California’s Legal Cannabis Market Bogged Down by Black Market

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BOULDER, Colo. – Cannabis industry market data research firms BDS Analytics and Arcview Market Research have released a new report titled California: Lessons from the World’s Largest Cannabis Market, which said consumer spending for 2019 is on track to reach $3.1 billion, and will continue to see growth, with projected spending of $7.4 billion by 2024.

But those legal cannabis sales estimates might be tripled, if not for competition from black market vendors, the report indicated. While former Governor Jerry Brown projected that tax revenue generated by legal sales would reach $643 million in 2018, taxes collected actually totaled little more than $345 million.

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“Regulators need to get past their pre-Prohibition prejudices. There would shortly be no more illicit market for cannabis than there is for liquor, if regulations for the two products were the same, i.e. testing to keep out harmful chemicals and checking ID at stores. The rest is regulatory overreach,” Arcview’s managing director of industry intelligence and editor-in-chief of the report Tom Adams summarized.

Improved state regulation was noted, as well as increased licensing in “growth-critical municipalities,” but the BDS/Arcview report comes after recent media coverage of a state audit that showed California Bureau of Cannabis Control has had some difficulty prosecuting black market vendors, due to lack of resources.

California also was the first state to experience a dip in sales after implementation of recreational sales in 2018, with $2.5 billion in sales that year compared to $3 billion in 2017. The statistic may indicate that some medical cannabis patients turned to black market resources, especially in areas without access to licensed dispensaries, after recreational regulations and taxation swung into effect.

The report predicted black market cannabis sales to make up 53 percent of the overall California market by 2024, and said that legal states with “more supportive regulatory regimes,” expect black marketers to make up less than 30 percent of sales.

Another insight into future consumers: Millennials and Gen Xers are coming into their own, and consuming cannabis more frequently than aging Baby Boomers.

 

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