Los Angeles Mayor Eric Garcetti said that the city is considering a major crackdown on illegal cannabis dispensaries that have plagued the city’s legal cannabis marketplace. The move could potentially add millions of dollars into police enforcement as legal dispensaries struggle to turn a profit while illegal dispensaries offer cheaper and tax-free products.
California’s legal cannabis market hasn’t been as prolific as originally thought, due to the high prices and high tax rate of cannabis. Many California cannabis consumers still purchase from illegal dispensaries, which has had a major effect on the amount of tax revenue the state has collected. Last September, a crackdown was launched in LA that resulted in 120 criminal cases against 515 defendants over unlicensed cannabis businesses.
Legal and illegal dispensaries can operate in the same neighborhood and storefronts can typically look similar. In illegal dispensaries, prices can be up to 50 percent below the legal market prices. Industry officials welcomed the plan as some estimates show up to 80 percent of cannabis sales in California are done “under the table” which cuts profits from the legal dispensaries.
Due to the prevalence of the illegal dispensaries, many legal shops “have been laying off employees and cutting staff, trying to figure out how they can stay open and keep the lights on,” said Ruben Honig, executive director of the United Cannabis Business Association, an industry group of licensed operators.
Mayor Garcetti has yet to put an exact figure on the amount of money that will be added, but said he’s considering adding “tens of millions” to help fund police overtime and enforcement operations in other city agencies.
“It really comes down to how much overtime, how many officers we can have” closing illegal dispensaries, he said.