San Diego officials are moving to tighten oversight of the city’s marijuana market amid complaints that unlicensed delivery operators are skirting local rules and undercutting licensed retailers.
The push comes as licensed cannabis retailers like A Green Alternative in Otay Mesa argue that untaxed delivery companies have been competing unfairly for years. The dispensary has sued the city, saying enforcement gaps allow unlicensed sellers to operate openly while legal stores pay a 10% local tax.
Attorney Lance Rogers, who represents A Green Alternative, said unlicensed sellers are targeting customers directly outside legal shops, offering cut-rate products that haven’t gone through city or state oversight. He said some illegal operators are even setting up operations just down the road from licensed storefronts.
To address those concerns, Councilmember Raul Campillo has introduced a proposal requiring delivery-only marijuana companies to obtain a San Diego license. He said as much as 50–60% of marijuana sales in the city may be taking place through unlicensed, untaxed deliveries, often from companies based outside city limits.
Under the plan, any delivery business selling within San Diego would be required to report income and pay local taxes. Companies that fail to comply could face steep penalties. The proposal also creates a private right of action, giving licensed dispensaries the option of suing unlicensed operators. Money recovered in those lawsuits would be split between the city and the business bringing the case, though details are still being finalized.
Campillo’s measure was approved unanimously by the City Council. A draft ordinance is expected early next year, with a potential start date of July 1 to align with the upcoming budget cycle.
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