The vast majority of California's marijuana growers have yet to move into the state's new legal regulatory framework, leaving big questions looming around whether they can survive in the brave new world of legal weed, whether a substantial illicit market will remain and whether that anticipated tax revenue windfall will actually materialize.
According to a report released Feb. 19 by the California Growers Association, representing mainly small-scale growers across the state, fewer than 1 percent of growers have been licensed so far. That's a measly 534 licensed growers out of an estimated 68,000 in the state.
The report, "An Emerging Crisis: Barriers to Entry in California Cannabis," identifies a number of obstacles for small producers, and warns that those issues must be addressed if participation is to increase and a post-legalization police crackdown avoided.
"Without broad participation, legalization will look a lot like prohibition" with many illicit growers, the report concludes. "The current system will not achieve its goals without fundamental and structural changes that allow small and independent businesses to enter into compliance."
Obstacles to participation include lack of access to the financial sector, the high costs of complying with regulatory and tax burdens, state regulations that seem perversely designed to weed out small competitors, slow-moving or sometimes hostile local governments and a saturated market.
As one Sonoma County cultivator put it in the report: "The unintended consequence of making it so difficult at the local and state level to enter the regulated market is that 80–90 percent of those who were working with dispensaries prior to Jan.1, 2018, are being pushed to the black market. This is not only bad for the regulated market, because so much high-quality product is now flooding into the black market, but crime is increasing as a result as well.
State and local governments need to make course corrections, "or else a staggering number of businesses will fail, while staggeringly few [will] enjoy significant growth," the report warned. "Many of the best growers—the most dedicated and passionate artisans who can add tremendous value to the state marketplace—are the ones being left behind."
Quick action to make California's legal markets more friendly to small producers may eventually entice more to fight their way into the regulated pot economy, but it's going to take the end of pot prohibition in the rest of the country to end California's black market pot exports.
Phillip Smith is editor of the 'Drug War Chronicle.'