Dozens of Unlicensed Cannabis Dispensaries Raided in LA

A series of raids have been taken against illegal cannabis retailers operating in Los Angeles.

Over a three-day period, from December 10 to December 12, search warrants were served on twenty-four unlicensed cannabis retail establishments. Enforcement officers seized $8.8 million in cannabis products, 9,885 illegal vape pens, and $128,742 in cash from the unlicensed locations.

“This week’s collaborative enforcement efforts were a huge success,” said Lori Ajax, the chief of California’s Bureau of Cannabis Control. “We look forward to working with local jurisdictions and law enforcement as we continue to shut down unlicensed operators in the illicit cannabis market.”

California’s previous enforcement actions

The raids on these twenty-four businesses is the latest in a series of major enforcement actions taken against illicit cannabis market players.

In late-November, the Bureau sent out hundreds of warning letters notifying landlords that officers had information suggesting their property was being used for illegal cannabis activity. Landlords of these properties, the letters warned, could be personally subject to criminal and civil penalties for allowing illicit cannabis activity to take place on their property.

Earlier in the year, a May raid on “Pure Remedy,” an unlicensed retailer based in Sun Valley, Los Angeles, resulted in the seizure of over $1.6 million in cannabis products. In March, another major raid resulted in the seizure of over $1.4 million worth of cannabis products from an unlicensed business in Costa Mesa.

“Illegal dispensaries harm and burden surrounding business owners and taxpayers,” said City of Costa Mesa Mayor Katrina Foley, in a statement following the March raid. 

“Allowing them to illegally operate in the city creates an unfair advantage over our lawfully permitted green zone businesses. We are so grateful for the efforts of the Bureau to address illegal dispensaries in Costa Mesa.”

Costa Mesa’s ‘green zone’ is a designated area of the city where firms that research, test, process, or otherwise work with cannabis products are allowed to operate.

Legal market still struggling to compete in California

As California approaches its two-year anniversary of its legalization of recreational cannabis in January 2020, the industry itself remains in a state of crisis.

The west coast state is the world’s largest cannabis market – estimated sales are projected to total nearly $12 billion in 2019 – but $8.7 billion of this figure is thought to belong to transactions occurring in the illicit cannabis market.

Legal cannabis businesses say competing against the illicit cannabis market is becoming too great a task; black market businesses don’t have to meet the state’s stringent testing regulations or pay any taxes or license fees. Without swift regulatory changes or a major crackdown on illicit businesses, legal cannabis businesses fear the emerging industry could be nearing collapse. Already a number of Californian cannabis businesses have laid off staff, blaming the job losses on the state for failing to pass measures that would have supported the fledging cannabis industry.

As well as taking up a large market segment, illicit cannabis market traders also outnumber their legal counterparts, with illegal sellers thought to outnumber regulated businesses almost three-to-one, according to an analysis carried out this fall. The audit, carried out by the United Cannabis Business Association found approximately 2,835 unlicensed dispensaries and cannabis delivery services operating in the state, compared to a mere 873 licensed sellers.

This year, California Governor Gavin Newsom signed numerous laws intended to help the state’s cannabis industry, including one allowing cannabis businesses to claim state tax deductions and a measure encouraging minority ownership of cannabis businesses.

But still, other important proposals failed. Notably, a proposal that would have allowed cannabis businesses to access limited banking services was pulled recently by its sponsor before its floor vote so that it could be amended. Senator Bob Hertzberg announced that he intended to make the senate bill a two-year measure and re-introduce the legislation in early 2020.

“If we’re going to do this, we have to do it right,” Hertzberg said in prepared remarks. “We owe it to the dozens of cities, counties, and cannabis industry officials who have been supporting this effort to see it through.”