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California Legal Pot Industry Warns It’s ‘Collapsing’

California Legal Pot Industry Warns It’s ‘Collapsing’

Meanwhile, Mexican drug cartels turn Northern California into ‘The Wild West’.

California’s pot industry representatives sent a letter to Gov. Gavin Newsom, explaining that the state’s legal industry is on the verge of collapse. It needs immediate tax cuts and a rapid expansion of retail outlets for relief.

The letter signed by more than two dozen executives, industry officials and legalization advocates followed years of complaints that the heavily taxed and regulated industry was unable to compete with the widespread illegal economy, where consumer prices are far lower and sales are double or triple the legal business.

Four years after broad legal sales began, “our industry is collapsing,” said the letter, which also was sent to legislative leaders in Sacramento.

Between cultivation taxes and the limits on dispensing facilities, California’s rules appear to be strangling the newly legalized industry.

The industry leaders asked for an immediate lifting of the cultivation tax placed on growers, a three-year holiday from the excise tax and an expansion of retail shops throughout much of the state. It’s estimated that about two-thirds of California cities remain without dispensaries, since it’s up to local governments to authorize sales and production.

The current system “is rigged for all to fail,” they wrote.

“The opportunity to create a robust legal market has been squandered as a result of excessive taxation,” the letter said. “Seventy-five percent of cannabis in California is consumed in the illicit market and is untested and unsafe.”

“We need you to understand that we have been pushed to a breaking point,” they told the governor.

Meanwhile, Mexican drug cartels are organizing to illegally grow large crops in the hills and valleys of Northern California.

The cartels are essentially returning that state region to the days of “The Wild West.”

Lured by America’s push toward legalized cannabis, cartels have abandoned many decades-old marijuana farms in Mexico, moving their operations to Northern California where they can blend in seamlessly alongside legitimate grows, said Mike Sena, executive director of Northern California’s High Intensity Drug Trafficking Area task forces.

“Why try to bring that bulk marijuana into the United States, when you can just grow it in the United States in remote locations like Mendocino County and then move it across the entire country?”

…It has essentially returned that part of the state back to the days of the “Wild West”.

“It’s the Wild West,” said Sena, who is based in San Francisco and oversees 22 federally funded drug task forces throughout Northern California. “We’ve got people in gunfights on a regular basis over marijuana.

Not one of these consequences was mentioned when the concept of legalized marijuana was voted in as 2016’s Proposition 64 passed.

And while the state and federal governments focus on a virus that is devolving into one that causes terrible colds, one state in the Union is on the verge of becoming Sinaloa North.


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casualobserver | December 21, 2021 at 3:34 pm

Mariana van Zeller has a good episode about this in her NatGeo series Trafficked. Even the citizens who are growing and selling outside the law admit it is not so risky because the chances of being found are not that high. And the penalties are low given how “non-violent” crimes are “reimagined” in California. LOL

Everything the progressives touch in that state NEVER turns out as planned. And it’s a great lesson for the rest of the states.

Pasadena Peabody | December 21, 2021 at 3:48 pm

Legal pot industry is collapsing.

You mean it’s going to pot?

Who could ever have predicted that a heavily regulated and highly taxed industry would have trouble competing with organized crime? It’s almost as if liberals don’t see the consequences of their policies!

No, that couldn’t be it. It must be Donald Trump’s fault somehow.

    Ben Kent in reply to irv. | December 22, 2021 at 4:50 pm


    Headline you’ll never see – because it’s not news. Marxists do not know how to run a free market. They are anti-free market. Tax and regulate it – until it’s dead — then blame someone else or have a party (or both).

I grow MJ because it’s a great sleeping pill. Here in the Pacific NW where it’s “legal,” an ounce of what I grow for $1.70 goes for $175 in the “legal” retail outlets. My chocolate chip cookies made with cannabutter cost me a bit less than 15 cents apiece; if I used retail MJ, they’d cost $3.

The “legal” MJ industry, and the tax collections that go with it, are doomed.

    This is what I never understood about the tax revenue value prop.

    The industry operated robustly outside the law and there was ZILCH the government could do to stop it. So when it was legalized…. WHY exactly is this underground industry suddenly going to turn half of it’s profits over to the government in sales tax and income tax just because the impotent and powerless state legislature said so?

      DesertBunny in reply to Andy. | December 21, 2021 at 5:25 pm

      Perhaps people who grow it legally are not the same people who risk growing it illegally.

      RandomCrank in reply to Andy. | December 21, 2021 at 5:27 pm

      RAND Corp did a great study about 15 years ago. Showed that about 90% of the cost of illegal MJ is concealment. The “thinking” behind gov’t taxation and regulation is that, no matter how ridiculous, it’s still cheaper and far less trouble than concealment.

