California’s Path to Tackle Illicit Cannabis and Empower Legal Operators

LOS ANGELES– California’s relentless battle against illicit cannabis has reached a critical juncture, as state authorities strive to curb the flourishing underground market and protect the interests of legal cannabis operators and consumers. With the California Department of Cannabis Control (DCC) leading the charge, the government’s determined efforts to dismantle illegal operations have yielded noteworthy results, but challenges persist.

The DCC’s recent announcement on March 2, 2023, highlighted their intensified campaign against illicit cannabis. The figures speak volumes: a staggering 150 percent surge in DCC-led search warrant operations, soaring from 62 in 2021 to 155 in 2022. These operations have led to a substantial increase in the confiscation of illicit cannabis, with seizures skyrocketing from 41,726 pounds in 2021 to an astounding 144,254 pounds in 2022. Correspondingly, arrests have climbed from a meager 17 in 2021 to 56 in 2022. Notably, the value of illegal cannabis seized in 2022 reached a remarkable $243,017,836, representing a substantial 212 percent surge from the previous year.

In a bold move to further tackle illicit activities head-on, Governor Newsom established the Unified Cannabis Enforcement Taskforce (UCETF) in the summer of 2022. This task force, comprised of multiple agencies operating in unison, aims to synergize local, state, and federal resources for a more effective crackdown on illegal cannabis operations. Their collaborative efforts have already borne fruit, as exemplified by a high-profile operation in San Fernando Valley in October 2022. Thirteen large-scale indoor cultivation facilities were dismantled, resulting in the seizure of 7,503 plants and over 936 pounds of processed flower, with an estimated value of nearly $8 million. The success of this operation can be attributed to the joint efforts of the California Department of Fish and Wildlife, California Department of Tax and Fee Administration (CDTFA), Los Angeles Department of Water and Power (LADWP), and the Los Angeles Police Department (LAPD).

However, these commendable strides have not come without consequences. California’s legal cannabis industry has experienced a setback, with sales witnessing an 8.2 percent decline from the previous year’s total of $5.3 billion. This downturn marks the first-ever decrease since the inception of recreational sales in 2018. Startlingly, illegal shops are estimated to account for a staggering 55 percent of all cannabis sales in California, as reported by Leafly, a leading cannabis information website. This statistic underscores the immense challenge faced by legal businesses, as the lure of cheaper prices entices consumers toward the illicit market.

Graham Farrar, co-founder of Glass House Brands, one of California’s largest cannabis producers, highlights the underlying issue. The illicit market’s competitive pricing undermines the legal market, inevitably driving consumers towards more affordable options. To restore equilibrium, Farrar contends that tax reform is the key. Drawing a powerful analogy, he remarks, “Nobody prefers bathtub gin, right? You only drink bathtub gin if legal gin costs twice as much. 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.”

As the narrative of California’s cannabis industry unfolds, the year 2023 emerges as a pivotal chapter. It delves into the delicate balance between legality and affordability, the state’s fiscal interests, and the survival of legal operators. The Golden State stands poised to navigate the next phase of its unyielding battle against the illicit cannabis market, searching for innovative solutions that strike at the root of the issue and pave the way for a thriving legal landscape.