CA Dep’t of Cannabis Control wins court victory against illegal cannabis businesses
$128 million in civil penalties
By California Department of Cannabis Control
The Department of Cannabis Control (DCC) announced on Dec. 6, 2022, that it has won a significant legal victory against participants in the illegal cannabis market. Represented by its partners in the Attorney General’s Office, DCC obtained a court order awarding more than $128 million in civil penalties—the maximum sought by DCC—against businesses and individuals that were engaged in unlicensed commercial cannabis activity.
“This ruling sends a strong message that the illegal cannabis market will not be tolerated in California,” said DCC Director Nicole Elliott. “DCC and our partners will do everything in our power to protect consumers and maintain the integrity of California’s legal cannabis market. We applaud the Court for its commitment to enforcing the rule of law in California’s cannabis industry.”
The ruling builds on longstanding efforts by state licensing authorities to protect consumers and combat the illegal market. In 2019 and 2020, state authorities conducted an investigation that revealed unlicensed cannabis manufacturing and distribution in Canoga Park, California.
The investigation further revealed that this unlicensed activity was tied to an operator—Vertical Bliss, Inc.—that held licenses for other commercial cannabis activity. State authorities swiftly revoked those licenses and then brought a civil action seeking additional financial penalties against Vertical Bliss and other participants in its unlawful scheme.
The complaint alleged that Vertical Bliss conducted unlicensed operations on an undisclosed premise in Canoga Park, California, and inverted illegally manufactured product back into the regulated market. On October 2, 2019, in response to tips about illegal manufacturing and distribution of cannabis goods, the Division of Investigation executed search warrants at the unlicensed Canoga Park location. The search revealed significant quantities of cannabis concentrates, edibles, vape cartridges and raw materials. Seized records document the production of more than 3.3 million Kushy Punch brand gummies during an 18-month period, with an estimated value of $64 million.
Vertical Bliss simultaneously held cannabis manufacturing and distribution licenses for a premises located in Chatsworth, California. These licenses were revoked, following the discovery of the unlicensed operations.
The Medicinal and Adult-Use Regulation and Safety Act (MAUCRSA) establishes strict requirements for the cannabis market and products, including requiring a state license and local approval for every premises where commercial cannabis activity is conducted. Manufacturing, distributing or selling cannabis goods without a state license or at a location that is not licensed is a violation of state law. A person engaging in commercial cannabis activity without a license is subject to civil penalties of up to three times the amount of the license fee for each day of operation.
The case is Department of Cannabis Control v. Vertical Bliss, Inc., et al., No. 20CHCV00560, in the Superior Court of California in and for the County of Los Angeles. In addition to the seven defendants covered by the summary judgment ruling, DCC continues to pursue a just and appropriate resolution against one remaining defendant, whose conduct was not at issue in that ruling. Final judgment has not yet been entered in the case.
To file a complaint regarding illegal cannabis activity, click here – Enforcement Online Services
Allen D. Payton contributed to this report.
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