California’s illicit marijuana market thrives as much of the state continues to restrict sales

In 2016, Californians voted to legalize recreational adult-use marijuana. Proponents of Proposition 64, including then-Lt. Gov. Gavin Newsom, argued that it would generate massive revenue, while decreasing illicit cannabis and drug cartel activity in the state.

Now, nearly six years later, it’s clear that promise has not been kept.

While the state has collected billions in tax revenue from cannabis sales since legalization went into effect in 2018, billions more continue to pour into a thriving illicit market.

A new report from cannabis website Leafly found that more than half of all cannabis sales in the state (55%) are in the illegal market. It means the product being sold hasn’t been subjected to the state’s rigorous testing and tracking regimen, and can contain harmful pesticides or other powerful narcotics.

California recorded more than $5.2 billion in sales in 2021, according to the California Department of Tax and Fee Administration. According to Leafly’s analysis, that means more than $11.5 billion worth of cannabis was actually sold in the state, with the majority of that money going to drug cartels and dealers.

“The purpose was to move cannabis into a regulated market,” said Wesley Hein, director of compliance and government affairs with Mammoth Distribution said of Prop. 64. “And so that’s what people felt like they were voting for.”

So why, if marijuana is legal in California, is the illicit market thriving?

LOCAL CONTROL

Leafly found that states like California that allow municipalities to opt out of cannabis sales saw an increase in illicit commerce. States without the opt out did not.

“The irony of local control is, you have no control,” said Sean Kiernan of the Weed for Warriors Project, a group that advocates for veterans’ use of medical marijuana.

By that, Kiernan means that when local governments opt out of allowing legal sales, which can be taxed and regulated, they are simply opening the door to illicit commerce.

Kiernan, an outspoken opponent of Prop. 64, has begun circulating for discussion his own ballot proposition to override and replace it with a measure that eliminates local control.

Published: October 04, 2o22

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