California Designates $100 Million for Cannabis Licensing to Combat Illicit Industry

California Designates $100 Million for Cannabis Licensing to Combat Illicit Industry

California lawmakers approved $100 million in grant funding to help legal cannabis businesses transition from provisional licenses to annual ones, in a move aimed at stemming the state’s thriving illicit marijuana market.

More than 80 percent of California’s legal marijuana businesses currently operate with provisional licenses under a process described as “expensive, time-consuming and difficult” by Jamie Steigerwald, chief marketing officer at LA-based cannabis delivery service Nug Avenue.

The approved funding will go directly to 17 cities and counties so they can employ more staff to help marijuana businesses with the licensing process. As well as creating jobs, lawmakers hope this will drive down costs in California’s legal cannabis industry and make the illicit market less appealing for black market sellers and consumers.

California legalized marijuana in 2016 but that didn’t mean the end of the illicit marijuana market. Far from it. Nearly three years after legalization, more than three quarters of cannabis sales in California still took place on the black market. The United Cannabis Business Association, which certainly keeps a keen eye on the situation, estimates the state has three times the number of unlicensed marijuana sellers as licensed ones.

This makes California an outlier among states that have legalized cannabis sales. For Chris Beales, Weedmaps CEO, this shows “there aren’t enough legal retail locations to meet the market demand.”

Others look to California’s marijuana tax arrangements and claim they’re too onerous for businesses and consumers alike. That’s the view, at least, of a candidate to replace Gov. Gavin Newsom should he be recalled by voters in a vote set for this month.

“When you think of it in terms of the supply chain, first it affects nurseries, where the operator has to pay local and state taxes,” said Jackie McGowan, a former cannabis consultant and lobbyist. “The cultivator produces the product and sells it to a wholesaler or retailer, and they have to pay the excise tax. It goes to the manufacturer, and that’s another tax. By the time it gets to the consumer, it’s been taxed 10 or 15 times depending on what jurisdiction you’re in.”

Lawmakers will be fully aware that every dollar that goes into the pocket of an illicit seller is lost tax revenue that could have been used for various social equity initiatives and public services outlined in provisions of California’s marijuana laws, such as education, drug addiction support and community projects.

Allocating funds toward expediting the state’s cumbersome marijuana licensing process is just one piece of the puzzle, however. Lawmakers are already working on a bill that would override local marijuana retail bans, while law enforcement have been instructed to clamp down on illicit grow operations in the state, especially in national parks and public wildlands.

About Brian Ellis

With 6 years' experience in business journalism, Brian is the person we turn to for anything related to the business of cannabis. His news coverage spans topics including marijuana business and finance. Brian's work features on, and