      What they have missed is that the “legal” system has established a high price umbrella that makes it easy to undercut the “legal” price and still make all kinds of money doing it. Longer term, legalizing personal possession and use reduces the stigma. This is what will pretty much kill the “legal” system.

      There are 100 million gardeners in America. As MJ’s stigma recedes, they’ll be opening their eyes. Pay $175/ounce at a store, or spend $50 for a clone, some soil, and some fertilizer, and grow not one ounce but 40 or 50 ounces? Even a stoner can do THAT arithmetic — especially when we’re talking about something that, well, it’s a weed fer chrissakes. It’s beyond easy.

      I don’t know when it’ll happen, but we WILL see an explosion in the number of people growing a plant or two. At that point, the “legal” biz will wither. There’ll always be people who buy from the store, but that market will be very different, and the tax take minimal.

        Anyone who wanted to grow before- grew it. Anyone who wanted it before was able to get it. The dealers knew how to get the good stuff. More than a few of my college friends grew.

        I can’t speak to the social trends of acceptability for the masses. The dumbed down masses like their pleasures and are typically gluttonous sloths, so more than likely. Since brewing good beer is far cheaper than buying it, there’s logic for a market. But the craft market for weed will always beat the taxed market.

        What the cartels did in response was to bring in heroin, meth and fet. They made it cheap in direct response to California’s ease of access. Hence the pooping zombie epidemic that mysteriously started growing exponentially in the past 3-5 years. This was the unintended consequence of legalizing weed. The devil just went to dealing in deadlier products.

        Tough to argue that the cartels aren’t the only winners here.

      gonzotx in reply to Andy. | December 21, 2021 at 8:25 pm

      Because it is legal and you no longer have to pay the lawyers, spend time in prison, avoid the cartel?

        I know a hundred pot users – pre legalization. Never once was one of them arrested or had run ins with the cartel. They all drifted cleanly outside the law. They hated that it was illegal to recreate- and thus were huge proponents of it being legalized. They however are not accountable or responsible for the counter actions of the cartels so long as they got their puff without the stigma.

    DesertBunny in reply to RandomCrank. | December 21, 2021 at 5:20 pm

    More and more people will grow their own marijuana, like you. It’s not difficult to understand and easy to grow. That would cut into the “legal”
    market and deprive the thieving politicians and govt. bureaucrats of their booty.

      RandomCrank in reply to DesertBunny. | December 21, 2021 at 6:42 pm

      Where I live, you can barely even give it away. The stores have flower, but it’s a much smaller part of their business than it used to be. Sales have definitely shifted to edibles, especially candy and drinks, which are trickier to make than Toll House cookies and brownies. Myself, it’s 100% about sleep, and with cheap MJ I make ’em double strength. One and done.

      I cannot overstate how easy it is to grow. My plants sit 15 feet from the tomatoes, fed by the same drip irrigation system. Use the same fertilizer. It’s about as laborious to harvest, dry, and stores it as it is to can my tomato crop. Making the butter is easy. I do everything in bulk, and between what I froze last summer and harvested this fall, I might not even bother growing any in ’22.

      I’m a retired journalist (old-school, trust me) and later financial analyst. When I did the numbers, I was so shocked that I ran them at least a dozen times. My cost has been $1.70/oz, and that roughly matches Rand’s $2.80/oz estimate if I were to throw in my garden labor at harvest time.

      Something else. Any bartender will confirm that half the drinks are bought by, um, “heavy users.” Anyone want to guess how much backyard cultivation will be (and is, on the Pacific Coast) done by hard-core stoners? Imagine taverns and liquor stores without alcoholics. I am a real exception. I’m a one cookie a night guy, suffering from multiple sclerosis. I actually put up with the psychoactive side because of how effective indica MJ is at knocking me out.

      I really don’t mean to be the promoter here, but damn: a penny on the dollar?

Only California could find a way to make recreational drugs unprofitable.

I don’t think I know of other instances where illegal is cheaper than legal….what an accomplishment by the cali crazies.

    RandomCrank in reply to healthguyfsu. | December 21, 2021 at 5:02 pm

    I can’t think of any other industries where the gross margin is >99%. If MJ were a normal industry, a retail ounce would go for $10 or $12, and that’s a high (no pun) guess.

    The authorities seem to think that they can treat MJ like alcohol or tobacco, but they miss a crucial difference: It’s much, much easier to grow, process, and store your own MJ than it is to do the same with alcohol and especially with tobacco. A gardener who can grow tomatoes can grow MJ just as easily, and anyone who can read a cookbook can make MJ butter.

