California Market at Risk of Collapse.

Liz Filmer
30 Dec 2021

In a letter to California Governor. Gavin Newsom and governing officials, a group of cannabis industry leaders, has warned that California's licensed marijuana market is on the edge of collapse if drastic action is not taken soon.

The letter, signed by 29 business executives and activists, reads, "An unwillingness to effectively legislate, implement and oversee a functional regulated cannabis industry has brought us to our knees," It goes on to explain how "Proposition 64" has failed to achieve its aims, four years after the start of legal sales. 

"Prop 64  was not passed simply to raise tax revenue but to end the illicit market, protect public health and safety, and create an accountable legal industry. Yet today, four years after the start of legal sales, our industry is collapsing, and our global leadership and legacy are at the brink of disappearing forever.

The industry representatives list the issues they believe have made the legal system "rigged to fail". These include:

Current regulatory environment threatening the viability of California's legacy cannabis cultivators. 
California's craft cannabis farmers are trying to survive on a chessboard they were instructed to join, but that is rigged for all to fail. 

The harms inflicted upon Black, Brown and Latina communities by the War on Drugs remain unresolved.
Equity operators are being assaulted, burglarized, and left without protection from the police. 

Due to excessive taxation, the opportunity to create a robust and regulated market has been wasted. Tax across the supply chain makes legal cannabis 50% more expensive at retail than the illicit market. As a result, the illegal market is currently three times the size of the legal market.   
The illicit market endangers the health and safety of both medicinal and recreational consumers. 
It is estimated that 75% of cannabis in California is consumed in the illegal market, is untested and unsafe. 

The State of California has not fulfilled the intent and purpose of Proposition 64. Californian voters overwhelmingly opted for legalization, yet only 32% of the state currently has legal retail dispensaries. A recent study found there to be approximately two legal dispensaries per 100,000 people in California. This is one of the lowest ratios in the US.

 Industry leaders requested in the letter that the Newsom administration take the following steps to try and turn things around by introducing the following items into the State Budget that is due for initial release on Jan. 10.

1. Eradicate the state MJ cultivation tax, which is expected to increase as of Jan. 1, 2022.
2. Bring in a three-year hiatus on Californias' 15% cannabis excise tax.
3. Increase the number of marijuana retailers in the state.

Although efforts to accomplish these steps have been discussed within regulatory terms for years, none have been implemented.
Industry leaders said that the overall effect of high taxes has been the obliteration of almost all profit margins. Driving many entrepreneurs out of the regulated market.

Nicole Elliott of the California Department of Cannabis Control released a statement. She said that the agency requires more time to "improve and iterate the regulatory framework."
Elliott noted that earlier in 2021, the three state agencies overseeing licensed cannabis companies were merged into the DCC and had not yet finished their job.

"It's important to understand that changes made in the July 2021 cannabis trailer bills now require regulatory improvements to be made through the regular rulemaking process, which can take a significant amount of time to complete," Adding further that she "remains committed to further refining the California regulatory system."

Whether Californias' broken system can be fixed is yet to be seen. Hopefully, the regulators will listen to the industry's needs and act accordingly. What is definite is that as it stands, many of those in the states' cannabis industry are facing the imminent loss of their businesses. Businesses that, for some, have been their craft since back when the world thought it was a crime. 

Liz Filmer