Are Unlicensed Operators Accessing California’s Legal Cannabis Market?

Unlicensed cannabis businesses are trying to infiltrate California’s legal cannabis market.
Are Unlicensed Operators Accessing California’s Legal Cannabis Market?

Unlicensed businesses are attempting to gain access to California’s legal cannabis market, and for now, it’s up to licensed firms to make sure the rules are being followed. Despite regulations from the state Bureau of Cannabis Control that require licensed cannabis companies to only do business with other licensees, there is not yet a system in place to verify compliance.

Ben Ballard is the chief operating officer at Silo Distribution, a licensed cannabis distributor serving Southern California dispensaries from its facility in Palm Springs. He told High Times that both unlicensed sellers and buyers have attempted to complete illegal cannabis transactions with his firm.

“I’ve never completed a transaction and found out retroactively that there was a license that didn’t check out, but it is something that people have attempted to do,” Ballard said.

Ballard added that there are several reasons a license number might be invalid.

“It could be a number of things,” he said. “It could be expired. It may be completely phony. The license they have might not permit them to do what they’re trying to do.”

Currently, companies can look up licensee information on the BCC website. But unscrupulous operators, including one who tried to sell black market vape cartridges to Silo, can take advantage of the same publicly available information.

“I’ve been given a license before and I looked it up,” Ballard explained. “The company name on the license didn’t match the brand, and they were in a completely different part of California.” Ballard says things got even fishier from there.

“So when I asked about it they said ‘Sorry, wrong licensing,’ and provided another one and it was the same drill. And they said, ‘Well, there’s some ownership stuff here.’ It was a very half-assed attempt at trying to pull it off, so it was pretty easy to figure it out.”

Ballard said he’s also had unlicensed dispensaries attempt to purchase products from his company. He said those cases are easier to spot because deliveries must be made to the address on the license. And when a sales representative is in a retail shop, it’s not difficult to determine if it is licensed.

“It does take due diligence, but it’s not an overwhelming amount of work.”

“License information does need to be prominently displayed,” Ballard said. “So if you have concerns about dealing with licensed or unlicensed groups, then you should be able to locate that yourself or they should be willing to share that with you. I would say if someone’s not willing to share their licensing information with you, then you may have a problem. It may be an indicator that something’s not above board.”

Virginia Falces is the communications director at OutCo, a microbusiness license holder in San Diego County. The company cultivates, manufactures, and distributes cannabis products from its headquarters in suburban San Diego. She said that although she hasn’t seen unlicensed firms attempt improper transactions with OutCo, she knows that there are imposters out there. And until METRC, the state’s upcoming seed-to-sale tracking system is in place, it will be difficult to verify the source of cannabis products.

“We have not experienced anyone pretending to be a licensed operator when they are not,” Falces told High Times. “However, we did receive a cease and desist order from the BCC at our address in El Cajon; there was an unlicensed company using our license number and address but with a different name. Since license numbers, addresses, and business names are readily available on the BCC website, it would be very easy for an unlicensed operator to get and use any license number. Either the track-and-trace system being in place or a copy of the BCC license would have prevented that.”

Ballard says it is usually easy for him to distinguish the “above board, up front players in this industry and the people that are doing stuff completely outside” of the regulations. He added that he’s followed his intuition and investigated further when things haven’t seemed right.

“It does take due diligence, but it’s not an overwhelming amount of work.”

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