Scott Eden is an investigative reporter and author of “A Killing in Cannabis: A True Story of Love, Murder, and California Weed.”
Derek Hubbard, the owner of a struggling cannabis cultivation company in Santa Cruz, California, was fed up.
His licensed business and other cannabis operators nearby had been hit by armed robberies. The local police department, he believed, wasn’t doing enough about it. So he took matters into his own hands. He hired a private investigator, who gathered information on the gang that was ransacking Bay Area weed businesses. Hubbard shared details with law enforcement, who advised him to educate himself on the Second Amendment. He bought a semiautomatic handgun.
When security alarms went off yet again at his indoor cultivation facility in November 2023, Hubbard raced to the scene and saw four masked figures breaking into the building. One wheeled around with what looked like a gun. Drawing his weapon, Hubbard fired multiple rounds at the thieves, who shot back, riddling Hubbard’s car with bullets. The suspects got away. After police reviewed surveillance video, Hubbard was arrested and charged with four counts of attempted murder. A month later, the same gang allegedly shot and killed a cop in Oakland while attempting to rob another licensed weed business.
Hubbard’s case says a lot about the sorry condition of the legal cannabis trade. Despite years-long efforts by states to establish a regulated industry, the illegal market is winning. In California over the last four years, the number of active cannabis cultivation licenses has plunged by half, to about 4,500, according to data from the state. Many licensed cannabis operators have concluded that legalization has counterintuitively increased violent and organized crime.
The Trump administration directed federal agencies in December to move cannabis to a Schedule III drug under the Controlled Substances Act, which had previously classified weed on the most stringent level, alongside heroin and meth. This move will allow licensed cannabis businesses to deduct business expenses on their federal tax returns. This change might save many of them financially, but it won’t lead to a reduction in cannabis crimes.
Hubbard’s operation was targeted by roving bandits who specialized in weed heists. (“He certainly wasn’t seeking street justice,” said Hubbard’s lawyer, Vikas Bajaj. “He was just seeking safety.”) Meanwhile, in Mendocino and Riverside counties in California, criminal organizations — Chinese and Mexican — have allegedly paid tribal leaders to ignore massive cannabis production facilities on their land, according to California officials. In Oklahoma, where cannabis production and sales for medical purposes were legalized in 2018, members of Chinese triads have set up huge growing operations, selling the product around the world and “overwhelming law enforcement with their resources and elusiveness,” as detailed in a 2024 ProPublica investigation. Criminal organizations, it turns out, are using legal weed as a cover.
Not long ago, I reported a story for a book about a cannabis start-up founder who, like many licensed operators, mixed legal and illicit business, and wound up killed. The story began in 2016 and unfolded during the turbulent early stages of California’s cannabis legalization gold rush. But a decade later, the promise that legal weed would reduce crime has failed.
The reasons are political and economic. A laissez-faire attitude prevails over weed in police departments and district attorney offices across the country. Resources have been directed away from cannabis.
But the real driver of organized, violent crime in the cannabis business isn’t the lack of law enforcement. It’s the black market’s existence. No one knows just how vast it is. The often-cited figure is $70 billion — referring to annual sales — which would make it more than twice the size of the legal cannabis business in the United States today, but that is probably an underestimate. Despite a sharp decline in cannabis prices for legal and illegal weed over the last five years, the black market remains lucrative. The reason: the incoherence of cannabis laws in the U.S.
The rescheduling of cannabis does not lift the federal ban on weed; only Congress can do that. Because interstate commerce in cannabis remains a federal crime, weed grown inside a state that has legalized it must be purchased there. The current system makes a mockery of this. Based on reporting I conducted for my book, the licensed cannabis cultivators of California grow far more weed in their legal facilities than California’s dispensaries sell. Where is all the excess pot going? Much of it is traveling to states that haven’t legalized, or to states that don’t have enough cultivation capacity (like New York) to satisfy customer demand. In other states — Texas, for example — loopholes in the law have allowed cannabis to be defined as “hemp,” and therefore sold in gas stations and convenience stores, right next to lottery tickets and Marlboros. (This loophole has recently been closed, but won’t take effect until November.) Shadowy networks control the interstate traffic in weed, legacy players from the old full prohibition days.
Law enforcement crackdowns aren’t the answer. No one wants to go back to the “War on Drugs” days of 20-year mandatory prison sentences for low-level weed dealers. The only sustainable remedy is federal legalization or a carve-out that permits interstate trade. Profits have been so squeezed by overregulation that many licensed operators have stayed in the game only because of the dream of federal legalization, which they say will inevitably trigger another gold rush. “They’re holding out for this fairy tale that Philip Morris will come in and buy them out,” said Joey Espinoza, a cannabis industry consultant in Monterey County, California.
Many industry participants and analysts predict that opening interstate cannabis trade is only a matter of time. A bipartisan bill that seeks to create “a regulatory framework” for legal interstate commerce has been proposed, but it is unlikely to gain traction in the Republican-controlled House and Senate.
Once this final prohibition falls away, however, it will trigger a new world for weed. As the economists Robin Goldstein and Daniel Sumner explained in their 2022 book “Can Legal Weed Win?,” the cost of producing cannabis — and, therefore, its price — will plunge to unheard-of lows owing to efficiency gains and innovations implemented in other agribusinesses. One hundred pounds of top-quality weed used to go for $2,000 a pound wholesale at the farm. Now it’s around $800 a pound. With a true, open national market, Goldstein and Sumner predict that prices will plummet to as low as $100 a pound. At such a price, the weed black marketeers of today would have far less financial incentive to participate.
Meanwhile, Hubbard perseveres, vigilant but hopeful. He eventually agreed to accept one misdemeanor gun charge with no admission of guilt and no jail time, which allowed him to maintain his California state licenses, according to his lawyer, Bajaj, who said, “I’d say that was a victory.”
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