LOS ANGELES -- Daniel Halbert moved here from Phoenix this year to invest his life savings in what he hoped was a golden opportunity: the medical-marijuana business.

But on Tuesday, the Los Angeles City Council told him to shut down his dispensary, part of a broad crackdown against a growing and unregulated marijuana industry. More than 600 dispensaries have taken advantage of a loophole in city regulations to open shop here in the past two years.

The...