Cannabis

Fixing LA’s Broken Cannabis Market

Los Angeles made a promise when voters created a legal cannabis market: businesses that followed the rules would have a fair opportunity to succeed, consumers would have access to regulated and tested products, and communities harmed by decades of cannabis criminalization would have a meaningful path to ownership. LA now has the largest municipal cannabis market in the country, but City Hall has broken that promise.

Illegal businesses remain prolific, while businesses that entered the legal market struggle to survive. Legal operators in LA carry a combined tax burden of roughly 35%, the highest of any major cannabis market in the country, while competing against a vast illegal market that pays no taxes, follows no safety standards and operates with little fear of consequences. The result: nearly 80% licensed businesses have fallen behind on local taxes and owe a combined $400 million, much of it in penalties and interest, while the City's cannabis revenue has fallen from a $123.5 million peak in 2021 to roughly $73 million today. For social equity operators, this discrepancy represents an existential threat and many have closed.

The consequences extend beyond business owners. Consumers are pushed toward untested products, neighborhoods are left with illegal storefronts, tax revenue declines, and the social-equity applicants City Hall promised to support are squeezed out.

Los Angeles cannot tax and regulate legal businesses as though they operate in a protected market while allowing illegal competitors to operate openly. We will restore the bargain: enforce the law, fix the tax structure and make the legal market work.

Stabilize the Market

Legal operators should not be punished for following the rules while unlicensed competitors operate openly. We will pair sustained enforcement against illegal businesses with tax reform and accountable regulation, giving compliant operators a fair chance to compete.

Crack down on unlicensed shops

  • Create a special task force as the lead enforcement entity that owns cases from complaint through resolution, with clear escalation protocols to LAPD and other enforcement agencies.

  • Get unlicensed shops off Google Maps, Weedmaps, and Yelp: State law now requires online marketplaces to verify a cannabis seller's license or post a warning, and gives the Attorney General and licensed businesses the right to sue platforms that keep listing unlicensed shops. The City will use that leverage, working with platforms to display verified license status from the State's daily-updated database and take down unlicensed storefronts.

  • Proactively identify illegal shops: cross-check online storefront listings, State license records, and DWP service accounts against DCR's license list to build a single citywide inventory of unlicensed locations, tracked by address from first notice through closure and published so the public can see what the City knows and how long each case takes. Prioritize patrolling neighborhoods with social equity operators to identify and close unlicensed operators in proximity to licensed stores. 

  • Treat illegal shops as a land use violation and put the pressure on the property owner: work with the City Attorney to utilize cease-and-desist letters to the operator and the property owner on day one; issue daily administrative fines against the owner if the shop stays open; pursue utility disconnect, padlock, and a lien for enforcement costs if it still stays open; initiate a civil nuisance action seeking the $20,000-per-day penalty the City already has authority to impose; and enforcing a permanent bar on City licenses for operators who kept selling after notice.

Fix the tax and alleviate financial burden

  • Champion replacing the City's flat 10% gross-receipts tax with tiered rates from 0.25% to 6% for two years, with the deepest relief for small businesses earning under $500,000 a year.

  • Include cannabis in the small business tax exemption reform. Cannabis retailers, especially social equity operators, are small businesses squeezed out by a tax structure that assumes margins they do not have 

  • Reform DCR’s funding model. Maintain cost-recovery fees for services that DCR provides directly to licensees, but fund key functions of the Department through the General Fund so legal cannabis businesses are not bearing the full cost of regulation.

Simplify Licensing, Compliance, & Renewals

Once someone has made it into the legal market and remains compliant, government should make it easy for them to stay there. Right now, the complexity of being a cannabis retailer means that licensed operators face barriers to entry and several off-ramps: initial licensing, ongoing compliance, and license renewal. 

  • Give every applicant one point of contact from application for a license to opening for business: assign a DCR case manager to coordinate the City's permitting process end-to-end, and provide bridge financing for Social Equity applicants, who often have substantially less capital to survive the gap between securing a site and legally generating revenue.

  • Replace annual renewal with multi-year licenses: once an operator has successfully completed their annual renewal after remaining compliant for their first year of operation, they transition from one-year renewals to an expedited three-year renewal term for operators with clean compliance histories.

  • Advocate for the State to stop policing tax delinquency with police force: a late payment should not end with officers emptying registers and breaking open ATMs at a licensed dispensary. The State should collect from licensed operators the way it collects from any other business, through payment plans, liens, and levies, and it should notify the City before taking action against a City licensee.

  • Let social equity operators build wealth like any other cannabis business: protect Social Equity licenses from acquisition during their early years, but do not permanently restrict who an operator can sell their business to. After a reasonable holding period, Social Equity owners should be able to sell to the highest bidder and realize the full value of the business they built

SUPPORT GROWTH

Once the market is stable, there are clear ways the City can help it grow responsibly. The State now permits cannabis cafes and consumption events with local approval, and LA will host the world in 2028. We will use the tools the law already gives us to open those doors for licensed operators, so the legal market becomes the best choice for consumers and Los Angeles sets the standard for how a well-regulated cannabis market works.

  • Expand pathways for licensed operators to host special events, consumption experiences, delivery, and other legally permitted activities without requiring entirely separate, costly approval processes.

  • Pilot cannabis cafe licenses in advance of the 2028 Olympics, creating new opportunities for licensed operators to attract customers and generate revenue. Importantly, we will ensure participating businesses meet clear standards that protect workers and neighbors from secondhand smoke.