The debate continues about what to do about the illicit cannabis market. Thousands of illegally operating dispensaries are flourishing for a variety of reasons, including:

The preponderance of growers (licensed and unlicensed) that provide product to the illicit market
The growing market for counterfeit products on the market, some of which are produced by the actual brand owners, but sold on the illicit market to avoid taxes and/or to dump illegal or untested (or failed tested) product
The ease of advertising unlicensed dispensaries on widely viewed online platforms, which make no distinction between licensed and illegally operating businesses.

A recent commentary by Ruben Honig, Executive Director of the United Cannabis Business Association (UCBA), stated:

“The California Legislature should get serious about protecting cannabis consumers from potentially serious public safety and public health risks of the underground cannabis market.

AB 1417 is pending in the Senate Appropriations Committee. Legislators should approve it when they return to Sacramento. AB 1417 addresses a critical need in the legalized cannabis marketplace: ensuring consumers have safe and legal products.

AB 1417 seeks to restrict advertising and marketing by unlicensed cannabis retailers. And it would establish civil penalties for entities that violate the law.

Currently, an estimated 80% of the cannabis sold in California comes from the illicit market. Products from unlicensed business are not lab tested. As a result, they may contain toxic byproducts like heavy metals, pesticides, mold, mite infestations, or residual solvents that can cause serious harm to consumers.

Legally grown cannabis products sold by licensed operators are tested to screen out harmful chemicals, pesticides and other contaminants.

The challenge confronting consumers is that they cannot trust that they are using safe products unless they purchase the products from a licensed retailer, and the current state of cannabis advertising exacerbates the confusion.

Some third-party advertisers in California, as well as apps, allow and encourage cannabis ads whether or not the business is licensed.

Some platforms that direct consumers to local cannabis dispensaries and delivery services — notably, Leafly — have announced that they will only allow advertisements of licensed businesses in California.

But others refuse to cease accepting advertising from unlicensed cannabis retailers, including brick-and-mortar and delivery services.

This confusion makes it more difficult for consumers to differentiate between businesses that are licensed and those that are not licensed. That’s why AB 1417 is so important.”

To keep California’s cannabis industry and long heritage of being a leader in consumer protection, we urge the California Senate to approve Assembly Bill 1417, and Gov. Newsom to sign it into law. It will be an important step toward keeping consumers safer, and ensuring a level business playing field.

At Hippo, we pledge to not work with unlicensed growers, or create packaging for products destined for the illicit market.

We urge all other packaging companies to take a similar pledge.

Together, we can help protect consumers, while supporting our industry at this critical time.

Illicit Products Are Everyone’s Problem