.Weed Woes: A deep dive into California’s total failure to get cannabis policy right

The cannabis trade publication, MJBizDaily, published an article last week bearing the headline, “$1 billion in illegal cannabis seized in California over past year, regulators say.” At the bottom of that article were related stories, including one headlined, “Why 3 illicit marijuana operators decline to go legal in California,” and another linking to a report titled “California Market Report: Illicit Market Woes.”

Taken altogether, that web page provided a perfect snapshot of California’s total failure to get cannabis policy right, and how that has led what should be a thriving new industry into near-collapse, or at least arduous, unnecessary struggle.

The central, unspoken irony of the first article is that the state government, in announcing the seizure figure, was actually bragging. Thirteen months ago, the three cannabis-regulating agencies were all merged into one, the Department of Cannabis Control (DCC). That just so happens to be the time period the DCC measured to reach the billion-dollar mark.

The merger was a good idea; it never made much sense to have several agencies regulating weed. They often worked at cross-purposes, and policy often didn’t make sense. Cannabis businesses were constantly confused by the morass of rules that sometimes contradicted each other. That situation has improved since the merger, and will likely continue to do so.

But the fact that so much illegal weed is still being sold in the state that authorities can seize that much of it in a single year is not anything the DCC should be bragging about. The seizures are perhaps necessary (though that’s more debatable than it might appear), but it’s necessary because the state doesn’t have its act together in the first place. Pot is legal in California. There shouldn’t be a substantial “illicit market” for it any more than there’s a substantial “illicit market” for booze. It’s as if, after prohibition was repealed, moonshiners not only continued to thrive, but actually had been far more successful than legal distillers.

Nevertheless, the agency devoted to implementing cannabis policy in California wrote a congratulatory letter to itself about the seizures. “This important milestone was reached through close collaboration with local, state, and federal partners and furthers California’s efforts to go after activities that harm communities and the environment, including water theft, threats of violence, elder abuse and human trafficking, to name a few. These operations and the products they produce threaten consumer safety and the vitality of legal and compliant licensees.”

But is it a ‘milestone’ or a millstone?

Later in the announcement, the DCC declares that it’s “working to expand access to tested cannabis products for consumers and lower barriers of participation for businesses. This includes a recent allocation of $20 million to DCC to grant cities and counties with funding that will support the creation of cannabis retail access in areas that currently do not allow it.”

That’s all good, as far as it goes. As was the legislature’s recent decision to eliminate (at least temporarily) the state’s cultivation tax. But the state’s 15% excise tax on weed sales, which comes on top of the regular sales taxes, as well as any local levies, is still hobbling the industry (the DCC doesn’t decide tax rates, of course: This is the Legislature’s failure). So are confusing and severe regulations.

The one problem the DCC specifically cited—the fact that most local governments refuse to license cannabis businesses, including retailers—is probably the worst of all in terms of giving Californian’s access to legal weed. We’ll see what good the $20 million in grant money does, but it seems unlikely to put much of a dent in the state’s illicit market, which generates about $8 billion a year in revenue, according to Global Go Analytics, while legal weed sales in the state are only about $4.4 billion.

Global Go Analytics estimates California’s illicit cannabis market generates $8 billion in annual sales, nearly double that of the legal market, which the MJBizDaily says brought in about $4,4 billion last year. No matter what the DCC does to “support the creation of retail access,” that situation won’t be relieved until the state starts treating cannabis like any other legal business.



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