San Diego is intensifying enforcement against illegal cannabis delivery that undercuts licensed retailers and reduces city tax revenue. City leaders, licensed operators and labor representatives cite mounting lost sales, lower tax receipts and safety concerns tied to delivery services that operate outside the regulated system.
City data and industry estimates cited in recent briefings put the unregulated share of cannabis sales in San Diego County at roughly 40%. That gap has coincided with a reported decline in local cannabis business tax revenue of about 30% over the last five years. Combined state and local cannabis taxes in San Diego can reach up to 36% of retail price, a figure business owners say makes it hard to match prices offered by illicit sellers.
March and Ash CEO Bret Peace described how some illegal delivery operations encourage drivers to claim affiliation with licensed brands when stopped by law enforcement. “CHP or the sheriff has called us to verify that somebody works for us,” Peace said. “A lot of these illegal delivery services told drivers: if you get pulled over in San Diego County, say you work for March and Ash.”
Illegal sellers use several tactics to reach customers: anonymous social media listings, direct messages, and mobile-friendly ordering pages. Peace estimates those sellers price products at roughly 40%–50% below legal retail, which draws repeat customers and erodes regulated market share.
City Councilmember Raul Campillo is sponsoring a local licensing program aimed specifically at out-of-jurisdiction delivery services that drop product inside San Diego. Under the proposal, delivery operations that do not obtain a local delivery license would face administrative penalties of $20,000 per day. Council documents say cumulative fines could reach $500,000 for prolonged violations.
Campillo said police will gather evidence under the new rules — for example, delivery logs, social media ads and vehicle stops — to document unlicensed activity. The proposal also creates a civil enforcement path: licensed San Diego businesses that collect evidence against unlawful competitors could sue and recover a share of assessed penalties, with the city receiving the remainder.
The licensing push aims to force delivery platforms to register, pay local taxes and comply with product safety and age-verification rules required of brick-and-mortar shops. Todd Walters, president of UFCW Local 135, which represents hundreds of cannabis workers, said the measure would help stabilize retail jobs. The union reports its membership in cannabis-related positions fell from about 500 to 400 workers, a 20% decline, as market share shifted to illicit sellers.
Law enforcement officials note practical enforcement challenges. Delivery drivers can cross city lines quickly, and online listings can disappear after takedown. Campillo’s draft ordinance addresses that by targeting the supply chain: businesses that deliver into San Diego without a local permit would be subject to the fines and civil actions described above. The city estimates it will take three to four months to finalize the rules and return them to council for a vote.
Officials have not set a permit fee yet; Campillo said the application cost will be determined before the ordinance returns for final approval. City staffers expect the licensing system to increase inspection and enforcement workloads for police and code compliance units, but they argue added revenue from recovered taxes and penalties could offset those costs if the program reduces unlicensed deliveries.
Business owners say they support measures that level the playing field but want clear enforcement and rapid takedown authority for online ads. Peace said regulated retailers want faster action against accounts and websites that repeatedly list unlicensed delivery services.
If approved, the San Diego plan would join other California cities tightening rules on delivery to protect local tax bases and licensed operators. City officials are presenting the ordinance as a targeted tool to recover lost revenue, restore market share to licensed sellers and enforce public-safety rules such as age verification and product testing.
Timeline and next steps: the draft ordinance will return to council for a final vote in approximately three to four months; permit fees and detailed application requirements will be published before that vote. In the interim, police and compliance teams will continue investigations into specific unlicensed delivery operations and collect evidence that could support future fines or civil suits.
