End of an era: After Jan. 9, California’s unlicensed medical cannabis collectives/co-ops illegal

On Jan. 10, California’s legal cannabis industry is expected to get even smaller.

Medical marijuana collectives and cooperatives will become illegal without a state license that day, per guidance that the Bureau of Cannabis Control (BCC) issued in January 2018.

Cannabis industry experts have suggested the impact of the deadline has already made its mark on the California marijuana industry by forcing nonprofits to either get licenses or close up shop.

But in many cases, the collectives/co-ops might just keep selling, turning their back on the regulations in hopes of avoiding law enforcement as long as possible.

Technically, unlicensed MMJ collectives and co-ops were allowed to operate through 2018 without state permits, because they were given a legal defense from prosecution as medical collectives under state law.

But that grandfathering period ends Jan. 9, meaning any collective or co-op being run without a state permit on Jan. 10 could be raided by law enforcement and shut down, with employees and operators facing possible criminal charges or civil fines.

While it’s unclear how many collectives and co-ops may still be operating in California to date – neither the BCC nor the California Department of Tax and Fee Administration had any firm data on existing collectives/co-ops – industry insiders estimated the number could easily be in the hundreds.

“It’s significant because, at this point, if you don’t have a license, whatever legal protection you have goes away,” said Los Angeles cannabis attorney Michael Chernis.

“And the stark reality is that for many places in California, licenses are not available,” Chernis noted, a reference to the fact that roughly two-thirds of California’s cities and counties still have MJ business bans in effect.

The issue is perhaps most pronounced in Chernis’ home region, Los Angeles, because the city has been so slow to issue licenses for cannabis retailers, including many that operated through 2018 under the same collective/co-op model that’s about to end.

“The big losers,” Chernis said, “are the businesses that have been around as long as anyone who’s been licensed, and they have to face a really difficult choice right now:

“Do they completely cease operations because the city of L.A. hasn’t gotten around to offering them a legitimate pathway to license … or do they continue operating in the black market?”

‘Symbolic’ impact or uptick in raids?

The broadest impact of the disappearing collective/co-op model will probably be on medical patients, caregivers and small local collectives and co-ops that weren’t really focused on the business end of the industry, but rather, were actually operating as nonprofit medical charities, said Ellen Komp, deputy director of California NORML.

“There will be patients who will have their access interrupted, and some of them won’t be able to access or afford a licensed facility where they can find their medicine,” she said.

“And collective owners will get caught up in the laws, prosecuted civilly or criminally for not having a license.”

Komp also noted the BCC was originally slated to perform a study on nonprofit MMJ collectives before the regulated market launched in January 2018, but that deadline was pushed back to January 2020, leaving any still-existing medical collectives in “legal limbo” for another year.

Komp and several other industry sources said it’s possible that after the collectives and co-ops become illegal there may be an uptick in enforcement efforts against unlicensed MJ shops.

“You’re still going to have a pretty robust illicit market, and what we’ve seen over the course of this past year is cities that are choosing to crack down on the illicit market … will continue to do so in the manner they have this past year, which is through code enforcement violations,” San Diego attorney Kimberly Simms said.

“I don’t think you’re going to see this huge uptick in raids,” Simms added, saying she doesn’t believe most communities have extra resources to devote to combating unlicensed cannabis shops.

“It is the sort of symbolic end to what people felt like has governed the industry for the last 20 years,” Simms said.

Hard-to-quantify impact

Another longtime MJ attorney, Oakland-based Bill Panzer, said many of the dispensaries that will face the choice Chernis referred to were never nonprofit collectives or co-ops.

Panzer said that before 2018, when all MMJ businesses were required to be nonprofits, “if you looked at the shops that were operating in California under the collective model under a magnifying glass, at least 90% would not pass muster.”

The ones that would, he added, have either already transitioned to the for-profit market and obtained state licenses, or have already exited the market.

“They’ve already been impacted,” Panzer said. “I don’t think there’s going to be many more … because the state has taken the position that nonprofits still have to get licenses. And a lot of these places can’t afford it, so they’ve been being shut down over the last year.

“I personally don’t know any (collectives) that have gotten a license and have still continued to operate as a nonprofit.”

