One year ago, Californians overwhelmingly voted to legalize recreational marijuana. In March, 80 percent of Los Angeles voters approved Measure M, authorizing the City Council and mayor to create its regulatory framework. Regardless of how we feel about legalized marijuana, it’s here and the city must finalize a sensible system to regulate it.
To effectively transform an illegal industry, we first must overcome recent marijuana regulation failures. After California legalized medical marijuana, Los Angeles voters tried to limit sales through Proposition D via a “limited immunity” scheme rather than straightforward licensing and regulation. This was an abject failure. Thousands of illegal pot shops opened because the city couldn’t suppress a very profitable black market with ambiguous legality. LAPD couldn’t close rogue shops fast enough, in part because of confusion around which were allowed and which weren’t. Confusion reigned because “limited immunity” isn’t the same as having a license. Consequently, I’ve been a strong advocate for clear legal lines and eliminating the limited immunity paradigm.
Los Angeles must clearly define who is licensed for what. If regulators provide a pathway for businesses currently working in the shadows to play by the rules, legal shops will be incentivized to help identify and discourage illegal competitors. Consumers will be able to choose legal shops with beneficial consumer, health and safety protections. Illegal shops will be marginalized, easier to spot and eliminate.
We cannot and should not tolerate crime from the marijuana black market. A well-regulated retail shop can ensure that their products only come from legal regulated suppliers. This gives us needed leverage to insure that cultivation and manufacturing doesn’t illegally happen in residential areas and will help stop volatile chemical explosions and fires caused by unsafe “honey oil” production in neighborhoods. It’s vital that we enforce safety precautions and only allow manufacturing in permitted industrial areas to minimize danger. Los Angeles does this for every other manufacturing business and can do it for cannabis.
Second, the council must eliminate cash transactions by marijuana businesses. Currently, marijuana is bought and sold for large amounts of cash because it’s still illegal under federal law. Banks and credit card companies refuse to risk involvement because interstate commerce issues make them vulnerable to federal prosecution. But, Angelenos don’t have to accept the premise that cannabis must be a cash business — the council can insist otherwise. There’s a better way to handle the excessive cash these businesses produce and collect the taxes due.
Today, marijuana businesses that are trying to operate somewhat legally and pay taxes bring duffle bags of cash to City Hall’s Office of Finance. That creates a security threat for businesses, city employees and the public. Removing or reducing cash will prevent crime and avoid costs, such as armored trucks, security, and city workers to count cash.
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Companies today will provide viable alternatives to cash, and the council should insist that such options are used. For example, much like riding Metro with a TAP card or using a gift card, customers can get a physical card and purchase marijuana with a quick swipe. These cards are not directly tied to a bank or interstate commerce. In September, Hawaii announced plans to become the first state with a cashless system for marijuana by using a Colorado credit union’s debit app. The federal government has not prohibited these types of apps and certain third party cards to be used. Los Angeles and Colorado are currently accepting them on a limited basis.
At the point of sale, cards enable taxes to be instantly paid, and revenue can be tracked to ensure businesses are paying the taxes they owe. Such accountability is required under state law — but the apps and third party cards provide the mechanism to insure it actually happens.
Los Angeles’s market will push companies to create new and innovative ways to switch to electronic transactions. It’s complicated, but not impossible. It will happen if we insist on it. If the city allows cash, dangerous and illegal businesses will grow as the market expands.
Regulated properly, we should welcome high-paying marijuana manufacturing, cultivation and retail jobs and an untapped revenue stream to help our city. However, this experiment will only work through aggressive enforcement of unambiguous City laws, and if we take the bold step of prohibiting the use of cash in marijuana transactions.
Bob Blumenfield is a member of the Los Angeles City Council, representing the Third District. This column was first published at DailyNews.com.
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