How will the city regulate marijuana?
Proposed cannabis regulations raise concern that L.A. may drive away businesses — and tax revenue.
Cannabis proponents say L.A.’s new rules are full of potential legal traps, Robin Abcarian writes.
I felt kind of sorry for the guy sitting next to me Monday at the “Future of Cannabis” event at the Los Angeles Athletic Club.
He’s a commercial real estate broker who knows nothing about the marijuana business. But a friend of his who works in the trade suggested that now would be a good time to move into this burgeoning industry.
After all, California voters legalized recreational use of marijuana in November. The city of Los Angeles is projected to be the biggest marijuana market in the biggest marijuana state. People are salivating at the chance to leap into this brave new world.
All they have to do is figure out the regulations. Which are, in a word, confusing.
This month, Los Angeles City Council President Herb Wesson’s office released a draft of the regulations that will govern the cannabis business in Los Angeles. The rules were put together after many months of meetings between the city and various stakeholders, including the United Cannabis Business Assn., the Los Angeles Cannabis Task Force and the United Food and Commercial Workers union.
From all accounts, the process was collaborative and productive.
Yet when Wesson’s office released its draft June 8, the cannabis community was shocked. Instead of proposing that cannabis companies receive licenses or permits from the city to do business, the city is proposing that they receive a “compliance document,” which will entitle the holder only to “limited legal immunity.”
“It’s remarkable and incredibly disappointing,” said cannabis attorney Michael Chernis. “Legally speaking, a license or permit is express permission, whereas ‘limited legal immunity’ is not. Ultimately, it leaves these businesses vulnerable to prosecution, and puts the onus on them to overcome charges made against them.”
It appears that the office of City Atty. Mike Feuer is responsible for this language. I called his spokesman to try to get a sense of what Feuer thinks he’s protecting the city from, but did not receive a reply by my deadline.
Some cannabis proponents fear that the city attorney’s office is stuck in the mentality that equates cannabis with the illegal drug trade and is only grudgingly accepting its changed status. Or that Feuer may be worried that the city may incur some sort of liability because marijuana is still illegal under federal law.
But California voters overwhelmingly passed Proposition 64 in November, which legalized marijuana for adult recreational use. City voters have overwhelmingly supported legalizing and regulating the industry. And the U.S. 9th Circuit Court of Appeals set an important precedent last year when it ruled that the Justice Department may not spend money on actions that contradict a state’s medical marijuana laws.
From a business perspective, it’s not entirely clear how failing to grant licenses and permits will affect the legal cannabis industry in Los Angeles. But some people think it will discourage investors from supporting local cannabis enterprises when they can put their money behind businesses in California cities that aren’t hedging.
“This will be like trying to build your business on quicksand,” said Ariel Clark, a Santa Monica attorney who specializes in cannabis regulation. “It’s fundamentally flawed.”
By this point, the commercial real estate broker sitting next to me was shaking his head. He let out a sigh and left.
There were probably 200 people in the audience at the Athletic Club on Monday. Not all were neophytes.
Some, like Christopher Hope, have been in the pot business for years. He spoke angrily about Los Angeles letting down voters who in March approved, by a wide margin, Measure M, which required the city to update the unfair and outdated marijuana regulations that have led to inconsistent enforcement and whoknows-how-many kajillions of dollars in lost tax revenues.
Hope owns a West Los Angeles medical marijuana delivery service, Sequoia Wellness, which operates in 12 Los Angeles County cities — roughly from the Hollywood Bowl to Pacific Palisades to Redondo Beach. He is trying to raise about $200,000 to expand his business and is furious that the city of Los Angeles may not extend to him the legal protection that a license would confer.
“I can’t go get a license? I am going from one meeting to another, talking to investors. I can’t go to them and say, ‘I don’t know if this is going to work or not, but hey, do you want to put some money into this? How are we supposed to work as a business? And why is Los Angeles, one of the biggest marijuana markets, not the beacon on the hill for everyone else to be looking at?”
On Wednesday, the Los Angeles City Council will take a major step into the future when it votes to create a Cannabis Commission and a Cannabis Department.
Hopefully, by the time council members vote on the proposed regulations later this summer, they will have realized it’s in everybody’s best interests to give the same kind of protections to legal cannabis that other legitimate businesses enjoy.
Otherwise, warned Jerred Kiloh, a dispensary owner who has been deeply involved in crafting the regulations, cannabis businesses — and their tax revenues — will be pushed out of the city.
“If they are not going to be safe in Los Angeles,” Kiloh said, “they are going to put up shops outside the city limits. They’ll still access the L.A. market, but L.A. is not going to reap the rewards.”
After all the struggle and dysfunction that this city has experienced as it’s tried to figure out how to regulate marijuana, that would be a shame.
This industry has lived in the shadows for too long. Come on, council members. Bring it into the light.