How to Crack Down on Illicit Sales Without Echoing the War on Drugs?

In October 2018, the California Department of Consumer Affairs’ newly-established Cannabis Enforcement Unit teamed up with the Los Angeles Police Department to carry out a raid on an unlicensed shop in Sylmar, a predominantly Latino and working-class neighborhood in the San Fernando Valley.

After serving a search warrant at “One Stop Healers,” the authorities seized more than $2 million worth of cannabis and cannabis products, including almost 500 pounds of flower and 200 pounds of edibles. The shop’s owner was arrested on misdemeanor charges, along with six employees.

The seizure, notably, took place ten months after the state had begun allowing the sale and taxation of cannabis for adult use. The end of prohibition, it turns out, has hardly ended illicit cannabis sales. A nascent industry—not to mention local governments eager for tax revenue—is pushing for this kind of rigorous enforcement.

But who gets hurt? Calibrating a crackdown that does not hurt the same people and neighborhoods that suffered in the War on Drugs is not so easy.

There is a tension between the crackdowns and one of the primary goals of legalization: redressing the harms done to economically struggling neighborhoods during the War on Drugs. In Los Angeles, for example, the crackdowns are being carried out at the same time as the city makes painstaking efforts to redress the socioeconomic effects of prohibition, and in some of the same areas.

When California legalized cannabis, the city set out to ensure that residents of areas that had been disproportionately targeted by law enforcement got to reap some of the benefits. Before issuing any licenses, Los Angeles hired a consulting firm to prepare a report with options for a program to support these communities. Then, in September 2017, the city hosted a meeting in Watts to share its proposed regulations and what it called its Cannabis Social Equity Program.

The choice in location was deliberate. As the city’s report underscores, Watts, along with South Central and Pico-Union (neighborhoods with predominantly African-American and Latino populations, respectively) had been subject to massive police sweeps during the War on Drugs. The day of the meeting, some 600 stakeholders gathered at the Watts Labor Community Action Committee, where city officials solicited written and verbal feedback. These comments were later incorporated in the final recommendations to the city.

With that information, Los Angeles honed its Social Equity Program. In addition to technical assistance and, potentially, capital and fee deferrals, the program prioritizes licensing individuals with low incomes who were arrested for cannabis-related crimes. Residents who have low incomes and live in what the city has identified as a “Disproportionately Impacted Area” also qualify.

To establish program eligibility, the seventy-eight-page report includes a series of maps that delineate regions where “significantly more cannabis-related arrests than the citywide average” took place between 2000 and 2016. It also includes areas “with a greater percentage of low income households than citywide average.” The report then overlaps these maps to identify regions with both a disproportionate number of cannabis-related arrests and a high concentration of low income households. According to the report, the program “will support the City’s intention to ensure that these communities are not further disadvantaged by future cannabis policies and furthermore are able to participate in the legal economy created by a regulated cannabis market.”

The problem? The city’s social equity goals may be clashing with its desire to protect its new cannabis industry against its unlicensed competitors. Many of the illicit cannabis market arrests that have taken place in Los Angeles since legalization have occurred in Disproportionately Impacted Areas.

Cannabis Wire plotted the raids of 105 locations made known in September 2018. Using data provided by City Attorney Mike Feuer, Cannabis Wire determined that the bulk of the arrests were made in pre-prohibition hotspots. The same can be said of the thirty-three crackdowns announced in May 2018.

These findings, of course, do not provide an exhaustive account of post-prohibition arrests in Los Angeles; however, they do they point to the challenge of enforcing policy without replicating previous patterns.

(Interactive map: Double click on circles to zoom in.)

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When California voters approved the Control, Regulate and Tax Adult Use of Marijuana Act in 2016, its stated purpose was to take cannabis production and sales out of the illicit market. According to the text of the measure, the creation of a regulatory structure would serve “to protect public safety, public health, and the environment,” as well as “generate hundreds of millions of dollars in new state revenue.” But a year into legal sales, California continues to struggle with unlicensed shops, deliveries, and clandestine grows. To be sure, these are early days: Only on January 16, 2019 did the industry begin to operate under final regulations, and not under the emergency regulations established in December 2017 to meet the deadline for launching legal sales.

