California’s Government is Destroying California’s Cannabis Industry

2.9 min readPublished On: April 7th, 2023By

SACRAMENTO– California, often considered a pioneer in the legalization of cannabis, has faced numerous challenges in regulating the industry. One of the most pressing issues is the overtaxation of legal cannabis farms, which has led to the loss of hundreds of licenses across the state.

According to a report by SFGate, the number of legal cannabis farms in California has plummeted by over 50% in the past year. This sharp decline is attributed to a range of factors, including the State’s laws which did nothing to protect small farmers, the State’s high cost of compliance, the challenges of meeting the State’s onerous regulatory requirements, as well as the burden of excessive taxation.

In California, cannabis is subject to a complex web of taxes, including excise taxes, sales taxes, and cultivation taxes. These taxes can add up quickly, particularly for small-scale farmers who lack the resources to navigate the regulatory landscape effectively. As a result, many have been forced out of the legal market and back into the black market.

The high taxes are not the only challenge facing legal cannabis farmers in California. The industry has also struggled with a range of regulatory hurdles from the State, including strict environmental regulations in California and over-the-top requirements for testing and labeling.

State Capitol California in Sacramento

While these regulations are intended to ensure the safety and quality of cannabis products, they can be difficult to comply with, particularly for small-scale farmers with limited resources.

According to analysis of California’s Department of Cannabis Control (DCC) by the Cannabis Business Times the number of cultivation licenses in California is in free fall:


DateCultivation Licenses
Dec. 31, 20218,493
Dec. 31, 20227,672
Feb. 23, 20237,559
March 15, 20237,063

Compounding all this is the situation reported across the state of the CDTFA, the California Department of Tax and Fee Administration is threatening (or some cases has called on the homes) of several well known farmers and retailers in cannabis to enforce tax payments.

California’s government has in effect created a situation where legal cannabis farmers are struggling to compete with the illicit market, which operates outside of the regulatory framework and can offer lower prices. This has put pressure on legal farmers, many of whom are already struggling to stay afloat.

The situation in California is a cautionary tale for other states considering the legalization of cannabis. While legalization has the potential to generate significant revenue and create jobs, it also requires careful planning and effective regulation to avoid unintended consequences.

One potential solution to the challenges facing legal cannabis farmers in California is to reduce the tax burden on the industry. This could be accomplished by lowering excise taxes or providing tax incentives for small-scale farmers. Additionally, streamlining the regulatory process and providing more resources to help farmers comply with regulations could make it easier for legal farmers to compete with the illicit market.

California is regarded as the birthplace of the modern Cannabis Industry.

Everyone in the industry knows California’s legal cannabis industry is facing a range of challenges, including overtaxation and excessive regulation. But not many know that these challenges have led to the loss of hundreds (and hundreds) of licenses and a significant decline in the number of legal cannabis farms across the state.

To ensure the success of the legal cannabis industry in California and beyond, policymakers must work to address these challenges and create a regulatory framework that supports the growth and sustainability of the industry.

About the Author: News Team

Newsteam at Highly Capitalized are some of the most experienced writers in cannabis and psychedelics business & finance. We cover capital markets, finance, branding, marketing and everything important in between. Most of all, we follow the money.

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