Cannabis retailers suing B.C. for $40M while seeking end to illegal pot shops on reserves

The lawsuit takes aim at illegal pot shops on Indian reserves. The group says ‘these illicit retailers are not authorized under B.C. law to operate retail cannabis stores.’. Tijana Martin / The Canadian Press

A group of licensed B.C. cannabis retailers are taking the province to court for $40 million, due to what they claim is a failure to crack down on illegal pot shops on First Nations reserves.

In a lawsuit filed on April 27 in Victoria, the group says each retailer has seen “a $500,000 yearly reduction in gross sales due to business lost to illicit retailers operating on reserves with the knowledge of the defendants.”

The statement of claim listed B.C.’s Attorney General, the Minister of Public Safety and B.C.’s Community Safety Unit as the defendants. In all, 14 numbered companies are involved in the lawsuit.

All of the numbered companies are listed as having licensed retail cannabis retail locations in B.C.’s Southern Interior — from the Shuswap to the South Okanagan.

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Most of the numbered companies operate just one store, though one operates two stores while another lists four locations: Kelowna, Salmon Arm, Penticton and Armstrong.

The gist of the lawsuit is that while licensed cannabis retail stores have to buy cannabis from the province and follow strict laws, illegal stores don’t.

“These illicit retailers on Indian Reserves are not authorized under British Columbia law to operate retail cannabis stores,” reads the statement of claim. “There is no retail cannabis store license issued by the (Liquor and Cannabis Regulation Branch) in relation to these retailers.”

The lawsuit also said, “the illicit retailers sell black-market products or illegally obtained product that has not been purchased from the British Columbia government as required by the (Cannabis Control and Licensing) Act, nor authorized for sale under the Cannabis Act (Canada).”

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It also says “the defendants are aware of the continued, and growing, retail sales of cannabis on Indian Reserves in a manger that is circumventing and disregarding the prevailing legislative and regulatory regime in British Columbia for the retail sale of cannabis.

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“The defendants have repeatedly advised of the unlicensed sales occurring on Reserve Lands, with specific information regarding the location of the illicit retailers. However, the defendants have failed to act.”

According to the statement of claim, the retail cannabis industry in B.C. has seen rapid growth, with $1 billion in annual sales expected by 2024.

With that in mind, the group of retailers say “the defendants undertook the duty to safeguard the legal cannabis industry and prevent the illicit sale of unregulated cannabis products in the province.”

However, the plaintiffs say “the defendants failed in their duties to the plaintiffs” and that they breached their duty of care.

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Along with seeking $40 million in damages, the plaintiffs also want to see an order requiring the defendants to enforce the Cannabis Control and Licensing Act to prevent illegal pot shops no matter where in B.C.

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The lawsuit noted that in 2021, B.C.’s Community Safety Unit had taken enforcement actions against more than 70 unlicensed cannabis retailers and removed around $25 million worth of cannabis products from the illegal market.

It said 39 monetary penalties had been issued and that more than 170 unlicensed stores have closed because of the CSU’s actions.

On Saturday, the Ministry of Attorney General said the case had not yet been served on the province.

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