California initiates enforcement against approximately 500 unlicensed marijuana businesses

Less than two months after California’s legal cannabis industry launched on New Year’s Day, state officials are starting to target hundreds of marijuana companies that are operating illegally without a license.

The state’s Bureau of Cannabis Control has sent out about 500 cease-and-desist letters to companies that are doing business but haven’t begun the application process, an agency spokesman told Marijuana Business Daily.

“Just this past week we went from going to licensed operators to do compliance checks to now sending out cease-and-desist letters to the unlicensed operators that we’re finding advertised on different platforms,” said Alex Traverso, chief of communications for the bureau.

“That’s the first step. We’re getting those letters out, and we will follow up relatively soon on the next step, which is not yet available for me to relay.”

The Bureau of Cannabis Control oversees licensing for marijuana retailers, distributors, testing labs and microbusinesses.

It’s unclear what types of businesses have been targeted.

The Department of Food and Agriculture licenses growers, and the Department of Public Health oversees manufacturers.

Recipients of the cease-and-desist letters are most likely a mix of illegal businesses that have “no intention of getting a license” and companies that want to play by the rules but haven’t figured out all the red tape, Traverso said.

California has a lengthy history of quasi-legal dispensaries that operate in a gray area, which could account for many of the letter recipients.

The Los Angeles police department recently estimated there are still 200-300 illegal dispensaries operating in city limits.

It’s also possible some operators are running their businesses illegally because they haven’t received permission from their local authorities to open. Such approval is a key threshold in obtaining a state business permit.

No ultimatums – yet

The letters, which started going out on Valentine’s Day, do not give the businesses ultimatums or specific timelines but encourage them to begin the licensing process.

“We’re going to give (the letter recipients) a little time to right the ship and hopefully come and seek out their license,” Traverso said.

The letters do include a stern warning:

“If you are in fact engaging in unlicensed commercial cannabis activity, you must cease all commercial cannabis operations until you obtain a valid state license to avoid further violations of state law.

“Such violations may result in criminal and administrative penalties, as well as civil penalties totaling up to three times the amount of the license fee for each violation.”

California license fees range from $500 to $125,000, depending on the size and type of business, according to emergency regulations the bureau issued in November.

It’s not clear if the department of Food and Agriculture has sent any cease-and-desist letters, but the Department of Public Health has not.

Steve Lyle, the Department of Food and Agriculture’s director of public affairs, wrote in an email to MJBizDaily that his agency’s “focus is on licensing.”

However, he said, if the agency “becomes aware of an illegal grow, it will inform local agencies for potential law enforcement follow-up.”

Lyle also noted that CDFA has a tip line for complaints regarding illegal cannabis companies.

So far, less than 1% of California’s enormous population of marijuana farmers have obtained licenses, according to a recent report from the California Growers Association.

A Department of Public Health spokeswoman wrote in an emailed statement that the agency “has begun conducting enforcement activities, including site visits.”

Finding the offenders

Meanwhile, the Bureau of Cannabis Control’s letters are just the beginning, according to Traverso.

More cease-and-desist letters will be issued on a rolling basis as the bureau identifies more companies that may be operating without permits, he said, and enforcement actions will ramp up as his department beefs up on staff.

Traverso said many of the bureau’s letters went to companies that have advertised on digital platforms such as Weedmaps because agency staff are cross-referencing ads on the site with their license database.

“There are certainly those online sites – like the Weedmaps of the world – that are advertising unlicensed retail locations and giving them something that looks like a license number, but it’s not a state license number; it’s something that they generate,” Traverso said.

“We’ve been going and looking at those folks that are listed there and double-checking in our system to see if they have a license, and if they don’t, they’re getting a letter.”

The agency also has been identifying potential violators through its online complaint system, through which a number of licensed companies have been identifying unlicensed competitors, Traverso said.

“Through that system, we’ve received over 300 complaints,” he said, “and I’d say the majority are probably about unlicensed activity.

“We’re taking all these complaints any way we can, and we’re following up on all of them.”

Traverso said the timeline and next steps for enforcement against unlicensed businesses are both up in the air.

However, he added, state lawmakers have made it clear to the bureau “they want to see enforcement.”

“They don’t want the licensed folks to be adversely affected by the illegal market,” Traverso said.

