Landscape | Fall 2018 Issue

Pot Shops Go Mainstream

Marijuana comes in from the cold

By Kathleen Kelleher

This is no sleazy pot shop. No jostling to stand in line. No buying a bag of weed that might be laced with mold and pesticides. Instead, it is an antiseptic, well-lit boutique, decked with sleek tables where iPads line up to explain and sell marijuana the way a sommelier would offer a bottle of Pinot Grigio. The store, one of two operated by MedMen in Venice, buzzes with customers, chatting about edibles, vaporizer pens and dried cannabis flowers packaged in stylish wrapping like expensive perfumes.

On Instagram, MedMen says it is #mainstreamingmarijuana.

But mainstreaming is still a pipe dream. Two years have passed since Californians voted to legalize the adult, recreational use of pot, and the sale of cannabis for pleasure has been legal for more than six months. It is impossible, however, to buy marijuana from a legal dispensary in most of the state. That is largely because, by seven months into this year, 67% of the 482 municipalities and 58 counties in California had banned recreational pot businesses, according to Amanda Ostrowitz, founder of, a website that tracks marijuana regulations. During that time, California issued only 413 licenses to sell cannabis, Alex Traverso, spokesman for the state Bureau of Cannabis Control, said in an email interview. One reason, he said, is that licenses are granted only to applicants with local permits.

Credit – or blame – groups like Smart Approaches to Marijuana (SAM), one of the nation’s leading anti-legalization organizations. “We’ve learned that even if one votes for statewide legalization, they [voters] often do not want pot shops in their neigh­borhoods,” Kevin Sabet, president of SAM, said, also in an email interview. “SAM has an experienced grassroots team in California that is working with communities across the state to support local bans and restrictions. We have put together model text for bans and worked with towns and unincorporated areas to draft and implement their proposals.

Anti-pot groups stretch from northern to southern California. The International Faith Based Coalition, Take Back America, Citizens Against Legalizing Marijuana (CALM) and Stop Po, are based in the north. To the south are San Diego’s Prevention Coalition and the North Coastal Prevention Coalition, to name only a few. They are opposed by pro-pot organizations, including the Association of Cannabis Professionals, United Can­nabis Business Alliance, Southern California Coalition, and Canna Advisors, which try to persuade local and county jurisdictions to allow legal dispensaries. Some groups publicise officeholder positions on pot; others endorse candidates in local, state, and federal elections.

They are at cross-purposes, but there is common ground. In addition to opposing legalized marijuana, anti-pot groups want to wipe out unregulated, black- market shops. So do pro-pot groups. “It is counterintuitive, but at the core, we are saying the same thing,” said Dallin Young, executive director of the San Diego-based Associ­ation of Cannabis Professionals. “We want to get rid of the black market, and we want to make it more difficult for teens to get access to pot. We are fighting for regu­lations. . . . We don’t want it to be unregulated.”

The black market “is thriving at the moment,” said Pamela Epstein, chief executive of Green Wise Consulting, which helps marijuana businesses get licenses and permits. Illegal operators cost legal businesses money. Outlaw marijuana is cheaper, not least because it is free of the 15% state excise tax, plus local sales taxes, which, for places like Culver City, are set at 10%. Moreover, legal dispensaries must absorb the cost of local permits, application fees and the pricey state licensing, Epstein said.  She calls it unfair competition.

Kenny Morrison, president of the California Cannabis Manufacturers Association, said he has paid $25,000 in application fees alone for two state licenses to make marijuana products. In total, he said, he would end up paying $500,000 to obtain the licenses.

In addition, legal marijuana businesses had to have their products tested, starting on July 1, for pesticide and mold. At first, too few laboratories were licensed to do the work. This created a bottleneck and forced a fire sale of untested pot. What couldn’t be vended by the deadline had to be trashed. Licensed dealers, Epstein said, “cannot sell non-compliant product.

“The cost of being compliant with the law is very high,” she said. “Operators are encouraged to report any black-market businesses.”




A close look at local jurisdictions shows how difficult it can be to buy le­gal marijuana in the Golden State.