    As I write, not many gardeners grow their own MJ. The so-called “legalization” movement is still new, plus the gardening population tends to be older and less adventurous. Thus: a lot of legal and practical issues in most of the country, and the stigma remains. Time marches on, and those barriers will fall.

    A couple decades from now, MJ will be virtually free of charge, unless the government gets cracking and cranks up some way to demonize the person who grows a plant or two in the back yard.

Leave it to California to F up a gimme! Criminals know how to administer their program better!

Completely predictable.

Just legalize possession in cigarette form or edible form with a tax stamp QR code to track lawful purchase and tax payment. No tax stamp = penalty harsh enough to outweigh not paying the tax.

    RandomCrank in reply to CommoChief. | December 21, 2021 at 7:06 pm

    So they’ll fly over your backyard to detect two plants, then search your house? Not too likely.

      CommoChief in reply to RandomCrank. | December 21, 2021 at 7:57 pm

      Nah. Just enforce during normal police encounters. Save the drones for large operations, some guy with two plants ain’t worth it. The same guy with 200 plants is another story. IMO, if they are not going to completely legalize it or if they want the tax revenue then use the tax stamp as the determining factor. No tax stamp means harsh penalties. Make it cost effective to pay a reasonable tax v risk incarceration and hefty fines.

      Otherwise the option is to simply legalize possession and sales among adults. That would drop the bottom out of the price and be a disincentive for continued cartel trafficking of it. As a recovering libertarian absolutist I would prefer that we legalized every drug and let adults make their choices then live with consequences.

      IOW if you buy come an addict living on the street turning tricks to feed your habit that’s on you. Private charity can act to help but not with any tax dollars other than incarceration for that persons crimes to feed their addiction. Community standards should prevail in determining whether they allow, disburse, house, treat or involuntarily commit drug addicted/mentally ill vagrants. Let CA be CA and Alabama be Alabama.

        Morning Sunshine in reply to CommoChief. | December 21, 2021 at 8:10 pm

        IOW if you buy come an addict living on the street turning tricks to feed your habit that’s on you. Private charity can act to help but not with any tax dollars other than incarceration for that persons crimes to feed their addiction. Community standards should prevail in determining whether they allow, disburse, house, treat or involuntarily commit drug addicted/mentally ill vagrants. Let CA be CA and Alabama be Alabama.


          RandomCrank in reply to Morning Sunshine. | December 21, 2021 at 10:47 pm

          I am with you 100% about the addicts. Not really a MJ issue, although I also think that the negatives have been glossed over in recent years. It’s a paradox for me. I think there are negatives, just as with alcohol (but different.) I am ultra-reluctant to ever have my MJ find its way to young people, and in my own case am confident that it hasn’t. So here I am, Mr. Spiked Cookie, not wanting mine to be eaten by anyone <25 years old. LOL

          healthguyfsu in reply to Morning Sunshine. | December 22, 2021 at 11:24 am

          While MJ isn’t an addiction, it does without any doubt lower motivation if used chronically at levels designed for a “chronic high”. That can turn someone who really likes it into the economic equivalent of an addict…of course, they could probably stop if they wanted to but would they?

        RandomCrank in reply to CommoChief. | December 21, 2021 at 8:20 pm

        Requiring a tax stamp would be like making my tomatoes illegal unless I carried the receipt. Ridiculous. In any case, I think the early tax- and regulatory regimes will collapse not because of big, organized forces like cartels, but becaus of the unorganized army of backyard gardeners.

        Among other things, a home gardener can grow a LOT of marijuana in a small footprint. I got 3-1/4 lbs from two plants, and that little only because one turned out to be a dwarf, plus the big heatwave in June hurt yields of everything. Had it been a normal year, I’d have gotten >5 lbs., and you’ll just have to trust me when I say that I didn’t do anything special.

        At this stage, MJ still has perceived scarcity value. That’s what will change, and it’ll change because there’ll be a tipping point where everyone and his brother will be growing it.

        These “legalization” schemes are going to di

          CommoChief in reply to RandomCrank. | December 21, 2021 at 10:07 pm

          There’s a tax stamp on a bottle of liquor, The possession of untaxed liquor is illegal in every State. Displaying the tax stamp which is affixed to the bottle is proof of tax payment. Same for cigarettes. That isn’t close to retaining a receipt. Retention of a container with a tax stamp doesn’t seem like a high burden especially when that same system has been in use for taxed liquor and taxed cigarettes for generations.

          RandomCrank in reply to RandomCrank. | December 21, 2021 at 10:38 pm

          Please post a link to any cases where this has been enforced against an individual with consumer-level amounts of alcohol.

