California’s Legal Cannabis Industry Shadowed by Black Market

California is home to the world’s largest legal cannabis market, on track to post a record $3.1 billion in licensed sales this year. After legalization passed, the market was off to a rough start, with dispensaries struggling to keep up with stringent licensing, steep fees, and a slew of regulations regarding packaging and testing. With a posted growth of $600 million in just a year, the legal cannabis market is showing signs of incredible prosperity, but it is still overshadowed by one thing: the black market. 

With high taxes and many cities refusing to allow licensed dispensaries to operate, California’s black market continues to flourish despite legalization. Data collected by Arcview Market Research and BDS Analytics shows that for many people, it is much easier and cheaper to purchase cannabis from illicit dealers. They estimate that $8.7 billion is expected to be spent in the illegal cannabis market, dwarfing that of the legal markets. 

Legal shops are faced with obstacles of remaining competitive with the illegal market, especially when considering taxes and regulatory fees add up to 77% towards the price of a gram of cannabis. There are currently 583 licensed dispensaries and 263 licensed home delivery firms across the state, though many have tried to enter or stay in the market despite local governments barring dispensaries from operating. 

The passing of Proposition 64 resulted in the legalization of recreational cannabis, but it also gave local governments the power to prohibit legal cannabis sales within their jurisdiction. An estimated 76% of cities and 69% of counties have banned cannabis sales, and this is thought to be a major contributing factor to the explosive growth of the black market. 

Still, the cannabis industry has been a huge boon in job growth here in San Diego. While the number of open facilities and retailers does not match the number of permits issued by the city, once they open their doors, it is expected to account for more than 1,500 new jobs. Available positions range from paying minimum wage all the way up to six figures. 

Despite the illegal market’s continued success in an era of legalization, there is still hope for an industry that is very much in its infancy. With more people entering the market, there is great potential for the legal cannabis industry to be a true powerhouse in San Diego’s overall economic output.