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Santa Ana’s black market for Marijuana

marijuana black market

Seven months after Santa Ana began licensing medical marijuana dispensaries, officials say there are up to twice as many unlicensed pot retailers as sanctioned shops in the city.

Some licensed dispensaries say competition from unregulated shops – which aren’t subject to the same city taxes, limits on operating hours and other oversight – is threatening to put them out of business.

“We’re stoked to have a store, and we’re trying to do everything right,” said Jeffrey Holcombe, co-owner of 420 Central dispensary. “But the rogue stores are making it extremely tough.”

There are unlicensed sellers who openly thwart the law, authorities say. Others are challenging the city’s procedure for awarding licenses or argue they have a legal right to provide medical marijuana as collectives under the state’s 20-year-old Compassionate Use Act, which legalized medical marijuana.

The Santa Ana Police Department has a dedicated task force working on enforcement of the medical pot industry and says it has shut down more than 90 of the 109 unlicensed operations identified to date.

Shuttering the remaining 20 or so unregulated shops has been a lengthy, difficult process, exacerbated in part by lack of information on who is actually running the businesses, said Cmdr. Jason Viramontes.

“We do everything within our power to shut these down,” Viramontes said.

The ongoing enforcement battle in Santa Ana, which has the only sanctioned pot shops in the county, highlights a larger question infusing the statewide debate over legalization of marijuana: Can the government gain full control of a gray, retail pot market that has gone largely unregulated for two decades?

Medical marijuana has been legal in California since 1996, and storefront pot dispensaries have proliferated. But until October, state law made no provisions for such businesses or placed any regulations on their operations.

Cities across the state, including many in Orange County, have declared war on unlicensed shops in recent years, using police raids and court actions. Other jurisdictions opted to regulate and tax the businesses, as Santa Ana did when voters approved Measure BB on Nov. 4, 2014.

After the measure passed, the City Council approved a plan to allot 20 licenses on a lottery basis – only 10 of which have completed the permitting process. The City Council also pledged $1.5 million annually toward enforcement to gain “rapid closure of any collectives/dispensaries operating illegally.” Illegal pot shops lead to “a proliferation of crime” and lower the quality of life for residents, Viramontes said.

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