CALIFORNIA STEPS UP ENFORCEMENT AGAINST ILLEGAL CANNABIS, BUT IS IT ENOUGH?

In an announcement dated March 2, 2023, the California Department of Cannabis Control released cannabis enforcement statistics for 2021 and 2022 in an effort to demonstrate its commitment to bringing down the illegal market.

The DCC reported: “DCC-led search warrant operations increased from 62 in 2021 to 155 in 2022, a 150 percent increase. DCC also seized over 41,726 pounds of illegal cannabis in 2021 and more than 144,254 pounds in 2022, a 246 percent increase. Arrests more than tripled, with 17 in 2021 and 56 in 2022. And DCC led operations that seized $243,017,836 worth of cannabis last year, a 212 percent increase from the $77,772,936 seized in 2021.” 

In addition, Governor Newsom established the Unified Cannabis Enforcement Taskforce (UCETF) this past summer. The UCETF is a multi-agency task force designed to coordinate local, state and federal resources to combat illegal cannabis operations. A recent example of one of the UCETF’s operations was a bust in San Fernando Valley on October 18, 2022 which shut down thirteen large indoor cultivation facilities and netted 7,503 plants, more than 936 pounds of processed flower, both totaling almost $8 million. The operation included the DCC, California Department of Fish and Wildlife, CDTFA, Los Angeles DWP, and the LAPD.

The illegal cannabis tsunami continues to roll over legal cannabis operators in California, however. California generated $5.3 billion in legal cannabis sales in 2022, down 8.2% from 2021. This is the first time legal sales in the Golden State have decreased since recreational sales began in 2018. Cannabis website Leafly estimates 55% of all cannabis sales in California are from illegal shops.

According to Graham Farrar, the cofounder of Glass House brands, one of California’s largest cannabis producers with a 1.5-million-square-foot greenhouse in Camarillo, the illicit market is simply outcompeting the legal market in terms of price, and consumers are following lower prices. Farrar thinks significantly lower taxes would help level the playing field for the legal businesses. 

“Nobody prefers bathtub gin, right? You only drink bathtub gin if legal gin costs twice as much,” Farrar says. “If we could bring taxes on the consumer down, I think you’ll see more people in the legal market. And I think you’d actually collect more tax revenue.”