The Ontario government recently announced proposed measures to crack down on illegal cannabis storefronts, a move being welcomed by many of the estimated 1,800 legal retailers in the province.
The changes, which were announced on Oct. 19, would give the Alcohol and Gaming Commission of Ontario the authority to conduct inspections at suspected illegal storefronts, seize contraband products and issue monetary penalties once approved.
The enhanced enforcement powers come amid data from the Ministry of the Attorney General which shows that an estimated 30 per cent of the cannabis retail landscape in the province is still made up of illegal retailers, nine years after legalization.
“I’m just happy that we’re moving from reactive to proactive,” said Paul Macchiusi, owner of Minerva Cannabis, an independent cannabis retailer located near Bathurst and Dupont streets in Toronto.
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Previous enforcement efforts passed through different agencies
In January 2025, Toronto bylaw officers, who had previously been enforcing measures to shut down illicit dispensaries in the city stopped doing so because of a lack of funding and concerns about the “dangers of dealing with criminal activity surrounding these storefronts,” Carleton Grant, the head of Toronto’s licensing department, explained during a budget committee meeting last year.
The previous year, in 2024, the Ontario government passed legislation providing $31 million over three years to an Ontario Provincial Police-led task force, the Provincial Joint Forces Cannabis Enforcement Team, to target illegal retailers.
The team was created respond to “illegal cannabis production, sale and distribution,” according to a previous statement from the Ministry of Finance to CTV News.
Under the previous system, Macchiusi said it seemed like enforcement was often being passed from agency to agency.
“When an illicit operator does pop up and a legal retailer contacts any level of government for support, it’s literally the Spider-Man meme over and over with every level of government, police, province, OPP, whatever it is, pointing. ‘No, you talk to this person, talk to that person, talk to this person,’ and it’s the circle that we keep running into,” Macchiusi said.
Harrison Jordan, a lawyer specializing in cannabis and regulated industries and the founder and managing lawyer of Substance Law, which advises cannabis businesses on legal and regulatory matters, said that he thinks that the AGCO has historically lacked the authority to pursue illicit dispensaries.
The hope, he said, is that changes with the new legislation.
“Historically, the Alcohol and Gaming Commission of Ontario (AGCO) has not had the mandate to pursue illicit cannabis stores. Its authority has focused on regulating and enforcing the rules applicable to licensed businesses,” he said.
“This has created difficulties for legal retailers. Store owners might contact the AGCO, only to be told that enforcement against unlicensed stores falls outside its mandate. They are then directed to local police or municipal bylaw enforcement.”
In a statement, Dr. Karin Schnarr, registrar and chief executive officer of the AGCO, said that “Ontario’s regulated cannabis market works best when licensed businesses are not forced to compete with illegal retailers next door and consumers are protected in a well-regulated marketplace.”
“This new responsibility builds on the AGCO’s longstanding role to support a safe and responsible market, and we look forward to working alongside law enforcement partners to bring sustained action against illegal cannabis retail in the province,” Schnarr said.
Illicit dispensaries ‘impossible to compete with on price’
Products sold through unauthorized cannabis retailers may not be subject to the same regulatory requirements as those sold through Ontario’s legal system.
Before products land on legal retail shelves, they must be approved by Health Canada and go through proper testing and approvals from Health Canada.
Once products are approved through the federal regulatory framework, the Ontario Cannabis Store (OCS) acts as a wholesale distributor to licensed cannabis retail stores, as well as operating the province’s online cannabis retail store. The OCS also decides which products can be sold within the province.
Legal cannabis retailers pay sales taxes, excise duties, government and regulatory licensing fees and other costs that illicit businesses do not face.
“If illicit operators can operate freely, then what is the point of legal operators paying licensing fees, excise tax, and so on and so forth? It undermines the entire industry,” said Macchiusi.
“Most operators are feeling deflated because they don’t feel as if the government actually has their best interest in mind.”
He said that “between pricing, advertising, storefront rules, the illicit seem to have an open playing ground to do as they please, whereas most legal retailers feel as though they’re handcuffed and they’re just trying to keep the lights on.”
According to Jordan, legal storefronts also face a “significant application process, including background checks and more than $10,000 in government fees alone.”
“Finding a suitable building can also be difficult because some landlords remain unwilling to rent to cannabis businesses. There is still a stigma surrounding the industry among certain service providers, which can make it difficult for retailers to obtain services at affordable rates,” he said.
Legislation’s effectiveness depends on action
Macchiusi said the proposed changes are a step in the right direction but questions remain about how they will be implemented and enforced.
“It’s an announcement. It’s not enforcement. There’s no budget. There’s no timeline,” he said. “There’s no inspectors that have been listed about who’s going to be enforcing this or how. Most of us are looking for laws to change and for landlords to actually be held accountable for hosting illicit operators in their storefronts.”
In a statement to CTV News, the Retail Cannabis Council of Ontario (RCCO), a non-profit organization that represents independent, licensed cannabis retailers in Ontario, said it welcomed the announcement.
“Licensed cannabis retailers are required to meet strict regulatory standards, pay taxes, and operate within a highly controlled framework, while illegal operators continue to disregard these requirements with limited consequences. This creates an uneven playing field and undermines the consumer protections established through legalization,” the statement notes. “While we are encouraged by this announcement, the real measure of success will be meaningful enforcement that results in the closure of illegal stores and prevents them from simply reopening.”
Unlicensed cannabis products pose potential health risks and support criminal activity, ministry says
In a statement, the ministry said unlicensed products pose “potential risks to consumer health and safety.”
In a news release, Attorney General Doug Downey pointed out that illegal cannabis retailers that flout the rules also “undermine” the legitimate businesses that follow them.
“To help build the strongest economy in the G7 and protect Ontario from threats to our communities, we are proposing measures to strengthen enforcement, protect consumers and support a fair and competitive marketplace,” he said.