Enforcement mostly falls to local authorities

Others aren’t as optimistic that law enforcement will turn a blind eye to unlicensed cannabis collectives and co-ops.

“Enforcement is likely to increase, because that (collective) defense isn’t there anymore,” stressed Omar Figueroa, another longtime MJ industry lawyer.

BCC spokesman Alex Traverso wrote in an email to Marijuana Business Daily that his agency will continue to use a carrot-over-stick approach and try to coax illegally operating collectives/co-ops into getting state licenses, instead of coming down hard on those without permits.

Traverso noted that, in the past month, the BCC issued more than 1,300 temporary cannabis business licenses, including to many currently operating as collectives or cooperatives.

For those companies to become fully legal and sustainable, however, they’re going to have to obtain full annual permits – a much harder threshold.

That also doesn’t exempt unlicensed collectives and co-ops from prosecution by local authorities, which have largely been running point in combating California’s illicit market over 2018.

In many of those cases, however, misdemeanors, not felonies, have been the only charges filed.

John Schroyer can be reached at [email protected]

20 comments on “End of an era: After Jan. 9, California’s unlicensed medical cannabis collectives/co-ops illegal
  1. Pat on

    This was the bone tossed out to law enforcement agencies, who by and large have been sitting on the sidelines with the exception of flagrant violations such as large grows eg: 100’s-1000’s of plants, etc.

    This is law enforcement’s opening salvo to come in and reap the profits from amoral; and what’s going to prove to be, in part, a very costly legislative and political mistake laid down upon the still unwitting ca. taxpayer. The problem now, is that it’s not pre-1996. Twenty-two full years have now passed where legalization drew in ANOTHER, much different group of people. These people, that are historical law abiders and generally good citizens. A lot of them. Most of them of modest means, having used this as an opportunity to do something good ( when it was medical cannabis ) and to bolster their incomes at the same time.

    This group ( outside of the historically criminal cartels ) is probably much, much larger than those of the underbelly of society that the cops should be going after for obvious reasons. However, after 22 yrs of conditioning of the folks that were never involved with cannabis prior to 1996; learning and perfecting their trade; this including, for instance how to effectively cultivate organic cannabis; having made their connections over the years under a legal framework… And, most of all, had gotten a good taste of that greater independence it brought to them and economic security.
    Is this group is all of the sudden going to stop what they’ve been doing? ( That’s potentially a huge investment in time and capital. ). Esp. when the rug was pulled out from under them w/a bait and switch by the state of ca? They won’t. Most won’t. They’ll most likely continue now, with a fervor and vengeance and end up in the black market side, to be mixed in the the really bad guys in the cop administrator’s mind. The relative newbies ( and a lot of the peaceful oldies ) ideologic framework are much different that of the real “bad boys” most of whom were able to get licensed because of the money that they were able to amass often through ( threat of ) violent, unscrupulous means. Over time, the post 1996 group has become dependent on it. And, not just for economic reasons.

    So, now. compared to prior to 1996, the cops are going to have a potentially larger field to harvest from. Much larger and more vulnerable. As a lot of these folks are poor or just trying to make ends meet. The funny thing is, is that the cops have historically had a “hard time” going after the really bad players prior to 1996, AND through today. So, does this give law enforcement rationale to expand their budgets that much more to go after the post Generation 1996’ers? You bet. Part of the deal with the legislators and the BCC. That’s how these cop administrators and their union’s think. They don’t give a damn how that tax dollar is spent. So long as they can get their hands on as much of it as possible by any means.

    Just make sure, that you, Mr. Law Enforcement… when you go after these people who aren’t harming anyone ( besides not handing you and good percentage of their profits…just because ); that you go after your deputies’ brother’s, sisters, mother’s, father’s , grandparent’s, best friends, retired law enforcement buddies, etc….first. Right? You know who they are and where they live and what they’re doing. By now, there’s a lot of ‘em. Some of them may have been able to take that money, and open up a daycare center in a nice area of town and take care of your kids while you’re at work. And, possibly at a subsidized rate. Go after them first, and do to them what you plan on doing to everyone else that’s not related to you or that you are friends with. See what happens to your relationships with those people when you do it. And, if you don’t, and a neighbor gets tagged instead, the finger’s going to get pointed right back at that kindred spirit of yours. Let’s see how the moral, ( esp in those rural counties that don’t allow licenses; which compose of the vast majority of counties in ca. ) within those agencies deteriorates, all for the purpose of fattening the administrator’s coffers by doing something like this. It won’t be that administrator doing doing the leg work. He’s sitting behind a desk pushing pencils. Increasingly, and over time, working against the tax payers best interests to primarily serve own.

