California's legal weed industry can't compete with illicit market - POLITICO

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 law lets local officials decide whether to open the door to cannabis or slam it shut.

LOS ANGELES — California’s cannabis market is booming nearly five years after voters legalized recreational weed.

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.

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.

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.

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.

Every state establishing a legal market has had to contend with illicit operations, but the underground market in California is far more entrenched.

California’s cannabis law lets local officials decide whether to open the door to cannabis or slam it shut.

Some local officials say the industry harms children or argue dispensaries would attract crime.

Spiker, who helps develop local cannabis regulations, said some elected officials fear a pro-cannabis stance could cost them their seats.

The price of cannabis products sold in legal dispensaries can be two to three times higher than nearly identical items sold in unlicensed shops, which aren’t subject to cultivation or excise taxes that drive up costs for retailers.

The difference between the legal and the illegal is not always obvious.

Underground dispensaries are often indistinguishable from licensed shops and sell similar-looking items that may be counterfeit or diverted from the legal market.

“The divide between legal and illegal is too big a gap to overcome."