Los Angeles Reserves the Right to Decide Who May Sell You Pot

Recreational marijuana arrives with a million strings attached.


Ringo Chiu/ZUMA Press/Newscom

The City of Los Angeles voted yesterday to implement a host of licensing and regulatory guidelines that would usher in the legalized growing, manufacturing, and sale of recreational marijuana next year.

For the most part, this is good news. One of the biggest cities in the United States is ending this particular segment of the drug war, assuming the Department of Justice doesn't come in and arrest everybody.

L.A. is doing this for the money. When California approved recreational marijuana use, it gave local governments the authority to levy taxes on the trade. The Los Angeles Times reports that the city expects legal pot to generate $50 million in tax revenue in just its first year. (That sounds like a huge pile of cash, but it's nothing compared to the $1 billion the city spends annually on pensions and health care for retired city employees. The infusion of marijuana money is not going to solve L.A.'s spending problems.)

Unfortunately, Los Angeles is handling this newly legal form of commerce the way it handles everything: with an incredibly complicated licensing system that favors certain people at the expense of others. This approach may mean that the black market for marijuana will continue in the city.

L.A. is deliberately capping the number of shops and grow facilities that it will license, based on population and location. Officials calculate that fewer than 400 actual pot shops will be permitted, along with around 340 growers and 520 manufacturers.

Fundamentally this means city officials, not the marketplace, will be deciding who gets to be a marijuana dealer. And that means influence matters. There's already going to be a licensing priority toward the entrenched medical marijuana interests who were early entrants as legal dispensaries. Note that when the city finally stopped resisting the opening of medical marijuana dispensaries, it did so in such a way that played favorites with these established businesses and deliberately helped them fend off competitors.

In an attempt to be more inclusive, the city will also implement a "social equity" program to give some "priority processing" for people who qualify on the basis of being poor, or having previously been convicted of misdemeanor marijuana crimes, or having lived in areas who have been disproportionally impacted by pot enforcement. While that sounds nice, the rules are complicated enough that you can be sure they'll be gamed. And the city is imposing so many security and data retention requirements, that few actual poor people seem likely to get in before the license cap is reached. There are also all sorts of public hearing and notification requirements—not to mention the rules embedded in with the state's notoriously abused California Environmental Quality Act—that NIMBY types (and potential competitors) can use to keep pot shops out.

If Los Angeles were really committed to help poor people and those chewed up and spit out by the drug war to start their own cannabis businesses, it wouldn't be capping the number of pot shops the city would permit.

So we'll see how it goes. There are some empty storefronts in my Mid-City neighborhood that could host a pot shop. But there's also a rehab facility and an elementary school, and the regulations prohibit a shop from being within 700 feet of either of those, so I'm not holding my breath.