    If most of this doesn’t make any sense; it’s because it doesn’t. And, when it doesn’t to the average citizen, you can best bet there’s a huge special interest behind it. One that has the public’s best interest in the garbage heap. The special interest of the day is: Law Enforcement. A public agency charged with protecting the public with the efficacious use of their tax dollars as the general public would largely expect from such an agency. We’ll see what happens. Unless of course, the new congress makes all of this federally legal ( As a priority. Jan 10 is a week away. ), in such a fashion, to make most of this go away for those most undeserving to be victimized by this stupid and crazy ca. “law.”

    Reply
  2. Open Minds on

    The BCC is a joke. They haven’t even closed down illegal dispensaries that have been operating for years, and now they are going to go after legal ones that didn’t get their license on time? Yeah right. My legal dispensary is surrounded by 5 illegal ones. How do I know? You can find them on Weedmaps.

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    • Ak on

      Those illegal dispensaries paved the way for your “legal” one. It’s not a secret that the overwhelming majority of licensed businesses are white owned. You have Jon Boehner in the cannabis industry for crying out loud!!!! Ever think people might prefer to get their product from decent human beings who aren’t capable of doing it legally?? It’s crazy how anyone would buy from the same wealthy people who are responsible for throwing millions of decent fathers and mother’s in jail for doing the exact same thing they are doing themselves now. Someone who supports planned Parenthood wouldn’t want an anti abortionist running the clinic for profit so why should cannabis users support people like Boehner???

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      • Pat on

        He’s ( Boner head ) “connected” to the machine/establishment, that’s why. So, that they can get a chance to get connected to money and power, in the most corrupt fashion.

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      • Open Minds on

        Ak on – You’re not making any sense. How would you like to be a business owner surrounded by competitors who don’t have to pay taxes and therefore can undercut your prices? Yes, existing taxes are too high but that doesn’t mean illegal dispensaries are ok. Not to mention the fact that the products being sold at illegal dispensaries are untested and full of pesticides, heavy meals, molds etc. By the way, the legal dispensary I go to is owned by a person of Hispanic descent.

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        • Pat on

          Open Minds, you make an interesting point with regard to race, and the inequities so obviously pronounced in how this is all manifesting itself around the issue. So, you say the owner of this dispensary is of Hispanic descent. Why not just say: Hispanic?? Elizabeth Warren is pretty white to me, but she claims to be of Native American descent. So, when you state Hispanic descent, rather than Hispanic, or Black, or Asian ( w/o the “descent” caveat ) ; do they actually really “look” Hispanic, Black or Asian, etc.. ( other than White )? And, do they come from a compromised socioeconomic background? What I’m getting at is, did this person acquire their wealth by above board means ( or not ) do be able to get a license for his dispensary? Or, does she/he look “White-bread” and come from an upper middle class family that happens to have “some” Hispanic in their blood lines? I say this because just a handful of minority owned dispensaries does not justify the majority being White owned. You seem to be suggesting that.

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        • Ak on

          Ask that guy who is operating an “illegal” dispensary if he would apply for a license if get could????? You are the one who isn’t making any damn sense. Do you think these industry was 94% white before legalization?

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  3. mike on

    enforcement, enforcement =confiscation of cash for the locals to keep. becone legal but you can’t because locals refuse to allow pot biz. losers are all the real legit businesses that were coops trying to sincerely serve those that need pot as meds. keeping it quasi illegal means that so many that could benefit from the medical benefits are afraid to buy or use because again, enforcement that as we can see from ice, will go after even grannys, so this will keep needed meds still away from them. this is just another step in crowding out the small operators to ensure big businesses take it all.