John Schroyer can be reached at [email protected]

15 comments on “California initiates enforcement against approximately 500 unlicensed marijuana businesses
  1. Tina Braithwaite/Tribal Chairwoman on

    How can the BCC ask the tribes to wave sovereign immunity and give up civil juridiction to get a state license??? How is it that the BCC is expecting tribes to ask the counties for permission to operate? Tribes are not county regulated! Tribes are equal to the State yet the state wants to dictate to tribes what we can and can’t do. What if i walked into the Governor’s office and demanded to audit their books and demanded to see their records? Not that I would because i respect them as a government! TRIBES NEED TO BE RESPECTED AS GOVERNMENTS!! COUNTY AND STATE OFFICIALS NEED TO EDUCATE THEMSELVES ON TRIBAL SOVEREIGNTY AND PUBLIC LAW 280! WE OFFERED TAX PARITY AND STILL GET LOCKED OUT OF THE MARKET!!! IF ITS LEGAL IN THE STATE IT SHOULD BE LEGAL FOR THE TRIBES!!!! I FEEL TRIBES ARE BEING DISCRIMINATED AGAINST!
    Why do the tribes NOT have a Tribal representative on the BCC Advisory Committee?

    Reply
    • Cartrell Williams on

      I agree it’s been a lot of racism that they continue to over look. We also pay taxes when will the government stop abusing there power it will turn on them soon. We must vote to continue to put the right people in office and not the greedy ones that continue to destroy the world with greed and lies!

      Reply
    • Marilyn Morrin on

      The Tribes have ties to FIVE federal agencies and, federally, cultivation and distribution of cannabis are illegal. Tribes do NOT have the liberty of cannabis businesses until the FEDS change the law. The Tribes has too much to lose.

      Reply
  2. Bill on

    Just a question, what happened to the companies supposedly tracking the marijuana crops. I bought into Helix because of their tie in with Biotrackthc and that stock is dropping.
    Sounded perfect for these illegal operation issues.
    Just curious. Thanks

    Reply
    • Martin on

      The trackers are for licensed grows to licensed dispensaries. How is a tracker going to follow pot from an illegal grow in NoCal when it is on its way to Detroit, North Carolina, Texas, Fla, Atlanta… selling at 3 times the price it would sell here, and no taxes. Maybe you should invest in Apple.

      Reply
  3. Mike on

    Only 1%? Confused and greedy gov has made it so complicated, 50 pages, and expensive it is no wonder only large corporations that will rake in big money can comply and open. Sure gov is looking out for public safety, but people already getting paychecks making rules for people trying to earn a living makes the over restrictive rules that causes the 99% noncompliance.

    Reply
  4. George Bianchini on

    ”Steve Lyle, the Department of Food and Agriculture’s director of public affairs, wrote in an email to MJBizDaily that his agency’s “focus is on licensing.”

    Mr. Lyle should get his own staff in line first. Some of the CDFA commissioners don’t or won’t honor prop 64. Tim Pelican, CDFA commissioner for San Joaquin county, secretly petitioned the Board of Supervisors to destroy, in the dark of night, a fully legal DEA tested and passed Industrial Hemp grow, with no due process. We all are aware of the ”NOT IN MY TOWN” positions that many, I mean most law enforcement and other Bureaucrats are taking. They have had the power to do so for a long time.

    Now comes prop 64, we now have the power to defend ourselves. San Joaquin County has now been sued for $77,000,000. Tim Pelican should be fired. All other Commissioners should have prop 64 explained to them, as well as the fact that their personal dislike for this legal activity will be very expensive. Futhermore, if the CDFA cannot do it’s assigned job, then we need a new CDFA boss, since we need to fire the current one. They don’t need to police the industry until they clean their own house.

    Reply
  5. Hastings RH on

    There’s easily more than 1000 in LA alone on weedmaps.. Legalization is a crock -99% of municipalities have banned production and distribution.. Personal is a joke too -1oz or 6 plants..

    Good thing we still have medical “for now” and we have protection from federal interference
    but political cronies are trying hard to get rid of medical just like corrupt OR and WA

    Reply
  6. Kirstan Sanders on

    There is a way to combat this – proactively. Basically, issuing our own ‘cease and desist’ to the state agencies issuing. How? We become compliant – proactively.

    It’s really hard as a small or medium sized business trying to navigate all this compliance work AND run a business. State agencies KNEW this would be the issue for many dispensaries – it’s just an easy grab for them to prove they’re ‘watching the weed companies’ appropriately. It’s not the right play, it’s the obvious play though. The RIGHT play would be to make sure everyone can operate on equal ground and to HELP businesses vs. drop them.

    **slight personal push: I started in risk and compliance ages ago; my aim was to progressively build the ability to reach out and engage these smaller businesses to make SURE they’re compliant so when the state does come, and they will, they’re already way ahead. Also, because of the tax issues associated with 280E, it’s best to constantly evaluate, pivot, plan for the tax ramifications that arise by being sell only or sell/grow without the proper guidance to alleviate some of that stress or make some different business decisions.

    Reply

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