Still, in an effort to undermine the unlicensed market, state and local agencies have increased enforcement on a number of fronts, often using multi-pronged strategies in which locals are encouraged to participate. The $2,000,000 bust in Sylmar, for instance, was executed following a complaint to California’s Bureau of Cannabis Control.

One of the first indicators of the coming crackdown in California came in February 2018 when Lori Ajax, chief of the state’s Bureau of Cannabis Control, sent a cease and desist letter to the CEO of Weedmaps, a website and cell phone app that allows users to locate and review cannabis retailers and products. The issue, the letter explained, was that Weedmaps was advertising both licensed and unlicensed shops. “You are aiding and abetting in violation of state cannabis laws,” Ajax wrote, calling upon the company to stop promoting illicit businesses. If Weedmaps failed to comply, she added, the company could face criminal and civil penalties, including fines for each illegal ad.

Ajax then issued 900 letters to retail storefronts and delivery services believed to be operating illegally, many of which the Bureau discovered on Weedmaps itself.

A few months later, California’s Attorney General, Xavier Becerra, met with federal and state officials to discuss strategies to combat illegal grows. Soon after, Becerra launched a Campaign Against Illegal Marijuana Planting to uproot large-scale cultivations in public and private lands. With the help of local agencies, the campaign subsequently eradicated 614,267 plants in more than 250 illegal grow sites across forty counties in California. According to Becerra, authorities also confiscated 110 weapons and arrested fifty-two people.

The role of citizen complaints

In addition to executing their own investigations, state and local authorities increasingly rely on complaints from average citizens. For instance, according to Bureau of Cannabis Control spokesperson, Alex Traverso, of the 900 cease-and-desist letters sent to unlicensed businesses in the beginning of the year, about 375 were issued in response to complaints received by the agency.

And citizen grievances have led to enforcement procedures that go beyond warning letters. The shutdown of “One Stop Healers” is one of several examples. Before that, a complaint to the Bureau resulted in the raid of The Cannaisseur Club, an unlicensed cannabis delivery service in Sacramento, on August 22, 2018. Likewise, a complaint to the Bureau led to the closure of the Church of Peace and Glory just two days later.

Through citizen complaints, local agencies carry out enforcement procedures even without state support. In September, for instance, Sonoma County authorities in northern California shut down 638 unlicensed sites after receiving nearly 700 complaints of cannabis production on private property.

Los Angeles County: A multi-pronged strategy

At the municipal level, one of the most ambitious enforcement projects is developing in Los Angeles County, whose population alone exceeds 10 million—more than any US state, except of course California, that has legalized adult use.

In May 2018, county officials began crafting a Strategic Plan to Close Unlicensed Businesses. To this end, the county’s Office of Cannabis Management teamed up with several other authorities, including the District Attorney; the Sheriff; the Treasurer and Tax Collector; and the Departments of Consumer and Business Affairs, Public Health, and Regional Planning. Together, they set out create a plan to educate the public about the illegal market, advocate for stricter laws against it, and to share information with cities and the state. The partnership also took on direct enforcement.

At the municipal level, one of the most ambitious enforcement projects is developing in Los Angeles County, whose population alone exceeds 10 million—more than any US state, except of course California, that has legalized adult use.

The group launched its efforts with a press release warning about working conditions at unlicensed businesses. “If you work at an illegal store,” it reads, “you could be physically unsafe. Our inspectors and law enforcement have observed unpermitted electrical wiring, exits that are blocked in case of a fire, and other dangerous conditions.”

The enforcement group also cautioned against worker exploitation. According to Brian Stiger, director of the Los Angeles County Department of Consumer and Business Affairs, since adult use was legalized in January 2018, regulators have received complaints about unfair labor practices and possible violations at unlicensed stores, including wage theft and sexual harassment. In addition to alerting job seekers about these potential risks, the Office of Cannabis Management provided guidelines to help aspiring budtenders determine if a store is licensed, urging them to ask prospective employers questions like: “Can I see your state and local license?” and “When will I receive my pay stub?”

