Photo illustration from a photo of weed jars in a legal dispensary. Photo by Thomas Philip Galvez/Getty
Those in the weed business have discovered that the black market is still more profitable in many ways than the newly legal industry.
It was 2004 when William P. first got into the weed game. He was 18 years old and spent much of his life on the road, traveling between Oakland, Los Angeles, and San Diego to deliver chocolate edibles and sell weed. In the 14 subsequent years, he tried his hand at nearly every aspect of the cannabis supply chain, from starting a delivery service to hauling pounds of weed from the Emerald Triangle—Northern California’s famed farming epicenter—to dispensaries and buyers across Southern California.
“It’s an adrenaline rush that you cannot describe,” William told me. “That becomes a drug. And the money is good too.”
His plan was to secure a license and join California’s newly created legal market this year but “money talks,” as William said, and instead he ended up working with a illicit medical marijuana collective that funneled weed out of state, tapping into that “OT” or out-of-town money, as he calls it.
William, who operated largely out of Southern California, is just one small part of California’s booming illegal market. Even though recreational (or “adult-use”) marijuana has been legal in the Golden State since January 1, the cannabis industry is still functioning largely as it has for for decades—in the shadows.
In fact, the situation become so dire that earlier this year, Governor Jerry Brown proposed allocating an extra $14 million of the state budget to policing unauthorized weed. The money would fund five teams within the state attorney general’s office that would focus on effort like “complex, large-scale financial and tax evasion investigations,” according to a statement from Brown. In June, however, the proposal was scrapped after a dispute over how to pay for it.
So cities throughout the state—including Los Angeles, widely recognized as the largest legal marijuana market in the US—continue to grapple with a unsanctioned industry. Six months into legalization, LA remains besieged by illegal businesses, said Adam Spiker, executive director of the cannabis trade group Southern California Coalition (SCC).
“It’s still a majority of the market,” said Spiker. “There’s no doubt about it.”
One reason is—as many predicted—the cost of legalization is daunting for would-be cannabis entrepreneurs. There are a slew of financially demanding requirements borne out of regulation, including required building and security upgrades, as well as attorneys’ fees to ensure compliance. There’s also operating costs that the illegal weed industry has never had to deal with, like having to pay workers’ compensation and pass pesticide testing standards required by the state.
Then there’s hefty taxes, which include a 15 percent excise tax in addition to sales tax and local fees that some say discourage customer spending and encourage illegal sales, where profit margins are wider. A bill introduced earlier this year in Sacramento proposed slashing the excise tax to 11 percent to help permitted businesses compete with illegal operations, but that effort was shelved in May.
To Read The Rest Of This Article By Hayley Fox on VICE
Published: September 05, 2018
Founder & Interim Editor of L.A. Cannabis News