Cannabis retailers in Ontario want to know what the city is going to do about a growing number of unlicensed cannabis stores.

An estimate earlier this year from Toronto said that more than 50 unlicensed cannabis stores were operating in Toronto alone, and some retailers say they believe the number now is even higher. 

Cannabis store owner Paul McGovern, a former police officer with Toronto Police Services who stepped down in 2018 to open Vertie Cannabis, says he understands that enforcement priorities are complicated. With a limited budget and many competing issues, targeting unlicensed cannabis stores is likely not seen as being as important as going after car thieves or fentanyl dealers. 

He argues that another issue that impedes enforcement in Toronto is that it is the only city in Ontario that doesn’t treat this like a law enforcement issue, instead handing it over to bylaw officers who otherwise inspect bars and restaurants. 

McGovern also argues that public awareness is an issue. While store owners might be following this closely, the general public, municipal and provincial lawmakers, and the legal system in general might not. While some in the justice system might still think the landscape is similar to the wave of stores opening in the years before legalization, he says the arguments that might have held up in court then will not now. 

“I get the impression that maybe not everybody in the justice system is aware of what’s going on. We’re hyper focused on this in our industry but I don’t think the same is true for the general public or for police agencies. So part of the challenge is helping them understand how different things are today than in, say, 2016.”

While he thinks there is a lack of funding to address the issue, McGovern says he’d also like to see a more coordinated province-wide approach similar to what British Columbia and, more recently, New Brunswick have done by giving inspectors broader law enforcement powers so they can work hand-in-hand with police to move unlicensed stores towards compliance and seize products. 

“So far it’s been a very sort of ad hoc response in Ontario. Every police agency and jurisdiction is responsible for enforcing the law within their borders, and seemingly everybody is doing it a little bit differently.”

But the lack of coordinated enforcement means that retailers like himself are likely losing sales, and local communities and provinces are missing out on tax revenue. Not to mention what he says are likely connections to organized crime behind many of these stores. 

“What’s all this costing? In terms of lost sales and the risks this creates for legal businesses, what’s the cost of lost excise, lost sales tax, lost jobs, all of those things? It’s really remarkable when you think about it. How much are taxpayers in Ontario missing out on?

“We really hope something different can happen sooner than later, because how can anyone compete with no tax. With those kinds of margins?”

Ontario recently announced it is planning to add $31 million to its budget to address illegal cannabis stores and websites operating in the province. As part of Ontario’s Budget 2024, it says it plans to provide the funds over three years to the Provincial Joint Forces Cannabis Enforcement Team (PJFCET).

The head of Toronto’s licensing and standards department says the city needs more money to enforce the law against a growing number of illegal cannabis stores operating there.

In July, Cambridge Today spoke with Corry Van Iersel, owner of True North Cannabis in Cambridge, who shared similar sentiments. 

“We are a legally operating business here and our sales are down 25% because of places like this,” Van Iersel told Cambridge Today. “How can we compete when their products are stronger and cheaper than ours?”

Highlighting another layer of complexity in enforcement is that one of Van Iersel’s two locations is near a store that argues it operates outside of provincial and federal cannabis regulations. While some police agencies in Ontario have targeted such businesses, seizing products and/or making arrests, other jurisdictions take a more cautious approach. 

New Brunswick, for example, has said they cannot enforce their own cannabis regulations against stores operating on First Nations’ reserve lands, while officials in British Columbia have said they can but still often do not. 

However, these types of stores are not the bulk of the more than 60 operating in Toronto, McGovern points out, nor are they the kind of “activist crusaders” that helped lead the charge prior to legalization. Instead he argues these are businesses just looking to make an easy buck by taking advantage of low enforcement priorities.

“We’ll never achieve the goals of the Cannabis Act unless there is some meaningful enforcement,” he tells StratCann. “I don’t think anyone expects it to go away with just enforcement, but with that said, if we don’t have some enforcement of the rules, why bother having the rules to begin with?

“The very fabric of legalization is brought into question because of these stores and their proliferation. It’s a big deal on a lot of levels. I hope Canada can find a way to get it right. I don’t think we can look the other way anymore. This is too big and too meaningful.”

Featured image from Google Street View of an unlicensed store in Scarborough, Ontario that was raided by OPP earlier this year.

This article has been corrected to note that the featured image is in Scarborough, not Kingston.

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