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  4. George Verstraete on

    The only thing that matters is that Everone needs to be held to the Same standards, Period. If you have a group that is trying to do Everything Legal and All the costs that it takes to get there, then it’s totally unfair that others don’t have to be held to the same standards/ safety concerns / taxes/ permits etc

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    • Pat on

      George, the state doesn’t care. Never did. The “standards” you refer to, don’t really exist. The process is different for everyone applying for a license. It’s also the boatloads of money that the state ( and local jurisdictions ) says you need to pay to have an opportunity to play; and, then it’s still wait and see. In addition, once you’re on the hook, the state/locals devise new ways to add/increase fees, etc. It is unfair. Very unfair. It’s blatantly corrupt. Many of today’s black marketeers that continue to do business the 215/420 way saw right through the b.s., and the snare the state ( in conjunction w/oligarch special interests ) has set up to catch as many as they could in their web. It’s like a lobster trap: Once you’re in, you can never get out. The Hotel Cal.

      All the state needed to do was minor tweaking of existing law 215/420, and ensuring a well standardized product testing program. That’s it. The upshot of this “law” is to eliminate as much of the old guard’s competition and to keep the prices as high as possible. Nothing else. The state wins. The oligarchs win. The 99% lose ( the ca. taxpayer loses even bigger ) AND have the potential to be severely punished if they dare compete or go against the state’s Fu*ked up decree. It’s 2019 and this sh*t’s still going on. It’s not at all about the plant. It’s about what the plant means in revenue/the money it brings in. The state has absolutely no interest in anything else, but in controlling the spigot of money and where it goes. If tomatoes were worth anything that weed is now, do you think that the state would have just left well enough alone with regard on how tomatoes are regulated now?

      Reply
  5. Taylor Leeson on

    Is it legal for Weedmaps to third party broker an online deal with a non-licensed dispensary. Weedmaps keeps sending me notifications for not paying for an order that I backed out because the store did not have a license.

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    • Not a Fan of Weedmaps on

      Is it legal for Weedmaps to third party broker an online deal with a non-licensed dispensary? I’m not a lawyer, but I’ m pretty sure the answer is no. By doing that, not only would Weedmaps be engaging in unlicensed commercial cannabis activity, it would be acting outside the scope of the immunity afforded by the Communications Decency Act. You should let Lori Ajax, Chief of the Bureau of Cannabis Control, know what is happening to you. Weedmaps has defied Chief Ajax’s polite request to stop advertising unlicensed operators, and apparently has now escalated the situation to the point of brokering online deals with unlicensed stores. You should also consider notifying the Cannabis Enforcement Unit in the Division of Investigation within the Department of Consumer Affairs. Also the Office of the Attorney General of California. Weedmaps needs to realize that it is not above the law.

      Reply
  6. john ward on

    ”For those companies to become fully legal and sustainable, however, they’re going to have to obtain full annual permits – a much harder threshold.”

    And there is the rub. By violating the voter approved prop 64, the BCC has taken from the pioneers of the industry and given it to the deep pocketed investors that don’t give a hoot about the medicine. It’s not right to put this newly forming war on drugs on local law enforcement. If the new law was handled right the grey/black market operators should have been brought into the light of day, thereby eliminating the bulk of the illicit market. The BCC was given $30 million bucks to make this happen. In fact it was required in ca. Code 26014.
    In my opinion the BCC has not so far, nor will not, follow the State law. The Board needs to be fired and replaced by people who know what their doing.
    The almost 300 pages of rules and regs needs to be whittled down to about five pages. In fact the rules for selling sugar, a psychoactive product also from a plant, now responsible for over 200,000 deaths per year should have the 300 pages of stupidity, not cannabis, a harmless plant.
    We needs common sense rules for this simple plant.
    Maybe when the BCC Board started writing the rules for “The Marihuana Plant” the closest reference they had was how to operate a Nuclear Power PLANT! Hey there both plants.
    FIRE ALL THE BCC BOARD MEMBERS!!! Don’t make us go all class action on ya!

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  7. Rick Thompson on

    This closely mirrors the situation in Michigan, where 60% of all dispensaries were forced to close on January 1st.

    Reply
  8. Bruce Murray on

    Another big problem is there are whole counties (kern) that have banned all cannabis activity. so many of the dispensaries couldn’t even get a conditional use permit to operate.

    Reply

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