On the consumer front, the county established an Emblem Program for Authorized Cannabis Stores. Modeled after the county’s restaurant rating system, the program will require every licensed retailer to display an emblem on its premises signifying that it is a duly licensed business.

Within the county, the City of Los Angeles’ Department of Cannabis Regulation has also decided to require licensed retailers to display an emblem placard—and doubling down on enforcement against illicit activity. In May 2018, City Attorney Mike Feuer announced that his office, in coordination with the LAPD, had filed criminal cases against 149 defendants associated with 33 unlicensed locations and two delivery services.

“The message is clear,” Feuer said during a press conference, “LAPD is on it. Our office is on it. If you’re operating an illegal cannabis shop, selling recreational marijuana, you’re going to be subject to criminal prosecution.”

These enforcement procedures were followed by others, including the takedown of an illicit grow in August 2018, where authorities seized more than 600 pounds of cannabis in Panorama City and, more recently, the filing of criminal cases against 515 defendants connected to 105 unlicensed locations across the city.

Los Angeles routinely encourages residents to report questionable cannabis activity, via social media and other outlets. To assist consumers—and prospective complaint filers—in determining whether a shop is authorized to operate, the city, like the state, keeps an online list and map of licensed businesses.

The Office of Cannabis Management provided guidelines to help aspiring budtenders determine if a store is licensed, urging them to ask prospective employers questions like: ‘Can I see your state and local license?’ and ‘When will I receive my pay stub?

In addition to crowdsourcing, Los Angeles is taking calculated steps to undermine illicit cannabis sales. In October 2018, the City Council proposed new tactics aimed at closing unlicensed shops, including having them barricaded or padlocked, shutting off their utilities, and imposing escalating fines on their employees. Council members also approved a motion to create a building code enforcement unit to go after businesses breaking the law.

Who bears the brunt of the crackdowns?

But as we have seen, a tension—between the goal of eliminating illegal sales and the promise of social equity in cannabis reform—has emerged.

Some political leaders worry about the repercussions of enforcement on working people. One of these officials is councilmember Marqueece Harris-Dawson, who represents the Eighth City Council District, a region that encompasses some of the most impoverished neighborhoods in Los Angeles. Back in October, he proposed three initiatives to undercut unlicensed cannabis sales, including the measure calling for escalating fines on employees before resorting to criminal charges.

This initiative notes that the series of raids that brought charges against more than 500 people punished many “employees of illegal businesses, not the owners or operators of illegal businesses themselves.” The text of the measure also says that “Property and business owners should bear the majority of responsibility for illegal cannabis operations, not those that work for them.”

In that vein, though Harris-Dawson’s measure maintains that the City Attorney and the Police Department should retain the ability to charge individuals who work in unlicensed shops with a misdemeanor, it also proposes using the city’s Administrative Citation Enforcement Program to limit the damage on individuals. Approved by the City Council in 2014, the Citation program gives police officers a middle option between issuing a warning and criminally charging an offender. By encouraging the use of these citations, which are not handled through criminal courts, Harris-Dawson aims to prevent a proliferation of criminal procedures.

The councilmember, who grew up in South Los Angeles during the crack cocaine epidemic, has repeatedly addressed the impact of policy and enforcement on impoverished communities of color. For instance, during a meeting of the Rules, Elections and Intergovernmental Relations Committee in October 2018, Harris-Dawson pointed out that Measure M, which outlines the city’s regulations for adult use, stipulates that landowners with unlicensed cannabis businesses on their property can be fined up to $20,000 per day. But it is apparently not enforced. After learning that no one had been fined under that provision, the councilmember expressed disappointment: “That was a very, very important provision and one way to cause, at least voters in my district, to believe that a lot of these rogue shops would be dealt with.”

Pursuing employees, said Harris-Dawson, is a step into the past: “I’m afraid that going forward, going into dispensaries and arresting people and catching them doing other things, that’s not too much different than what we did in the War on Drugs.”

