California is home to the largest legal marijuana market in the world, but consumers are almost three times more likely to purchase cannabis products from unlicensed dispensaries and delivery services in the state than regulated sellers, resulting in lost tax revenue and a thriving underground pot trade, according to an audit made public last week.
The study was conducted by the United Cannabis Business Association (UCBA), which describes itself as “the leading voice for legal cannabis” in the Golden State. The group has criticized elected officials and law enforcement for failing to shut down shops operating illegally. It claims many consumers are lured to unregulated stores via an online community forum called Weedmaps, where users can discuss the potency of various strains and find recreational and/or medical marijuana dispensaries in their area.
Among the UCBA’s findings:
An audit of Weedmaps’ platform this week showed a total of 3,757 active dispensaries or delivery services in California, only 922 of which have a potential license listed. This means, using Weedmaps, Californians are almost 3 times more likely to shop at an unlicensed retailer than a licensed one…
The unlicensed operators on Weedmaps do not pay taxes or the cost of compliance with local and state regulations, do not follow required worker or consumer protections and do not allow labor unions to organize workers, in turn allowing them to charge a fraction of the cost. Put simply, these retailers, that are allowed easy access to the public through Weedmaps, profit without contributing to California while risking the health and safety of our state’s residents.
The UCBA estimates there are even more illegal operators in the state than the data shows, noting that many unlicensed shops haven’t advertised on Weedmaps. According to the Bureau of Cannabis Control (BCC), there are just 873 licensed marijuana retailers in the state. Edibles, vaping products, and flower sold in those regulated establishments are subject to state testing, which drives up costs.
UCBA President Jerred Kiloh sent a letter to Democratic Governor Gavin Newsom and the head of the BCC requesting officials “enforce laws that are already on the books to finally curb Weedmaps’ advertisement of unlicensed retailers here and now.” The industry group called on authorities to retroactively fine the web platform for each violation posted on the site going back to July 1. Over the summer, Newsom approved penalties of up to $30,000 a day against illegal cannabis sellers.
Weedmaps insists it recently implemented a “plan to support licensed operators” and stop non-regulated shops from advertising on the site by requiring a state license number and state identification. The website said it “is beginning to notify existing California-based advertisers that they must enter their state license number on their account.”
Chris Beals, CEO of Weedmaps, predicts “These policy changes will only have a symbolic impact on the size of California’s unlicensed market.”
“The only demonstrated solution to the size of the unlicensed market is for industry and government to come together to ensure sufficient numbers of licenses are issued,” he added. “We hope that monopolistic cannabis operators, as well as the lobbying organizations that represent them, will realize that their advocacy for limited license monopolies only hurts the diversity, size and strength of the licensed market.”
76% of California cities and 69% of its counties have banned marijuana dispensaries, which some lawmakers say has contributed to the booming illicit market. The voter-approved referendum that permitted adults to possess and grow limited amounts of the drug for personal use also gave local jurisdictions the right to prohibit legal sales in their communities.
Industry officials project $8.7 billion will be spent on unregulated cannabis merchandise in California this year, more than double the estimated $3.1 billion in legal sales.
In the last two years, the BCC has seized at least $30 million worth of marijuana products from unregulated sellers doing business in the state.
Follow Jeffrey Cawood on Twitter @JeffreyCawood.