The Half-Legal Cannabis Trap

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In LA, people are getting arrested for what they think are legit jobs in the pot business. Will “decriminalization” just spread the problem nationwide?

LOS ANGELES — Everything about Kelvin’s job in a neighborhood southwest of downtown seemed like any other assignment, if not a little more exciting. The 40-year-old, who had previously worked as an electrician, had been employed since 2015 by a private security company that contracted him out to guard marijuana dispensaries.

In 2019, he was protecting one of the thousand or so cannabis stores in California’s biggest city—part of an industry that has grown less and less underground since 1996, when the state first legalized medical marijuana.

Kelvin, who asked not to be identified beyond his middle name to avoid professional retaliation, doesn’t smoke pot, but says the gig felt like the future. He grew up in a time when other Black people he knew in Los Angeles would go to jail for possessing even small amounts of the drug. Now, customers could walk into shops like the one he was guarding, many of which can be identified by green crosses on the outside and Bob Marley posters and music playing inside, to browse jars of bud on display before making a purchase over the counter.

But one day, he recounts, police dressed in camouflage showed up with guns drawn. They ordered everyone onto the floor. Kelvin was arrested, as were the employees of the store. The cops said the dispensary was unlawful.

Kelvin was confused, and furious. “I didn’t think we were doing anything wrong,” he says. He had no idea the city considered the business illegal. In the year and a half he’d been working at that location, he had even gotten to know the local cops, who would wave to him when he was walking down the street to get a snack. He had his security guard license, and a license for the firearm he carried while on the job. He’d been hired through a security contractor. How was he supposed to know the dispensary they’d sent him to didn’t have its license?

What happened to Kelvin was the result of a vast gray area: For years, Californians could legally possess medical marijuana, but stores weren’t allowed to sell it—in fact, the whole supply chain bringing it to them was considered illegal. Now, even though the city and the state are licensing cannabis shops, Los Angeles continues to struggle with its legacy of legal confusion and selective enforcement. Businesses can appear legitimate, and even exist for years, without any legal license to operate. Many of the illegal shops are in Black and Latino neighborhoods, with their employees vulnerable to arrest while owners are shielded behind shell companies. So as police and prosecutors attempt to crack down on unlicensed dispensaries, they appear to be reproducing the very social inequalities that legalization was supposed to fix.

The illicit pot shop where Kelvin worked wasn’t an outlier: In fact, the majority of shops in LA are unlicensed. In the entire city, only 184 pot shops, less than 1 in 5, are licensed. Many Angelenos have no idea that the place they buy their cannabis—or in Kelvin’s case, report to work—might be operating outside the law. This gray-market section of the industry established itself over more than a decade, between about 2005 and 2018, when local politicians were reluctant to regulate an industry that was breaking federal law. Because it was technically OK by state law to provide pot to medical patients and receive a “donation” in return, and because many dispensary owners considered themselves activist entrepreneurs and took in a lot of money doing what they saw as civil disobedience, it was difficult for police to permanently shut down the new marketplace of brick-and-mortar shops. By the time the city managed to impose rules in 2018, creating a clear distinction for the public between legal and illegal businesses had become nearly impossible.

But illegal shops do sometimes get raided, catching workers like Kelvin in the middle. While exact data is unavailable, defense attorneys say that at least hundreds of mostly Black and brown people have been arrested in the past two years for working at illicit storefronts, many of whom, like Kelvin, were not aware they were breaking the law.

Though Los Angeles is an extreme example, as a large city that let the problem fester for years, this sort of situation could take hold far more widely across the country. Joe Biden said during his primary and general election campaign that he wants to decriminalize, but not legalize, marijuana nationwide—in part to reduce the harm done to the populations hit so hard by drug law enforcement over the past half-century. (When asked in November, a Biden spokesperson didn’t elaborate on the president’s agenda in any detail beyond what was in his campaign platform; the White House has been silent on the issue since the change in administration and did not respond to a request for comment from POLITICO.) Decriminalization generally means making it so that people can legally possess weed, but businesses can’t sell it. If Democrats do pursue that path, the entire country might soon look like Washington, D.C., or Vermont, where a thriving gray-market economy has started to develop.

As the example of Los Angeles shows, a supposedly middle-ground approach toward marijuana—while far from the all-out War on Drugs approach that disproportionately hurt Black, brown and poor Americans—can ultimately continue to detrimentally affect those same populations in the long run. If localities are supposed to be laboratories for democracy, with each charting its own path around marijuana legalization, then the mess in Los Angeles is a possible warning sign.

