California’s illegal pot business is booming

From the road it looks like a goat farm. From above, the Riverside County, California sheriff’s deputies saw something different. Four huge white tents known as hoop houses containing $1.5 million worth of illegal marijuana plants.

“The illegal industry competes with the legal industry and practically puts it out of business,” said Sgt. James Roy, chief of the Riverside County Sheriff’s Department 12-person marijuana eradication team.

“This place is no different than thousands of others we’ve met this year that have confiscated about half a million plants in Riverside County alone,” Roy said.

California became the first state to legalize medical marijuana in 1996, followed by recreational cannabis in 2016. Since then, it’s been a disaster for the legal marijuana industry and law enforcement agencies, who continue to arrest illegal growers and dispensaries despite legalization.

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Marijuana plants in a green light grow room during their night cycle in Gardena, California.

Marijuana plants in a green light grow room during their night cycle in Gardena, California.
(AP)

“The price of everything in Los Angeles is going up, except weed, it’s everywhere,” said Detective Mike Boylls of the Los Angeles Police Department’s Gang and Drug Squad.

“The state has legalized cannabis and hoped to make it a legitimate market. But the problem is that these illegal deals are popping up and undercutting all the legitimate deals. They sell products for almost half the price. So our job as law enforcement has actually gotten more difficult,” Boylls said.

The California experiment is important because the rest of America is at a crossroads when it comes to pot. In November, two states — Missouri and Maryland — legalized adult recreational marijuana use, bringing the total to 21. The initiative fell through in three states — North and South Dakota and Arkansas — as more data showing the higher THC levels in commercial production concerns public safety experts. The percentage of accidental deaths related to cannabis has more than doubled from 9% in 2000 to 21.5% in 2018, and the percentage of deaths caused by both cannabis and alcohol has increased, according to an im more than doubled in a study published in the American Journal of Public Health last year.

“We’ve been told if we legalize it, we’ll get rid of the drug dealers, we’ll greatly reduce the illicit market. People will gradually buy it and there won’t be an underground market anymore,” says Kevin Sabet with the Foundation for Drug Policy Solutions.

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“But the exact opposite happened. The illegal market has exploded since California legalized marijuana because of the surge in demand due to great marketing. We know marijuana is a lot worse than people think, so the idea is that it’s no big deal,” Sabet said.

In the midterm elections in November, pot was again a popular topic on the ballots.

In the midterm elections in November, pot was again a popular topic on the ballots.
(AP Photo/Seth Little, file)

California’s problem starts with the economy. Lawmakers including Gov. Gavin Newsom saw a cash cow and backed proposals to legalize the drug despite a federal ban. By requiring licenses to grow and ship marijuana, permits for retail sale, and taxes on purchase, the state effectively imposed a 70% tax on legally purchased marijuana.

While proponents say the regulations make it safe and certified free of pesticides and chemicals, the high price has pushed sellers and consumers back into the illegal black market. California taxed pot sales at $5.6 billion last year, but police estimate illegal sales are twice that — with 10 illegal farms for every farm that has a state license.

“It’s definitely profitable for the illegal market,” says Roy. “They sell greenhouse marijuana anywhere from $500 to $2,000 a pound here on the West Coast. But if they take the exact same product and send it back east, it costs two or three times as much.”

Matthew Schweich of the non-profit cannabis reform organization Marijuana Policy Project says California is to blame for killing the golden goose.

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“We’ve spent a century making cannabis illegal and driving people into an illegal market. Then it will be legalized, but the tax rates are too high. It’s just a simple cost analysis,” Schweich said. “People can buy cannabis cheaper than going to a regulated licensed store because the tax rate is too high. So if you have a state that allows the possession and home growing of cannabis versus a long list of states that don’t, it follows that people can take advantage of that policy, grow more than they should and they in states bring where it is illegal.”

In last week’s bankruptcy, Roy’s team destroyed 3,000 plants and a nursery. Dozens of rows of plants, up to two meters high, stretch about 30 meters in length in each greenhouse. A row of light bulbs on the ceiling allows farmers to get two extra harvests each year, maximizing profitability. In an adjacent house, deputies found two breeders hiding in a closet. A third man ran into the desert but was spotted by a helicopter.

Jeremy Baldwin marks young cannabis plants at a marijuana farm operated by Greenlight.

Jeremy Baldwin marks young cannabis plants at a marijuana farm operated by Greenlight.
(AP Photo/Charlie Riedel, file)

“Along with these growers, these illegal growers, comes a lot of violence and a lot of guns,” says Roy. “We issue warrants for operations like this every day. And in 80% of the places we find guns, high power weapons, assault rifles and things like that.”

In 2020, Riverside linked 14 murders to illegal marijuana operations, including seven shootings at a large processing center. Nothing was taken. The victims came from Laos. Police say California’s illegal growers are usually funded and run by either Asian organized crime or Mexican cartels that routinely try to put each other out of business. Distribution is less centralized, but US street gangs often control street sales to illegal pharmacies.

“There are so many illegal cannabis businesses here that we need to close these businesses,” said LAPD’s Boylls.

The problem is that when voters decriminalized marijuana, the police were deprived of the tools they used to shut down operations. Crimes and offenses became misdemeanors and transgressions. Suspects ignore warrants and prosecutors don’t take cases. Because there are no penalties, nobody goes to jail and pharmacies see fines as a cost of doing business. The store, which was raided by the LAPD last week, had been shut down by police seven times. This year alone, the LAPD has busted more than 300 illegal pharmacies.

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“This will most likely reopen in a day or two. And we need to look at that again,” Boylls said.

“So my advice to other states is: don’t force the cart before the horse. Don’t decriminalize the drug until you have your processes in place and know how you’re going to enforce regulations controlling the illegal business, or you’ll be playing catch-up,” he continued.

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