Could California’s New Fines on Illegal Dispensaries Kill the Black Market?

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Could California’s New Fines on Illegal Dispensaries Kill the Black Market?

California's state assembly has introduced two new Bills designed to curb the illegal cannabis market in the state by targeting black market distributors and landlords with heavy fines - up to $50,000 daily. 

Fines and Seizures

The first, Assembly Bill 2094, introduces a severe $50,000 a day penalty for regulators to bring against any landlord or other person found to be providing a mortgage to an illegal cannabis dispensary or other black market operation. This bill is designed to give California’s cannabis regulation system encouragement - and clearly codified tools - to specifically target brick and mortar black marketeers. 

If a facility is found to house a black market marijuana operation, Bill 2094’s large fine should give landlords the stiff push required to evict their illegal tenant. If not, the bill allows for full-on seizure of property that fails to make payments.

Supplier Liability

The second bill, Assembly Bill 2122, extends liability to any and all persons or businesses that aid a black market operation, allowing the authorities to pursue them. Bill 2122 stipulates that a $30,000 a day fine can be brought by authorities on landlords, building managers, power companies, and any other organization found to be abetting illegal operations.

The text of the legislation makes clear that the accused doesn’t have to know they are doing something illegal to be charged, so it’s vital for any organization aiding a dispensary to implement a strict vetting protocol to ensure the legality of your business partners. Ideally, businesses should check - and periodically re-check - their partners to ensure mutual compliance with the law.

Bad for Bad, but Good for Good

Assembly Bill 2122 also sets up a means for the CA Attorney General to be reimbursed for successful convictions of black market dispensary operations - incentivizing successful, well-researched, and vigorously-pursued cases.

This section of the bill is meant to make it more appealing for law enforcement to go after larger players in the black market, as they will be supported, hopefully encouraging a snowball effect of wrapping up the black market quickly.

Parallel Possibilities

In addition to Bills 2094 and 2122, an additional item of legislation - Assembly Bill 2456 - hopes to bring more socially equitable solutions to help bring down the black market, while also reducing the costs of the legal market and make cannabis available at more reasonable rates.

Introduced by Assemblymember Phil Ting, Assembly Bill 2456 is designed to provide a model ordinance for cities, counties, and any other jurisdiction hoping to set-up legal cannabis dispensaries in their area. The hope is that, by providing a clearer start-up process, legal operations will be able to provide easier access to regulated products and quash the illegal market in its tracks.

As Assemblymember Ting notes in the AB 2456 release, “ I hope my proposal can make the start-up process easier for them, so they can combat the underground market and begin benefiting from increased tax revenue.” As AB 2456 notes, roughly 80% of 2018’s retail cannabis sales occurred within the black market - whether or not consumers are aware of it.

Since California is a known pioneer in cannabis legalization, alongside other states like Colorado or Washington, many are keeping a close eye on how these new regulations deal with the legal marijuana market’s oldest foe: illegal operations. Ideally, this new legislation will aid legitimate cannabis dispensaries by clearing out black market distributors, but wider effects of the new policy remain to be seen.

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THC Regs, “California To Fine Black Market Landlords And Suppliers Up To $50,000 A Day,” Feb. 25, 2020
Assemblymember Phil Ting (District 9), “Ting Introduces Bill to Help Cities And Counties License More Cannabis Retailers,” Feb. 19, 2020