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Free Minds & Free Markets

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

Recreational marijuana arrives with a million strings attached.

marijuanaRingo Chiu/ZUMA Press/NewscomThe 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.

Photo Credit: Ringo Chiu/ZUMA Press/Newscom

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  • Diane Reynolds (Paul.)||

    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.

    Why do these local governments do this?!! It's enraging.

  • BestUsedCarSales||

    Probably because the medical shops that already existed and transitioned to open sales petitioned to keep out new shops and growers to come in. This is done to prevent competition that lowers the overall price and profit of the weed itself.

    It's rentseeking same as it ever was. Something completely predictable sadly. This is why only fully unregulated sales will lead to actual free markets.

  • ||

    It seems to be going all different directions depending on the area.

    Some dispensaries are being allowed to simply transition into being vendors, while others are being elbowed out. Some areas seem to be eager to get this going, some (like San Jose) are circling the wagons to keep it out.

    Even in my area, where people openly smoke pot on their stoops, others complain about the "smoke shops" (there's actually only one) and the "bad element" they attract.

    The politics + the economics (i.e. cronyism) are very, very tangled.

  • sarcasmic||

    Even in my area, where people openly smoke pot on their stoops, others complain about the "smoke shops" (there's actually only one) and the "bad element" they attract.

    Temperance never dies.

  • Half-Virtue, Half-Vice||

    Does it ever shut up and mind it's own fucking business?

  • Diane Reynolds (Paul.)||

  • Half-Virtue, Half-Vice||

    so I'm not holding my breath.

    That's right, breath deep my man.

  • Sevo||

    (looking down, finger tips to forehead)
    I'm seeing......
    a continued black market in weed for cheaper prices.

  • Elias Fakaname||

    Good.

  • Hugh Akston||

    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.)

    Never change, Shackford.

  • Scott S.||

    Where else but at Reason will you find somebody contextualizing marijuana tax revenue in terms of skyrocketing pension commitments? Where, I ask you?

  • Diane Reynolds (Paul.)||

    It's ok. They associate skepticism over bike lanes with White Privilege where I live.

  • EscherEnigma||

    Eh, still better then the alternative. The alternative being "continued prohibition".

  • CE||

    Protection racket's gotta protect.

  • Eman||

    come on, how do you legalize something without licensing it? we cant have just anyone selling people marijuana. seriously though, an actual free market for marijuana and accessories would be a slippery slope to legalized heroin, like once people see the quality and safetey increase and

  • Eman||

    and price plummet some smartass mght start thinking it wouldnt be a bad model for how to treat more demonized drugs.

  • Elias Fakaname||

    All joking aside, I think the prescription opiate market is the one that correlates to heroin and various other hard drugs, not pot.

  • Robert||

    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,


    Hilarious considering the states that specifically prohibit such operators!

  • Social bookmarking||

    Yeah, come on, how do you legalize something without licensing it?

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