In an interview with Cannabis Wire, Harris-Dawson summed up his motive behind the measure saying, “I represent a district of people who paid a high price during the War on Drugs, a community that was devastated by overpolicing.” The measures he’s presented, he hopes, will bring about “a more civil approach” to enforcement.

Which way forward?

Some argue that a solution to the problem of illegal competition is a break on taxes. In addition to calling for increased law enforcement, owners of licensed businesses in California have complained that high taxes prevent them from competing with the illicit market. Because unlicensed operators don’t pay taxes, goes the argument, they can afford to sell products at much lower prices.

To address these concerns, California Treasurer Fiona Ma and lawmakers recently announced a bill that would give licensed cannabis businesses a tax break. If implemented, the state excise tax on cannabis will be reduced from 15% to 11% and a separate tax on cultivation will be suspended through 2022. Proponents of the measure claim the breaks will amount to a price drop for consumers of the legal supply, thereby reducing the differential between illicit and legal prices.

But other critics of cannabis policy in California maintain that the illicit market’s staying power is a problem of its own making, one that could be resolved if cities like Los Angeles simply issued more licenses.

Weedmaps—which has launched a campaign to increase the number of jurisdictions that permit the sale of cannabis—certainly seems to think this is the case. On its website, the company calls upon users to “Save California’s Cannabis Future” by sending an email to elected officials that reads:

Dear Official, California residents have voted to legalize cannabis, but local governments are refusing to provide a reasonable pathway for businesses to get the proper licensing they need to join the legal market. Failure to address this statewide epidemic will create an industry controlled by monopolies, and fuel the growth of an illegal cannabis market.

As an elected official, it is your responsibility to develop regulations that give unlicensed operators the opportunity to legitimize their businesses. I am calling on you to uphold the wishes of California voters, and create a fair and reasonable licensing process.

On that same webpage, Weedmaps also tells users that “The cost of a police raid on an unlicensed cannabis business ranges from $50,000 to $100,000.” “On top of that,” it continues, “most businesses reopen quickly anyway. The result is cities losing out on tax revenue while wasting millions of taxpayers’ dollars on police enforcement that could be better served elsewhere.”

Weedmaps, meanwhile, has never stopped promoting unlicensed businesses—not after receiving a cease and desist letter from San Diego City councilmember Chris Cate, and not after receiving a letter from the Bureau of Cannabis Control’s chief, Lori Ajax.

Since then, Ajax’s office has issued cease and desist letters to some 2,000 unlicensed shops, many of which continue to be promoted on Weedmaps. And earlier this week, Ajax noted that: “Probably 80% of the complaints [the Bureau] receive[s] is on unlicensed activity.” To date, the agency has gotten about 5,400 complaints, mostly through its online complaint system. The bulk of the grievances, Ajax added, point to illicit activity.

In Los Angeles, Cat Packer, executive director of the Department of Cannabis Regulation, indicated that the City Council will soon decide on the recommendations set forth in October and determine if property owners will face penalties for allowing unlicensed cannabis businesses to operate in their buildings. As Bisnow reported, Packer asserted that “Property owners specifically have been left out of this conversation in terms of enforcement.” Moving forward, she is “recommending to go after property owners” because “You can’t have illegal activity without property.”

As California continues working out its cannabis policies, conflicts between regulators and businesses will likely continue, as will the tension between unlicensed market enforcement and questions of equity, and fairness to impoverished communities.

It may not be easy to resolve.

“The industry did call for more enforcement,” Josh Drayton of the California Cannabis Industry Association told Cannabis Wire. “But we still need to figure out how to go about this without targeting our black and brown communities and repeating the failed War on Drugs. We need to see who’s being arrested, what are the charges. We need a visual picture to see if minorities are still being targeted.”

“In all honesty,” he added, “we still don’t have it all figured out.”

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Cannabis Wire
Cannabis is rich territory for serious journalism. Legalization raises urgent questions about regulation and law, technology and taxation, science and business, criminal justice and individual liberties. It stands at the intersection of a booming billion-dollar industry and promising advances in medicine, all while remaining federally illegal.

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