Los Angeles Marijuana Industry at Boiling Point

cannabis defense lawyersEver since cannabis was legalized in California in January 2018, a flood of marijuana businesses have opened, hoping to take their share of the pot market. But it’s no secret that many industry stakeholders are unhappy with the current state of affairs.

Today there are 182 licensed marijuana dispensaries operating throughout Los Angeles, and many of those business have paid well into the tens of thousands of dollars to operate legally. First by registering their companies and covering licensing fees, then paying city taxes and continually meeting strict safety standards imposed by the state.

Meanwhile, there are countless other outfits operating slightly more under the radar. They are able to skip paying licensing fees and, as predominantly cash run businesses, also avoid paying taxes. To the frustration of legal business owners, rouge pot shops attract a slew of customers with undercut pot prices, prices that legal outfits have a hard time matching given their higher operating costs.

While regulation of cannabis use and sale continues to undergo assessment and tweaking in the state of California, many licensed cannabis business owners have reached boiling point. The biggest reason, illegal pot shops continuing to operate comfortably, with little pressure from state authorities requiring them to toe the line.

Fed Up Stakeholders Taking Action
The California Minority Alliance (CMA), disenchanted by the city’s efforts to deter illegal pot shops from trading, has made its plans to sue City Attorney Mike Feuer’s office, well known. The CMA contends the city has essentially ‘ignored’ South Central L.A. while claiming to clamp down on unlicensed marijuana shops throughout the city.

Similarly, the Southern California Coalition (SCC) penned a letter to Feuer’s office, outlining tactics it recommended could help close down a greater number of illegal cannabis businesses. While these actions reflect a collective frustration, other industry insiders note it’s not the city attorney’s job to charge criminals with felonies.

For legal marijuana business owners, perhaps there is a glimmer of hope on the horizon though. This April, Feuer’s office filed a first-of-its-kind civil lawsuit against a blatant illegal cannabis outfit, Kush Club 20. The case seeks to slap Kush Club 20 with the Proposition M outlined consequence of a $20,000 per day fine, for operating without a license. No doubt the industry will watch with great interest to see how the court rules, before determining whether it makes financial sense to duplicate similar suits against other big time offenders.

New Permits Up For Grabs Soon
Under Phases 1 and 2, the Los Angeles Department of Cannabis Regulation (DRC) has approved a total of 297 license applications. Phase 3, slated to launch in September, will grant more social equity permits and for the first time will also open licensing up to the general public.

More Speed Humps Likely in the Road Ahead
But not so fast. Cat Packer, DRC director, believes Phase 3 timing may be pushed back, and that the city could reach an ‘undue concentration’ limit for permits, triggering a cap on license approvals. This will mean those wanting/needing cannabis permits to continue business operations, may:

  • have to wait longer than expected to get licensed, risking financial consequences for operating illegally in the meantime, and
  • be unpleasantly surprised to find there are not enough permits to go around for all who apply for them.

As discussions continue surrounding the regulation of cannabis sale and use, it is clear there is still a very long way to go before finding a mutually agreeable solution.

Need Legal Help For Your Marijuana Business?
Our Orange County cannabis business attorneys can help answer any questions you may have.

The Los Angeles CANNABIS LAW Group represents growers dispensaries, ancillary companies, patients and those facing criminal marijuana charges. Call us at 949-375-4734.

Additional Resources:
Proposition M (Adopted by the voters of Los Angeles at the Election on March 7, 2017), Ordinance No. 184841

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