The Unregulated Illicit Cannabis Market Is Booming in California

LOS ANGELES-In 2024, California’s legal cannabis production experienced an 11.8% increase, reaching 1.4 million pounds, according to a study commissioned by the state’s Department of Cannabis Control (DCC).

Despite this growth, the illicit cannabis market continues to overshadow the legal industry, with unauthorized production estimated at 11.4 million pounds. A significant portion of this illicit cannabis is believed to be transported out of state, while in-state illegal sales nearly double those of the legal market.

California’s total cannabis consumption stands at approximately 3.8 million pounds, indicating that the legal market supplies less than half of the state’s demand. This disparity underscores the challenges faced by legal operators in competing with unlicensed sellers. To address these issues, DCC Director Nicole Elliott highlighted efforts to reduce costs, expand access, and strengthen enforcement, aiming to create a fairer and more resilient industry.

The report also noted positive trends for the legal market, including a nearly 5% increase in nominal wholesale prices, a 7.5% rise in the industry’s gross value, and the aforementioned 11.8% boost in licensed production. However, the report cautioned that prices remain low and business conditions are challenging. These conditions could worsen if the state’s excise tax increases from 15% to as much as 19% by July 1, potentially burdening legal operators further.

Enforcement efforts have intensified, with California officials seizing illegal cannabis valued at $534 million in 2024. Since 2019, approximately $2.8 billion worth of illicit cannabis has been confiscated, reflecting the state’s commitment to supporting the legal market and protecting public health.

Despite these enforcement actions, the illicit market remains robust, challenging the viability of licensed businesses. The state’s legal cannabis industry continues to be undercut by cheaper, unregulated products due to insufficient enforcement, exacerbating the industry’s challenges.

In conclusion, while California’s legal cannabis production has grown, the persistent dominance of the illicit market poses significant challenges. Addressing these issues requires a multifaceted approach, including policy reforms, enhanced enforcement, and efforts to make legal products more competitive to ensure the sustainability of the state’s legal cannabis industry.