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Audit finds nearly 3,000 illegal marijuana businesses in Calif., dwarfing legal trade

James Queally and Patrick McGreevy, Los Angeles Times on

Published in News & Features

SACRAMENTO, Calif. -- California's black market for cannabis is at least three times the size of its regulated weed industry, according to an audit made public Wednesday, the latest illustration of the state's continued struggle to tame a cannabis economy that has long operated in legal limbo.

The audit, conducted by the United Cannabis Business Association, found approximately 2,835 unlicensed dispensaries and delivery services operating in California. By comparison, only 873 cannabis sellers in the state are licensed, according to the Bureau of Cannabis Control.

The figures are the latest sign of California's rocky rollout of its legal marketplace, which promised better regulations and control beginning in 2018. Legitimate marijuana businesses have repeatedly criticized state leaders and law enforcement for failing to curb unlicensed dispensaries and delivery services, which sell cannabis at a much lower price by skirting state and municipal cannabis taxes.

Earlier this year, an industry-backed financial audit projected that roughly $8.7 billion will be spent on unregulated cannabis products in California this year, compared with just $3.1 billion spent on cannabis sold by legal businesses.

Officials have also warned that cannabis products sold in the illegal marketplace can pose health risks because the edible products, vaping pens and flower on shelves of illicit stores have not been subject to state testing. Since June, the California Department of Public Health has linked more than 60 cases of acute lung disease to patients who had recently used vape pens, and warned that many of those people had recently purchased products from unlicensed shops.

The UCBA, a trade association that represents dispensary owners, cultivators and other licensed marijuana businesses in the state, conducted its audit by scouring the popular and controversial website Weedmaps, which functions as a Yelp-like service for cannabis dispensaries and products.

 

Lawrence Mansour, chief technology officer for APOP Media, a UCBA member focused on cannabis advertising, said he calculated the estimate of illegal operators by compiling a database of every California-based listing for a cannabis dispensary or delivery service on Weedmaps. Mansour said he found 3,757 listings, a number far higher than the total list of approved cannabis sellers registered in the state.

Any attempt to quantify the number of unlicensed cannabis sellers in the state would be an estimate. The BCC does not track such data, and there are illegal marijuana businesses in California that do not advertise on Weedmaps.

The UCBA presented the audit's findings in a letter to Gov. Gavin Newsom and the cannabis agency early Wednesday and called for a crackdown on Weedmaps, which many in the cannabis industry have criticized for amplifying the reach of illegal sellers.

"Every day that Weedmaps continues to advertise for unlicensed retailers they are putting consumers at risk and suppressing the growth and very existence of the legal market," the letter said. "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."

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