California: (Illicit) profit on the burning shore

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A new lawsuit filed in the state of California alleges that criminal entities have infiltrated the state’s Department of Cannabis Control (DCC), gained licenses, and are diverting “untold millions of pounds” of product to the illicit market by exploiting a gap in the seed-to-sale tracking process, reports Marijuana Business Daily.

Turning ‘a blind eye’?

Retail chain Catalyst Cannabis Co.’s parent company HNHPC is the plaintiff in the lawsuit, which alleges that the DCC is aware of the loophole, but have “turned a blind eye.” Licensed distributors are selling legally grown cannabis — of which there is currently an enormous glut — out of state and to unlicensed retailers, Catalyst CEO Eliot Lewis told MJ Biz.

“More legal product is going out of the state than is being sold legally in the state,” he said. “The only question is, is it two times, three times, four times?”

Undermining the legal market

The lawsuit states there are two major consequences of the practice. 

Cheaper cannabis on the illicit market hurts regulated businesses; and “hundreds of millions of dollars” in losses to state tax revenue.

DCC stays [mostly] mum

Acting deputy director for the DCC Christina Dempsey said “significant resources” are allocated toward licensing, compliance and enforcement, but declined to address the allegations directly. She also appealed for more information, asking that anyone aware of illegal activity to file a complaint through the agency’s anonymous website.

“Reducing and eliminating the unlicensed market requires effort from everyone – state officials, local officials, licensees and the public at large,” she told MJ Biz. “Those who are aware of illegal or improper activity can and should share that information so action may be taken.”

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