city. Almost 200 complied faithfully, but then the city, attempting to limit the number of dispensaries popping up, backtracked and quickly declared a moratorium on issuing any more licenses.
This was extremely counterproductive, as the period for registration lasted just a few short months before the moratorium came into effect. Hundreds of dispensaries did not receive news of the new requirements in time, and, in 2009, they sued the city of Los Angeles for its “unreasonable, discriminatory, and overly broad” ordinance.
A judge found in their favor, calling the city’s licensing process a “kangaroo-court railroading.” The judge issued an immediate injunction to prevent the city from enforcing its moratorium, giving illegal L.A. dispensaries some much-needed breathing space. As conflicting as L.A.’s weed laws are, and despite them, the city fast became famous for its weed culture.
The city attempted to institute a similar law back in 2010, one that would permit only dispensaries under the same management since 2007. Once again, and for similar reasons, a court threw it out. “We are singing ‘Happy Days Are Here Again,’” an attorney for the dispensaries boasted to the Los Angeles Times at the time of the injunction. Maybe he boasted too soon.
Not giving up, the city doubled down on its 2007 stipulation, proposing new laws that would lottery 100 dispensaries for licenses, but only those with proof that they had been operating since 2007. Newer dispensaries could not apply. Under threat of multiple lawsuits, one of which called the ordinance “a municipal game of ‘Russian Roulette,’” the city scuttled that one too.
Then, in yet another legislative oops in 2012, the city very briefly prohibited all L.A. marijuana dispensaries from operating at all, albeit it with a promise to pass a new ordinance soon that would allow the original pre-2007 dispensaries to remain open. Voters then passed a ballot measure a few months later that only permitted dispensaries meeting several criteria, one of which was the 2007 law.
Illegal L.A. Marijuana Dispensaries a Headache for Regulators
The illegal weed dispensary had so much gray area to thrive in that, in anticipation of recreational sales going live in January, the city once again passed a law prioritizing pre-2007 dispensaries, still promising that new dispensaries would eventually be able to open shop legally. To date, that process remains nothing more than just theoretical.
To Curbed, executive director of the Los Angeles Department of Cannabis Regulation, Cat Packer, said, “Launching the nation’s largest commercial regulatory program is an extremely complex undertaking. We are dealing with the challenges of balancing the buildup of city infrastructure while implementing policies that are still evolving. Most importantly, we are taking the time needed to get it right.”
However, even by its own rules, Los Angeles is not getting it right. Because of its “grandfathering” of pre-2007 dispensaries, the city is ignoring its own “equity” stipulations, which require those disproportionately harmed by prior prohibition, being black, Latino, and low-income folks, to receive two-thirds of all licenses granted.
This means that the city should award the next 338 licenses to “equity applicants.” However, no funding from the city has been set aside for this. The Los Angeles Times reported earlier this year that the Department of Cannabis Regulation was severely short-staffed. With only four official employees, it was “borrowing” staff from other agencies to perform essential tasks.
Those owning the illegal weed dispensary are not the only folks annoyed with the city’s haphazard regulation of the pot marketplace. Even those lucky enough to have licenses are moaning. In speaking to Marijuana Business Daily, executive director of the Southern California Coalition, Adam Spiker, said that licensed L.A. marijuana dispensaries were unable to compete with the illegal weed dispensary.
Unlicensed stores have no obligation to pay taxes. They have fewer expenses and cheaper prices than their licensed counterparts, which consumers naturally love. As Spiker explained, “If licensed dispensaries are bled dry now, you are just going to see a bunch of outside money come in and they are going to buy these businesses for 20 cents on the dollar.” Los Angeles has only itself to blame.
“We just cannot compete with these illegal dispensaries that are undercutting us,” complained Daniel Sosa, another legal dispensary owner. “If they make taxes lower and actually let us compete against the illegal dispensaries, then we would see a return of our long-time customers.” Slashing taxes is one effective way to end the illegal weed dispensary. Awarding more licenses would be another.