As of mid-year, Los Angeles County had banned all commercial cannabis activity in unincorporated areas. Orange County had banned pot businesses everywhere but in the city of Santa Ana. Placer County, in Northern California, had banned all marijuana businesses. To the far south, the city of San Diego had only 14 regulat­ed adult-use recreational and medical marijuana retailers. The city of La Mesa had issued one medical marijuana license, but as of July, the business owner had not yet opened. Lemon Grove allowed medical marijuana dispensaries after a 2016 voter initiative, Young, the Association of Cannabis Professionals executive director, said – but as of August, there were none.

In unincorporated San Diego County, population 3 million, only four medical marijuana businesses had conditional-use permits, and because of a change on the Board of Supervisors, the permits cannot be renewed, Young said. Three seats on the board will open in 2020, he said, creating an opportunity to shift the county to a more pro-cannabis stance. “This is the first year,” he said, “that I think people in the industry are realizing you need to get involved in politics.

Distance from legally available pot creates opportunities for black-market operators. “If there are only 10 regulated dispensaries in the East Bay, and I live 45 minutes from one of them, I’m going to call . . . my unregulated delivery service,” Hezekiah Allen, executive director of the California Growers Association, was quoted by Business Insider as saying.

“Like I have for the past five years.”

How many pot shops are out there?

It is difficult to tally illegal pot shops in California.

“The illicit market outnumbers us by 5-to-1,” Morrison, the California Cannabis Manufacturers president, told Bloomberg News. “You can go to a random city and find four legal stores to 20 illegal stores. What’s worse, is those four legal stores are charging two and three times the price of the illegal stores.”

The Bureau of Cannabis Control counts more than 2,300 cease-and-desist letters it has written to black-market operators ordering them to close down, said Traverso, the agency spokesman. But they are not always compliant. “We are currently exploring our next steps against some of the outstanding illegal operators,” he said, adding that the bureau plans to begin working with local jurisdictions to build cases.

Those local agencies include the Los Angeles City Attorney’s Office, which had filed 86 cases by July 19 against 351 defendants based upon investigations into black-market activity.

Charges can include owning or operating an unlicensed retail pot shop; participating as an employee, contractor, agent or volunteer in unlicensed activity, and leasing, renting or allowing an unlicensed commercial cannabis business to operate on one’s property, said Frank Mateljan, deputy director of the city attorney’s com­munity engagement and outreach.

Most of the charges, Mateljan said, carry a possible sentence of up to six months in jail and a fine of as much as $1,000.

The Los Angeles County Sheriff’s Department raids about five cannabis dispensaries a week, said Lt. Frank Montez, head of its narcotics task force. As of August, he said, the task force had documented 80 illegal cannabis businesses in the county. Montez said he was sure there were many more.

After being investigated, customers caught in a raid are released, Montez said, “unless there is a warrant out for their arrest, they have a stolen gun, or have racked up additional charges.

“It is like a speeding ticket. They promise to appear in court.”

By July 11, the Los Angeles Police Department had served 81 search warrants related to cannabis activity, said Capt. Stacy Spell, head of the LAPD Narcotics Division. They included warrants for investigations into reports of cultivating and growing marijuana. Because Los Angeles has an estimated 300 to 600 illegal cannabis retailers, Spell said, the LAPD is only scratching the surface.

“But it is important to know that the department only deals with areas where our primary focus is significant criminal activity,” he said. “We have limited resources, so we only deal with the worst places that generate the most complaints, or there are other crimes associated with the location, like shootings, robberies, or it could be a gang location.”

Black-market operators can be jailed for up to 180 days, Spell said, or fined as much as $1,000 by the city – and $500 by the state.

“Illegal operators often open right back up after we have shut them down,” he said. “There are no teeth in the laws, and the penalties are so light – and there is a lot of incentive to make a lot of money. So it is like playing whack-a-mole when we shut them down. They open right back up because they are easily doing between $20,000 and $40,000 a day in business.”

Spell said the LAPD is most effective when its pot investigations are conducted in collaboration with other agencies, including the Fire Department, the Department of Building and Safety and the Department of Food and Agriculture. “We have found that if we go in as a team approach, it is a force multiplier, and we are more successful in shutting these places down.”

Closing down black-market operators and lifting bans in local jurisdictions can’t come soon enough for the legal cannabis industry. Licensed pot shops can operate lawfully in California, but they are still shut out of most of it.

Kathleen Kelleher

Kathleen Kelleher

Kathleen Kelleher is a Santa Monica-based writer who has written for the Los Angeles Times, the Orange County Register, Arroyo and other publications.

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