Temporary business licenses for every facet of the cannabis industry in California are expiring all across the state, leaving thousands in legal limbo.
As of August thousands of temporary business licenses are inactive for: cultivators, manufacturers, distributors, and store owners. Cultivators make up the bulk of these newly inactive licenses. The active temporary license number for cultivators was 5,381 as of early 2019, but as of August the number of active licenses total 2,795. California is now facing a burden of regulation, enforcement.
Enforcement is not an easy task. It takes manpower, equipment, identification and investigation of illegal businesses. Most importantly, it takes time. California law enforcement suspect there are 259 illegal cannabis retail operations in the state. This is contrasted with the 186 licensed retailers across California.
The current licensing issues are causing a market contraction in the legal cannabis industry that is already substantially behind the thriving black market in California. Marijuana is a $70 billion dollar a year industry nationally and legalization is meant to not only capture this demand, but phase out black market sellers. This is not the case in California.
In 2018, California predicted $1 billion dollar in tax revenue for legal cannabis sales, the actual figure ended up being $345 million. This is in large part due to the black market entrenched across the state. The current inefficiencies of the barriers to entry in the legal market are going to continue to make the fundamental goals of legalization an uphill battle.
A major inefficiency is California licensing requirements for potential cannabis related business owners. Licensing is the state’s way of making sure businesses comply with current legislation and regulation, so that consumers are protected and taxes are paid. This is exactly what you want out of a legal market, but this issue is how do you balance the cost of intense regulation with that of a thriving black market with no regulation?
California can either attack the black market through its police powers, streamline licensing and support legal businesses by lowering the barriers to entry and making the legal market more practical on the consumer, or do both at the same time.
It is not only that state that is to blame, city and local governments across California are not in support of a legal cannabis market. 76% of cities and 69% of counties have banned legal marijuana sales in the state. This stand on legal marijuana does nothing to combat the thriving black markets in these jurisdictions. This leaves a substantial enforcement burden on the state and the legal market is suffering because of it.
The fact of the matter is California has numerous growing pains it must fight through. Creating effective legislation and regulation, enforcing these laws and regulations, combatting an entrenched black market, and gaining support from smaller jurisdictions throughout the state. California will continue to lose ground to illegal operations until it has solved these issues.