It’s a cannabis Catch-22 for pot businesses in L.A.
Like countless Californians in the last few years, Roberta Koz Wilson and her brother Jeff saw the coming revolution in cannabis and decided they wanted a piece of it. Or in their case, a bite. Using a recipe perfected by their mother, they created Dr. Norm’s Cookie Co., a Los Angeles-based edible cannabis company named after their father.
Its tasty psychoactive products are available in at least 70 Southern California dispensaries. At the moment, they are sold to patients who have a doctor’s recommendation for pot.
Come January, anyone 21 and older will be able to imbibe them for pleasure. That is, if the Kozes are still in business.
Like so many other cannabis entrepreneurs, the Kozes are desperate to operate in the light, to be licensed and regulated, to pay their taxes. They are waiting for the city of L.A. to tell them how to do that.
Unfortunately, in the draft of cannabis rules that the Los Angeles City Council will be asked to vote on sometime in the next week or so, the Kozes — and almost every other cannabis business except about a few dozen older dispensaries — will be required to shut down their operation until they receive an official city license. It’s a process that could take months.
“You have a multimilliondollar industry in Los Angeles and to have it come to a grinding halt will be ridiculous,” Jeff Koz said. “People will be fired, or laid off. Businesses will have to leave the city. It’s a very messed-up situation to say the least.”
The Kozes, who are looking for investors and distributors and formulating new products, may have to leave Los Angeles. They are caught in what I will call the cannabis Catch-22: They don’t want to be put in the position of operating
illegally until they receive a license because illegal businesses will not be given licenses.
They could also be subject to prosecution by the Los Angeles city attorney.
Who the heck will want to do business in Los Angeles under those conditions?
Well, legally, anyway.
To say the local cannabis industry is beside itself with angst is an understatement.
Groups like the Los Angeles Cannabis Task Force have been working intensely for months with the office of City Council President Herb Wesson to develop regulations that are acceptable to the city, to the industry and, of course, to the voters of Los Angeles, who have again and again supported legalization.
“I have clients who have 40 employees saying, ‘I am going to have to lay everyone off and shut down,’ ” said Ariel Clark, a Santa Monica attorney who specializes in cannabis regulation. “It’s nuts.”
Clark estimates that about 80% of the Los Angeles marijuana industry would be affected by the requirement to shut down until licensing applications are approved.
“These are forced errors,” said Elizabeth Ashford, a cannabis consultant who spent years working in high-level jobs for politicians like Kamala Harris, Jerry Brown and Arnold Schwarzenegger.
“This does not bode well for any emerging businesses in the city of Los Angeles,” she said. “If this is how business is done, I can see why a lot of cannabis operators will look elsewhere with their tax dollars and their payrolls.”
Ruben Honig, executive director of the Cannabis Task Force, has been meeting regularly with city officials to iron out the details of 50 or so pages of rules that will form the basis of an ordinance regulating when and where cannabis can be grown, processed, distributed and sold to consumers.
Honig, who ran a medicated dried fruit business called Garden of Weeden, said the idea of closing down existing businesses until licenses can be granted was unexpected.
It had been his understanding, he said, that the city would not move against such enterprises while their applications were being processed.
“We are hopeful they find a path forward,” Honig said.
Some have argued that the proposed regulation is a way of leveling the playing field to allow an equal chance to people who have been waiting on the sidelines to go the legal route.
In fact it will do something contrary to common sense: It will benefit bigger businesses with deeper pockets, which can afford to wait on the sidelines during the licensing process, but drive out the small businesses that are the lifeblood of not just the cannabis industry but the city’s economy, too. I’ve seen forecasts that say the city could realize up to $50 million a year from cannabis revenue.
So what on Earth were city officials thinking when they came up with this scheme?
“I recognize that this is a flaw, and we are figuring out ways to try to deal with that now,” said City Council President Wesson. “I don’t want to screw it up.”
I wondered if he had spoken to worried entrepreneurs like the Kozes.
“I have spoken to a gazillion of them,” Wesson said. “I know that they are out of their minds.”
Wesson realizes that Los Angeles is expected by its sheer size to become the de facto capital of the cannabis industry in California, if not the nation. “The winds in this country blow from the west to the east,” he said, “and this is a huge responsibility and we want to do it right.”
Then please, do it right. Entrepreneurs like the Kozes deserve to flourish, not be forced out.