California lawmakers are considering legislation to penalize businesses that “aid and abet” unlicensed cannabis businesses. The effort comes as the legal industry struggles to compete against untaxed illicit businesses.

The bill, AB 2122, currently working its way through California’s legislature, would fine businesses that sell advertising or rent space to  unlicensed cannabis businesses. The proposal is sponsored by Assemblywoman Blanca Rubio (D-San Gabriel Valley), a longtime ally of the licensed industry.

Taylor Woolfork, legislative director for Rubio, said the bill, if enacted, could fine businesses up to $30,000 per day. The money would go to fund investigations and enforcement and to the state’s general fund.

According to Woolfork, enforcement officers would need to prove that an entity or person was “aiding and abetting.” That includes having knowledge that a crime was being committed.

Among entities that sell advertising, that includes newspapers, online platforms and billboards. Yelp, Google and social media would generally not have knowledge of a crime and so would not be subject to the fine. For those renting storefronts to unlicensed operators, it may be easier to prove knowledge, because the transactions often involve cash.

“We are not looking to fine folks who make honest mistakes,” Woolfork stated. 

“This is the beginning”

In an interview, Rubio stressed that 80% of California’s cannabis market is illicit. Some of these entities can pay large amounts for advertising that puts legal tax-paying cannabis businesses at a disadvantage.

The proposal seeks to hold accountable those who knowingly advertise the illicit shops or lease to them, without checking with the state on whether they have licenses. She also called it a way to protect consumers from unregulated products.

“This is the beginning,” Rubio said of future cannabis reform legislation to support the legal market. “Our legal cannabis shops need all the support we can provide.”

The measure has passed the state assembly and now must win Senate approval. It has support from the United Cannabis Business Association, the United Food & Commercial Workers Unions and California Attorney General Xavier Becerra, among others.

Industry insiders often point to California’s high taxes as the main disadvantage that legal REC businesses face against the illicit market. Ellen Komp, deputy director of California NORML, said she would rather see “lowering the taxation and regulatory burden on the licensed shops,” than more penalties.

It’s too difficult and expensive for people to get licenses, Komp said—often especially so for people of color who have suffered the most harm from past drug policies. And much of the state already hinders the legal cannabis industry through local zoning and permitting rules.

“Punitive efforts have never worked. Prohibition has always been a failure,” Komp said.

She said she wouldn’t oppose the measure if everyone could get licenses now. “But that’s not the world we’re living in,” she said.