Is California’s Cannabis Industry on the Brink of Collapse?



California’s legal cannabis industry has been a roller coaster since the state passed Prop 64 to allow adult-use back in 2016.

Praised for the revenue it has brought to state coffers, the industry has also suffered countless setbacks as local governments struggle to sift through bureaucratic red tape at the state level.

RELATED: California Gives $15 Million to Cannabis Social Equity Program Participants

Taking it to the Governor

According to a letter sent Saturday by leading California cannabis executives and activists to Gov. Gavin Newsom, the problems are too numerous for the industry to overcome on its own.

“An unwillingness to effectively legislate, implement, and oversee a functional regulated cannabis industry has brought us to our knees,” according to a copy of the letter, first obtained by MJ Biz Daily.

The 29 co-signees said cited “exorbitant taxes” and a regulatory system “designed for failure” as ways the failing industry has compromised politicians’ pledge to clean up the black market. Combined state and local taxes reaching up to 39 percent on cannabis sales makes the products sold at legal dispensaries 50 percent more expensive at retail than those sold in the illicit market, according to the letter.

As a result, California’s bootleg market for cannabis is estimated to be at least twice the size of the legal market. The size of the black market has made turning a profit nearly impossible for business owners selling legally, the letter said, and discouraged many from staying in business.

What they want to see happen

During a press conference Saturday, co-signees of the letter asked the state to get rid of a 15 percent state tax on marijuana cultivation and to end a separate 15 percent excise tax on retail sales. The co-signees also requested that the state issue more permits to legal cannabis dispensaries so more stores could open.

Nicole Elliott of the California Department of Cannabis Control released a statement Saturday acknowledging the department’s shortcomings. Elliott insisted the agency needed more time to solidify its regulatory framework. A spokeswoman for Newsom issued a similar statement, saying the governor was aware of the problems and is determined to improve the current situation.

But many co-signees are tired of hearing the same thing. They contend that authorities should have done more to solve the problem in the five years since Prop 64 passed.

“The California cannabis system is a nationwide mockery; a public policy lesson in what not to do,” the letter said.



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