MJBizMag August 2020 - 16

Trends&HotTopics | John Schroyer
California's Illicit Market
Proving As Strong As Ever
I
n the span of three days in July,
Southern California officials
announced that 91,000 illegal
marijuana plants with a street value
of $45 million had been found and
destroyed, and state regulators
served tax warrants on a dozen illegal
cannabis retailers in the same region.
There are scores of such instances
from the 2½ years since the launch of
California's regulated cannabis market.
Barely a week goes by in the state
without at least one bust of an illegal
marijuana company.
State agencies including the Bureau
of Cannabis Control (BCC) and the
Department of Fish and Wildlife have
teamed up with law enforcement
agencies to serve warrants, seize illegal
products and prosecute bad actors.
Federal agencies such as the FBI and
Drug Enforcement Administration also
have been involved.
And yet, the illicit market continues
to thrive.
The BCC has a backlog of
" thousands " of complaints related to
alleged illegal marijuana operations,
spokesman Alex Traverso said in midJuly.
The agency is even swearing in 87
new peace officers this year to target
illegal marijuana companies-but still,
Traverso acknowledged that the sheer
size and scope of California's problem
makes his agency's efforts look like
baby steps.
" It's a complicated puzzle, and
every day we try to fit another piece
in, " he said.
'A David and Goliath Situation'
According to some industry insiders,
the illicit market is stronger than ever.
" We've barely scratched the surface "
of the illicit market since January
2018, said Pamela Epstein, general
counsel for Eden Enterprises, a cannabis
company in Oakland, California.
She characterized the conflict between
legal and illegal operators as " a David
and Goliath situation. "
That's because the illicit market is a
vast web of home growers, unlicensed
stores and delivery services, street
dealers, informal medical caregivers
and nebulous networks that are-above
all else-adaptable. That ability to pivot
stands in stark contrast to the rigid
regulatory system with which legal
companies must conform.
" If a deal happens in a private
residence, it's never going to be
anything that anyone's going to be
able to stop, " said Johnny Delaplane,
co-owner of Project Cannabis, one of
San Francisco's licensed retail shops.
He reiterated a common industry
statistic that roughly 70% of cannabis
sales take place in the underground
market, a figure that most in the
industry believe has not budged much
since 2018.
Some in the legal market say they've
heard that prices in the illicit sector
have been dropping, making it even
more difficult for legal retailers to
compete with them.
Hundreds of illicit storefronts in
Los Angeles have pivoted and now
advertise themselves as CBD stores,
but they also sell marijuana products
without a permit, said Jerred Kiloh,
president of the United Cannabis Business
Association.
" They're becoming so nimble that
their pricing has become even lower, so
now we have an even bigger problem.
Enforcement alone isn't the solution.
Nobody in the industry wants to restart the
war on drugs and begin throwing people into
jail for dealing cannabis without a license. "
14 Marijuana Business Magazine | August 2020

MJBizMag August 2020

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