The marijuana market in Los Angeles is, by most accounts, the largest in the United States.
It’s estimated to rival the entire state of Colorado’s billion-dollar industry, with perhaps 1,000 retail shops plus untold cultivators, delivery services, testing labs, edibles bakers and concentrate makers operating in the city – even before legalized recreational marijuana sales kick in next year.
But many of those businesses pay no city taxes. And none of them are licensed, with little teeth in current city law to go after rogue shops that pop up faster than authorities can shut them down.
“Right now, there’s no way for patients or consumers or lawyers or even law enforcement to know whether they’re visiting a lawfully operating shop,” said Steve Gormley, CEO of Seventh Point, an LA-based private equity fund that’s buying dispensaries across the county. “It’s a very opaque process.”
Two competing measures on the ballot March 7 – Measure M and Measure N – aim to change that.
Both measures would allow the city to license marijuana businesses for the first time, impose new taxes, create stiffer penalties for illicit shops and pave the way for recreational marijuana sales.
Measure N, which was drafted by a cannabis trade group, made the ballot first. It’s a lengthy measure that favors existing shops while laying out detailed regulations for where and how businesses could operate.
The city put Measure M on the ballot to counter the trade group’s effort. Measure M is a brief and flexible plan that gives the City Council power – after gathering input at public hearings – to create a licensing scheme and operating rules for marijuana businesses.
Measure M has the clear edge heading toward Election Day, with endorsements from law enforcement, community leaders and area newspapers stacking up.
Even the trade group that authored Measure N has abandoned their proposal, throwing their support to city-backed Measure M.
“It is not an easy issue to deal with,” said L.A. City Council President Herb Wesson, who spearheaded Measure M. “But we believe this measure is very fair. Seeing that the lion’s share of the industry is supportive of it I would think sends a message that we did reach out, and we are trying to come up with something that everyone can live with.”
While voters have favored regulated marijuana markets in recent elections, Measure M still faces some challenges. Turnout for local primaries is always low – and may be particularly down March 7 thanks to political fatigue after such a bitter presidential contest. Having two marijuana measures on the ballot is also likely to cause some confusion, which often leads voters to shoot both down.
But the Southern California Coalition, a cannabis industry group that worked with the City Council to draft Measure M, said polling shows the measure should pass, with Wesson and industry leaders adding that they’re cautiously optimistic.
“I think the L.A. marijuana lobbies are pretty well organized and well funded,” Gormley said. “So I do believe we’ll have a good voter turnout and I do believe it will fall in our favor.”
HOW WE GOT HERE
Californians voted to decriminalize medical marijuana in 1996. For the next decade, Los Angeles did little to regulate the dispensaries, cultivators, manufacturers and delivery services that claimed the right to operate under that vague state law.
The L.A. City Council in 2007 finally passed an ordinance to block all new marijuana businesses. But that triggered a rash of lawsuits against the city while the number of shops continued to skyrocket, prompting voters in 2013 to approve Proposition D. The measure gave 135 medical marijuana dispensaries “limited immunity” from prosecution, but didn’t actually license those shops or give the city power to regulate other cannabis businesses.
“I do think L.A. city needs to clean up what’s going on,” said David Dinenberg, founder of L.A.-based KIND Financial, which makes software for the cannabis industry. “Regulation is a necessary evil in every industry – especially in the cannabis space.”