Five years after recreational legalization, the state’s regulated market is beset by steep taxes, red tape, and criminal activity.
SOUTHERN CALIFORNIA — At first glance, it looks like an ordinary ranch in the desert east of Los Angeles. There are horses, a pigpen, and a pack of dogs barking to signal the arrival of outsiders. The family here once farmed tomatillos, but tucked away in a corner of the property they’ve recently added three greenhouses with a more lucrative crop: illegal cannabis.
It’s harvest day and a half dozen workers cycle in and out, puffing joints and listening to music as they chop down the plants and hang the bud-laden branches out to dry. The proprietors say most of the product is headed out of state, where street wholesale prices are higher, but there’s still enough local demand that the top-quality stuff will stay in-state, undercutting a fledgling legal market beset by criminal activity.
California voters approved recreational marijuana five years ago, joining a club that has now grown to 18 states and Washington, D.C. The hope was legalization would eventually put illicit operations out of business. But instead, the opposite is happening: The underground market is booming, causing some to warn the regulated system is teetering toward collapse. There are many reasons why, but it mostly boils down to money—the new state-regulated system is expensive for everyone involved. Business owners face steep taxes and costly red tape, and consumers are finding better deals outside of licensed stores.
“We’ve been screaming from the rooftops that the system is broken and destined to implode, and here it is imploding,” said Jackie McGowan, founder of the cannabis lobbying firm Green Street Consulting. “We thought we could pop up a bunch of legal stores and charge twice as much as we did prior to legalization and think consumers were always going to fall in line. Well, they’re not anymore.”
National support for marijuana legalization remains at an all-time high, with over two-thirds of U.S. voters in favor of rolling back policies that for decades have disproportionately criminalized communities of color and fueled mass incarceration. It’s a rare bipartisan issue in Congress, with both Democrats and Republicans sponsoring legislation that could change federal law in 2022.
A DEPUTY WITH THE SAN BERNARDINO COUNTY SHERIFF’S DEPARTMENT PILES UP BAGS OF PROCESSED MARIJUANA SEIZED AT AN UNLICENSED GROW SITE. PHOTO BY VICE NEWS.
California is a cautionary tale about ignoring market realities and excluding the outlaw growers and dealers who helped build—and still largely supply—America’s weed economy.
Opening the floodgates
California’s illicit marijuana market is worth an estimated $8 billion, roughly double the total sales recorded in the state-regulated system. Besides dodging taxes, unlicensed growers are wreaking havoc on the environment and dividing communities that face water shortages during a historic drought. Authorities say Mexican cartels and other organized crime groups are behind some of the largest operations, but there are also mom-and-pop shops and small-scale farmers just trying to stay afloat in a hypercompetitive market.
Published: January 13, 2022
Founder & Interim Editor of L.A. Cannabis News