The California Cannabis Underground Market is Thriving

In Los Angeles, Omar Buddakey emerges from a plain-looking structure holding a joint.

This purchase took place on the black market, where no taxes are paid and the commodity is not controlled, five years after cannabis was made legal in California.

When he lights up his preroll, the 27-year-old tells AFP that legal outlets are too pricey.

Buddakey calculates that by staying away from the state-approved stores, he will save the equivalent of a paycheck from his patient transport work over the course of a year.

“For the same item, I would rather spend less. That also gives me the same emotion, so I know it’s the same thing.”

East Los Angeles’s working-class Buddakey area is filled with businesses like this one, many of which are identified by a green cross.

Even though they are against the law, many of them have their own websites and freely advertise online.

A guy who only goes under the name “Joe” greets a regular stream of clients inside one of them and offers them a choice of buds and leaves.

A pound (30 grams) of marijuana costs $100 here, which is $35 cheaper than at a business subject to state regulation.

He told AFP that “cops have raided this establishment perhaps eight to ten times.” They steal the marijuana, our cameras, and all the money.

We just reopen either in an hour or the next day.

“Nickeled and dimmed”

Twenty years after being approved for medical use with a prescription, recreational use of cannabis was legalized in California in 2016 thanks to a vote.

The goal was to eliminate unlicensed vendors from the streets, control the drug to guarantee it was of a high enough standard, and increase tax revenue for the state coffers — objectives shared by Canada, Uruguay, and Germany, among others.

The first legal stores debuted in 2018 and are now widespread throughout the state’s various cities.

Few streets in Los Angeles are without one, from simple hole-in-the-wall dispensaries to opulent boutiques, where a cannabis sommelier, or “budtender,” may suggest the ideal combination and expects a tip in exchange for their assistance.

Tom Adams of Global Go Analytics claims that the scale of the subterranean market, which has stayed constant at $8 billion annually, has not been affected by the surge of retailers.

The legal industry is having trouble. Sales of legal marijuana declined 8.2% to $5.3 billion in 2022.

According to Adams, “California is now paying for the two critical mistakes it made while structuring its program.” They weighed it down with excessive taxes and restrictions.

Like with many things in California, the regulations governing the sale of cannabis are intricate and governed by many, perhaps overlapping governments.

The final decision on whether to permit the selling of recreational marijuana on local property rests with each city or county. Less than 40% of them have therefore given their approval.

The state’s 40 million residents may purchase cannabis from 1,100 authorized shops, but due to their uneven distribution, a significant portion of clients are forced to buy from unlicensed dealers.

Yet where trading is permitted, according to Nathan Holtz-Poole of Venice Beach’s Green Goddess Collective, which employs 18 people, “we’re basically nickeled and dimed to death.”

“Unfortunately, that is really straining the business,”

The cost of marijuana purchased legally increases by 35% after excise and sales taxes levied by the city and the state of California, according to Holtz-Poole.

He sells everything from homegrown plants to highly concentrated cannabis extracts, from sweets to beverages, in his beautifully adorned, herbalist-like shop.

The 57-year-old businessman claims that while seeking the premium segment of the market, he isn’t exactly cashing in.

“We are barely getting by. At most, we are even.”

He claims that competition from illegal vendors hurts his bottom line and that he loses 30% of his clientele to businesses that are exempt from filing taxes.

According to Holtz-Poole, it is well known that certain locations offer THC-containing goods even though they are only licensed to sell CBD, a marijuana derivative that doesn’t make people high. THC is the psychoactive component of marijuana that induces a high.

He laments because “there is absolutely no enforcement at all” despite his repeated reports to the police. We are feeling totally abandoned.

According to police, they have one hand tied behind their backs as they ascend a hillside.

Michael Boylls, the supervisor of the Gang and Narcotics Division of the Los Angeles Police Department’s Cannabis Support Unit, declares, “We’re working our butts off.”

Every year, his team do 300 to 400 searches and occasionally shut down unlawful enterprises.

Yet vendors typically only receive a fine and may resume their business right away.

The issue, he claims, is that the law is toothless.