Other cities and states have similarly struggled in recent years with the rise of a so-called gray market for cannabis—which takes hold anywhere it’s legal to use cannabis but not sell it. As in Los Angeles, the consequences tend to fall disproportionately on Black and brown people. In a gray market, where any seller is taking a legal risk, the people who succeed are generally white. In Detroit, for example, several hundred illicit pot shops flourished from about 2011 to 2019, when Michigan had a loose law in place allowing for medical cannabis. In 2019, the state began to license dispensaries—but in a city that is about 85 percent Black, the marijuana business owners most likely to endure and survive the transition to legalization were from the suburbs, and not Black.

In Washington D.C., after Congress prevented a 2014 legalization initiative from allowing sales, businesses looked for loopholes to serve the new local market for personal cannabis use. Storefront adult-use dispensaries were, and are, illegal, but gray-market sellers began offering to deliver overpriced items like juice that would come with a free “gift” of weed. Police records show that during the next four years of quasi-legality, 84 percent of the people arrested on cannabis-related charges in the city were Black—about double the proportion of Black people living in the nation’s capital.

Los Angeles holds the distinction of having the largest and the oldest gray market in the United States. The particulars of every cannabis market are complex and localized, but no other city has anywhere near as many unlicensed individual marijuana storefronts as LA. Nor has any other city been dealing with the problem for so long.

The history of weed in Los Angeles is long and complicated, shaped largely without design by many people and forces, but an aversion to legalizing the supply chain is how the city’s cannabis problems began. “We allowed an unregulated medical market without formal licensing for two decades,” says Rosalie Pacula, a professor in health policy, economics and law at the University of Southern California. “There’s a real cost to not regulating this properly, and not cracking down hard initially.”

Starting around 2005, after the state began allowing medical cannabis patients to form nonprofit collectives, pot shops began to blanket Los Angeles, peaking a few years later at about 2,000 storefronts. Not a single one was legal. The cops and the feds occasionally played whack-a-mole, trying to shut the dispensaries down, but the average pot shop made more than enough cash to fund lawyers, lobbyists, and, if necessary, a quick move down the street and a re-up on merchandise following a raid. After picking up a doctor’s recommendation for as little as $40 and the claim of anxiety or migraines, the average pot smoker took practically zero legal risk in buying and consuming cannabis. The illegality of the supply chain didn’t register for most people.

Other states and municipalities handled things differently, offering comparison points that could inform national cannabis policy moving forward. San Francisco began licensing medical cannabis dispensaries in 2006, in response to the same boom that was happening in LA, prompted by the state’s nonprofit collective law. Today, the city does not have an issue with illicit storefronts.

“It’s not the same. We had a permitting process,” says Nina Parks, chair of San Francisco’s cannabis oversight committee. When recreational cannabis was legalized in 2016, she explains, “You had medical cannabis permitting in the public health department. You already had capable staff that knew what they were doing.”

In 2018, Los Angeles finally began issuing marijuana business licenses to a select few, in a complex process with high barriers to entry. Most shops were unable to make the transition, but they stayed open anyway. And by now, the public was tuned out. Even the largest local newspaper had lost the thread; in February 2018, the LA Times directed readers looking for legal weed to a website that listed licensed and unlicensed dispensaries together, undifferentiated. California Governor Gavin Newsom’s senior cannabis adviser Nicole Elliott told me a year ago, “I’ve secret-shopped in LA myself, and I can understand how it can be exceptionally challenging for consumers to know if a dispensary is legal or illegal.”

Although situations like Kelvin’s seem unfair, the California courts in an appellate decision last summer affirmed that it doesn’t matter whether employees understand that a particular pot shop is breaking the law for them to face prosecution. Exact arrest numbers are difficult to come by, but the most recent data, from 2018, shows California made 5,454 total marijuana arrests, with Black people nearly twice as likely to get arrested as white people. Los Angeles defense attorneys interviewed for this story say that, every week for at least the past year, they’ve seen between 20 and 50 low-level cannabis dispensary workers in court on misdemeanor charges; the vast majority are Black or brown, and between the ages of 18 and 25. One lawyer estimated that 95 percent of arrested pot shop employees are unaware they are working for illegal operations.

Kelvin was in his mid-30s when he started working security for cannabis dispensaries, but he didn’t understand that he might be liable for decisions made way above his pay grade. Like most people, when medical marijuana was effectively legal to obtain and possess, and then recreational marijuana became legal too, Kelvin assumed the shops providing it in broad daylight were aboveboard. “I didn’t know what to look for, as far as paperwork,” he says. “I was just going off what they told me.”

Hours after the raid, the shop where Kelvin had been working opened back up. Only the low-level workers had been arrested; the owners, who Kelvin says are not Black or brown, weren’t there when the cops arrived, and their identities were hidden behind an LLC, so the police and the Los Angeles City Attorney’s office didn’t know how to find them. This is typical.

