The latest report on the recreational cannabis industry in California reveals aggregate profits of about $345 million – not $1 billion as was anticipated in its first year. A new report by the state’s Cannabis Advisory Committee, revealed in-depth that one of the biggest drags on the market is dilution due to black market sales of the drug – often cheaper and more accessible than legal purchases from a licensed dispensary – creating unfair competition. Los Angeles marijuana business attorneys know the complex regulatory system doesn’t help.
Gov. Gavin Newsome, a staunch proponent of recreational marijuana legalization who received some $340,000 in campaign contributions from the cannabis industry, said it could take at least five years before the market truly hits its stride. One strategy by the state has been to extend timelines to licensed businesses to comply with all aspects of complicated state and local regulations. However, some evidence suggests this could be hampering business for those already in compliance. Part of the problem also has to do with the fact the state lacks adequate resources to enforce the laws. Pot shops also pay hefty taxes and must invest in significant resources to manage a cash-only operation.
Recently, the governor announced plans to expand the effort to shutter illegal cultivation of marijuana, particularly those operated by international drug cartels in Northern California. Specifically, he’s lending expanded aid from the California National Guard to assist the federal government in cracking down on black market marijuana operations. Analysis by New Frontier Data, a private company that follows marijuana industry trends determined 80 percent of the cannabis sold statewide is black market pot. Profits for illicit marijuana sales are estimated to be four times that of the legal market. Continue reading