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California’s legal weed industry can’t compete with illicit market

Local government opposition, high taxes and competition from unlicensed businesses are complicating the state’s push to build a thriving legal market.

California’s cannabis market is booming nearly five years after voters legalized recreational weed. But there’s a catch: the vast majority of pot sales are still underground.

Rather than make cannabis a Main Street fixture, California’s strict regulations have led most industry operators to close shop, flee the state or sell in the state’s illegal market that approaches $8 billion annually, twice the volume of legal sales.

Local government opposition, high taxes and competition from unlicensed businesses are complicating California’s push to build a thriving legal market. Many of those factors are baked into California law, including rules allowing city leaders to shut out licensed cannabis enterprises. Meanwhile, the state has relaxed penalties against illegal operations in the name of racial justice.

Infighting between industry groups and lobbying dysfunction in Sacramento have stalled potential legislative fixes, with no clear end in sight. The scale of those problems has California’s iconic cannabis industry — the legal side, at least — lagging behind other states that have regulated the market.

“You don’t have a real cannabis industry if the dominant portion of it has no interest in being legal,” said Adam Spiker, executive director of the Southern California Coalition, a cannabis trade association. “There’s no other regulated industry in the world that I know of that operates like that.”

Licensed cannabis shops offering legal goods are sparsely scattered across the state — there are roughly 2 per 100,000 people, one of the lowest rates in the nation among states that support legal recreational sales.

By comparison, Oregon has 17.9 retail shops for every 100,000 residents. Colorado boasts a similar ratio, and Washington state’s rate is more than triple California’s.

California has just 823 licensed brick-and-mortar cannabis shops, but close to 3,000 retailers and delivery services operate in the state without a permit, a February 2020 market analysis by Marijuana Business Daily found.

The unchecked cannabis ecosystem has caused major economic and environmental damage in California. Many of the state’s estimated 50,000 illegal cultivation sites have been found to use banned pesticides that can poison wildlife and water supplies and are believed to account for hundreds of millions of gallons in water stolen from farms and neighboring communities each year.

To Read The Rest Of This Article By Alexander Nieves on Politico

Published: October 23 2021

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