The battle against the lucrative business of illegal marijuana dispensaries in California

Josh Haskell Image
Wednesday, October 9, 2019
The battle against the big business of black market marijuana in CA
Though recreational marijuana has been legal in California for over a year and yet, local authorities continue to crack down on black market cannabis dispensaries, including in Los Angeles County.

Though recreational marijuana has been legal in California for over a year, local authorities continue to crack down on black market cannabis dispensaries, including in Los Angeles County.

Complaints from residents in unincorporated East Los Angeles about illegal cannabis dispensaries led to a massive response from the L.A. County Sheriff's Department Narcotics Unit. Authorities served warrants at two locations that had already been shut down before.

"We have about 300 identified illegal dispensaries in unincorporated L.A. County. We have closed approximately 140 of them. They could have re-opened, but that's 150 that are still open and running illegally in unincorporated L.A County," said Captain Holly Francisco, with the sheriff's department.

That's just one part of the county. One of the locations they searched sold a type of marijuana that could get you sick, authorities said.

"When we take this off the market, this black market marijuana, it could save a life. The THC levels in some of this that kids could get a hold of, it's important to us and our detectives will continue to do that," Francisco said.

While searching another illegal dispensary, authorities found something that isn't common when serving search warrants at similar locations: a grow room.

Deputies detained three employees and a security guard at the shop called OG's and OZ's located on Whittier Boulevard. It's hard for customers to tell the shop doesn't have a license because they're handed fake receipts, the dispensary sells its own swag and has all different types of cannabis and edibles. Over $10,000 was collected during the bust.

There are 874 licensed dispensaries after 21 months of legalization, according to the Bureau of Cannabis Control. An audit by the United Cannabis Business association found there's nearly 3,000 illegal dispensaries and delivery services in across the state.

A study by BDS Analytics projects the legal market is on track to reach $3.1 billion in 2019 sales but, the illegal market will generate $8.7 billion.

"If you're a consumer and you can go somewhere and get 40% less price for what they think is the same product, you're going to go there. California needs to do a better job of educating consumers about the safety of their product," said Cameron Wald, the Executive Vice President of Project Cannabis, a legal dispensary and grow operation.

Project Cannabis operates four locations in the state and their own grow operation in downtown L.A., complete with costly state-of-the-art technology to make sure their product is compliant with state regulations.

Wald said the black market is thriving because only 20% of California cities allow cannabis dispensaries and the penalties are weak for operators.

"We're talking about people that are breaking the law. We have regulated cannabis, we should be so thankful. Let's go after the people that are throwing it in our face and saying, 'We're going to continue to operate in the shadows'," he added.

It's a reality that state cannabis regulators are trying to tackle.

"We always knew we had a huge mountain to climb when it came to the illegal market," said Lori Ajax, the chief of the Bureau of Cannabis Control, the state agency that regulates the California cannabis industry.

Her office has launched the #WeedWise campaign, which recently held an event in Long Beach to educate consumers and business owners about the industry. They've also cracked down on the app Weedmaps, which still lists the locations of many illegal dispensaries.

A new bill, AB-97, allows the state to impose a $30,000 daily fine for non-licensed violations.

"For decades, we had medicinal cannabis and it wasn't regulated by the state. We probably have less licenses than expected, but that continues to grow. We have a ton of people applying for licenses each and every day and we continue to aggressively go after the illegal businesses," Ajax said.