San Diego’s proposed crackdown on illegal cannabis deliveries gets committee OK

A proposed crackdown on illegal cannabis delivery services in San Diego was unanimously endorsed Wednesday by the City Council’s economic development committee. The proposed policy changes would make enforcement more rigorous by raising the penalties for any illegal cannabis activity in San Diego and strengthen the ability of legal dispensaries to sue illegal operators and recover damages. San Diego officials estimate that 60% of cannabis consumed in the city comes from the illegal market. They blame that for worsening budget deficits by hurting legal dispensaries’ business and costing the city tax revenue. “Unless the financial risks outweigh the financial rewards, we will continue to play the game of whack-a-mole with bad actors who will find loopholes to continue to operate their businesses illegally and avoid paying their taxes,” said Councilmember Raul Campillo, who is spearheading the crackdown. Councilmember Jennifer Campbell agreed. “We really have to control this industry much more,” she said. While the new permit wouldn’t affect delivery services operating completely outside the law, industry officials say a big part of the problem is legal delivery services from areas outside the area operating in San Diego but declining to pay local taxes. The expanded power for civil action could help dispensaries fight back against the type of rival operation that an Otay Mesa dispensary faced earlier this year — a nearby tent selling cannabis without any permits whatsoever. It would grant permitted city dispensaries the power to use a legal maneuver called a private right of action, which would give them a stronger basis in court to argue they’ve been financially harmed by someone violating a city ordinance or the city’s municipal code. The proposed policy says the city would split any damages awarded in such cases with the business that sued, with the city keeping 75% and the business keeping 25%. The crackdown comes as the city’s cannabis tax revenue continues to slump. An increase in the city’s cannabis tax in May from 8% to 10% was projected to generate $650,000 before the end of the fiscal year on June 30. Instead, it generated only generated $200,000. Phil Rath, who represents a coalition of local dispensary owners, said the new policy could be a step in the right direction. But he said it’s unclear how effective the expanded ability to sue would be for legal dispensaries. The proposed crackdown will be presented to the full council for approval later this year or in early 2026.