MORE THAN A year after marijuana merchants began legally serving recreational customers in California, the number of licensed shops, the volume of sales, and tax revenue are all below projections. Most strikingly, legal cannabis sales totaled $2.5 billion in 2018, which was about $500 million less than in the previous year, when only medical dispensaries were operating.
What went wrong? Nothing really surprising. California is regulating and taxing the hell out of cannabis, which makes it hard for legal suppliers to compete with the state's longstanding, extensive, and highly developed black market.
To begin with, marijuana businesses need local as well as state approval to operate. As of January 30, according to a Southern California News Group database, just 78 of California's 482 cities were allowing recreational stores. The Bureau of Cannabis Control recently finalized a rule clarifying that home deliveries are allowed in towns where storefronts are prohibited, which should provide a way around local bans.
Even when there is no local ban, would-be marijuana merchants need permission from the municipal or county government as well as the state, a dual licensing system that doubles the regulatory headaches. Licensees are subject to the Medicinal and Adult-Use Cannabis Regulation and Safety Act, the Bureau of Cannabis Control's rules, and whatever additional restrictions the local government imposes.
"More and more local governments are coming around, but progress has been slow," says Dale Gieringer, director of California NORML. He says other regulatory issues include legally...