“I feel like it’s really not fair,” Kelvin tells me. “The owners just get to walk away free. They get to open up shops and don’t have any responsibility for the people who work for them.”

Kelvin’s security company told him they would pay for a lawyer if he went back to work, either at that shop, which remains open, or at another unlicensed shop. But Kelvin was done. He wasn’t about to get arrested again for somebody else’s illegal business. He has two little kids, and he can’t take those kinds of risks, he says.

He’s since paid over $5,000 to fight the case, which remains unresolved. If he is found guilty of participating in an unlicensed commercial cannabis establishment, he could face up to six months in jail and thousands of dollars in fines and penalties. He could also lose both his firearm license and his security guard license. “That’s my livelihood. That’s what I depend on, to feed my family,” he says.

Other industries aren’t regulated this way. “Let’s say code enforcement goes into a restaurant doing a random repeat inspection, and they find all kinds of code violations,” says criminal defense attorney Nicole Costen. “They might shut the restaurant down and fine the owner, but they don’t go and charge the bartender and the waitress.”

This, Costen explains, is exactly the opposite of what is happening with workers in Los Angeles’s illicit cannabis dispensaries: The workers are getting arrested while the owners often get away. “The purpose isn’t to discriminate, but that is the ultimate effect,” she says. “The majority tends to be the people working the minimum wage jobs. Obviously, they’re young, and they’re Black and brown.”

The dispensary where Kelvin worked is in a 16-square-mile stretch of the city that currently has zero legal marijuana dispensaries, in a neighborhood that’s about 40 percent Black and 56 percent Latino.

The office of city attorney Mike Feuer defended its prosecutorial strategies in a written statement, saying that “after our office is referred a case from law enforcement involving an unlicensed cannabis business our staff reviews all the evidence and makes a case by case evaluation whether to bring charges or not and against whom,” and that, “In general, first time offenders … who have no financial interest in the business” are given citations, which involve paying a fine between $500 and $2,000, including fees. The statement did not address questions from POLITICO about the disproportionate racial effects of the city’s cannabis enforcement.

But even downgrading a cannabis-related offense from a misdemeanor to a fine can be problematic, Pacula, the USC professor, explains, warning of research showing a “net widening” effect after turning pot possession into a traffic ticket-style infraction, where the number of people receiving citations can grow to be higher than the number previously being arrested. And monetary penalties themselves can also cause real damage. Numerous studies have shown that fines and fees can lead to the criminalization of poverty, are ineffective at raising revenue and, according to a U.S. Commission on Civil Rights report from 2017, disproportionately “harm communities of color and their relationship with law enforcement, which increases public safety concerns,” because “when people feel disrespected or preyed upon by police, they may lose faith in the justice system.”

“The problem is not the law per se, but how it gets interpreted on the streets by the cops,” Pacula says. “None of these are easy policies to implement in a manner that promotes reduced criminal injustices while also promoting public health benefit.” The proliferation of illicit pot shops in LA has been bad not only from a criminal justice standpoint but also because the products at unlicensed dispensaries are not screened by labs, as the ones at licensed dispensaries are. While cannabis itself is far less toxic than alcohol, certain contaminants added to illicit weed vape pens, for example, caused a lung injury crisis in 2019 that left dozens of people dead and thousands hospitalized. Similarly, a lack of regulation on pot farms has led to the widespread use of pesticides known to cause cancer, among other medical problems.

So, what should be done instead, particularly as the Senate considers cannabis reform? Biden talks about decriminalizing possession and consumption but not legalizing and regulating cannabis businesses, Pacula suggests, “because it sounds like it’s a compromise.” But, in the end, she says that kind of compromise has real long-term costs. Allowing cannabis consumption but ignoring how people get their cannabis just creates a new set of problems, which can be difficult to rectify retroactively. That’s why it’s important to think about these consequences now, experts say, and to consider buyers and sellers holistically and simultaneously.

“If we want to get this right, we really need to harmonize the laws and bring people into the supply chain,” says Rob MacCoun, a social psychologist, public policy analyst and professor at Stanford Law School.

Cat Packer was appointed as the executive director of the Los Angeles Department of Cannabis Regulation in 2017 and has seen firsthand the challenges of attempting to implement a licensing system in a place where the gray market has been flourishing for many years. She counts herself among those who worry about what could happen if the rest of the country waits too long to regulate the supply chain, as LA did.

“The reality is that with or without a licensing and regulatory program, cannabis continues to be bought and sold in communities,” Packer says. “But without a licensing and regulatory program, and an accompanying widespread public information campaign, unsuspecting members of the public can find themselves in increasingly normalized engagement with enterprises—as consumers, employees, or neighbors—that are considered illegal under the law.”