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Federal Regulations Forcing Some In Medical Marijuana Business Back To Street Dealing

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As local and federal regulations come down on pot entrepreneurs, some may find going back to the streets a more viable business model. | Getty Images

As federal regulations tighten on medical marijuana growers and dispensary owners, some may find their best bet for business is to bring the product back to the streets, a reality highlighted in a new report by the Los Angeles Times.

"Ricky," a veteran of the pot business, is the subject of the Times article. He claims that federal and local regulations, along with felony drug possession and cultivation charges, have forced him back to the streets where he began dealing drugs as a teenager in the 1970s.

He finds certain benefits to operating outside of the often ambiguous legal framework for the medical marijuana industry. Saying he deals only to those with medical clearance, Ricky cites no taxes, no permits and no paperwork as the best way to avoid a potentially troublesome paper trail.

New laws and enforcement raids have been especially tough on medical marijuana businesses, while avoiding cracking down on individuals who grow the plant in the privacy of their homes for personal use. Washington saw the DEA close 23 dispensaries in late August.

Across the pond, crackdowns on legal pot in the Netherlands, and particularly in Amsterdam, have led to similar results. The illegal market for drugs is gaining popularity there, as foreigners and even Dutch residents avoid registering to use the drug legally at marijuana shops.

Stateside, medical marijuana dispensary closures not only affect business owners, but also patients who use the shops as a safe means to obtain their medicine, creating a vacuum that can easily be filled by those who already have the skill set to run a street-level marijuana operation. For Ricky and other street dealers, the only difference from 30 years ago is a broader clientele and a better product.

"A huge demand has been created," Ricky tells the Times. "It's back to the underground. Anyone who is smart is just going to take it back to the streets."

Prosecutors in California have denied that medical marijuana dispensary closures have forced legitimate patients to illegal sellers.

President Obama's and the federal government's war on weed has proven to be of particular concern in California, where sales of the drug generate upwards of $100 million in tax revenue annually.

In July, the L.A. City Council voted unanimously to ban all dispensaries, a sweeping move that would shutter 700 shops in the area. The ban has been temporarily suspended thanks to a referendum.

Other California cities are also feeling the sting. Notable Oakland shops with clean records like Oaksterdam and Harborside -- the biggest dispensary in America -- are as vulnerable to closure as the hundreds of other pot shops that have shut their doors in the past year.

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