          CommoChief in reply to RandomCrank. | December 22, 2021 at 11:34 am

          Alabama used to and probably still does rigorously enforce untaxed liquor and cigarettes coming up from Florida. Speed traps were set up and during the encounter LEO would tack on the untaxed charges post search.

          Many snowbirds, spring breakers and even average folks purchased at much cheaper prices in Florida for transport home. Possession of untaxed cigarettes/liquor in excess of minimum allowed amounts was enforced. First hand experience, I was one of those college kids that got rolled up.

      gonzotx in reply to RandomCrank. | December 21, 2021 at 8:29 pm

      Probably very likely

The number of arguments – in person and on-line – that I got into with people who bristled at the notion that ‘legalizing’ weed would have little to no impact on the illegal weed trade, is too ‘high’ (pun intended) to count.

What’s happening now was PLAINLY predictable. Unlike beer, wine and even liquor, weed is ridiculously easy and cheap (per pound) to transport through illegal channels. It’s the kind of light but reasonably valuable commodity that SCREAMS for a black-market when the white market is prohibitively expensive because of government regulation.

Full Disclosure: I’m agnostic on weed. I really don’t care about it, one way or the other. I do think it’s kinda silly to prohibit an actual weed that, while not strictly indigenous, has been growing wild in North America for thousands of years, likely thanks to the Clovis or some other prehistoric people. But certainly, we want to keep it out of schools. So, some regulation is warranted. Hell, we federally regulate milk, cheese and even corn.

    RandomCrank in reply to TargaGTS. | December 21, 2021 at 7:04 pm

    Not just easy to transport, but easy to make (grow) yourself.

    I’ve brewed beer, which is the easiest alcohol to make. Probably about 10% of the retail price, but there you are with 5 gallons. It will be okay, but it’s easier to screw up a batch of beer than it is to screw up MJ, as long as you grow it outside. Storage is much easier, especially if you’re like me and consume in “edibles.” Cannabutter will be fine for years in a freezer, and my spiked cookies have never gone stale. Beer spoils, and is bulky. Plus it weighs a pound a pint.

    People make their own wine, and it’s almost always puke-worthy. Is someone going to make their own booze? Not many unless Prohibition came back. Cigarettes and cigars are highly engineered, especially the former. Bottom line: alcohol and tobacco are highly susceptible to what Econ 101 says about monopoly/oligopoly pricing: restrict quantity to maintain price. With MJ, you can simply grow your way around that, but you can’t grow your own bourbon, Ashtons, Talisker, Rittehouse rye, or Marlboros.

    The legal and social status of MJ is changing. The “legal” stores are not what the proponents think, or they won’t be for long. The main effect, over time, will be to change MJ’s status. Once that really sinks in, the essential difference that I have just pointed out will make marijuana a very different animal than alcohol or tobacco. It’ll be more like something on the spice rack, but with more downward price pressure.

    I wonder how many state officials have a clue. From their statements, I don’t think they do. In any case, they’d better be damn careful about forecasting tax revenues. Any “surges” will be temporary.

amatuerwrangler | December 21, 2021 at 7:05 pm

“Meanwhile, Mexican drug cartels are organizing to illegally grow large crops in the hills and valleys of Northern California.”

Cartels (most likely) and free agents have been growing in eastern Calaveras county since the law took effect. Well, openly growing. They are maybe working on consolidating among themselves, but it has been going since day one. Unlicensed grows, and “licensed” ones greatly over the specified acreage. Everyone knew this would be the result.

The idea of CA regulation and taxation stifling business…. that’s a new one. /sarc/

    RandomCrank in reply to amatuerwrangler. | December 21, 2021 at 7:14 pm

    If I were in a drug cartel, I’d contribute to politicians who make sure that “legal” MJ exists, but is really expensive — enough regs and taxes to inflate the price, but not enough to actually kill the industry. The “legal” side would be Sinn Fein, and I’d be the IRA. Imperfect analogy, but that’s what analogies are about. The idea is that I, Senor Cartileno, wants the legal stores and grows to make what I do more acceptable, and to provide a price umbrella.

    How much does anyone want to bet that what I suggest is already happening?

    Follow the cartels’ money: you’ll find it going into democrat politicians’ pockets.

One interesting aspect of MJ right now is the small scale relative to other agricultural commodities, such as wheat, corn, soybeans, and potatoes. Not a lot of deep farming experience, so we haven’t seen — for example — a lot of modification of machinery to remove labor.

When Rand studied it about 15 years ago, they pegged the cost to grow in a fully legal environment at 10 cents/gram, or $2.80/ounce. From there, the study said, costs would decline. Get my friend the North Dakota wheat farmer out there, and he’d be harvesting with his Deere combine, and it wouldn’t take long for him to come up with a much cheaper way to trim the buds.

The people who look at this tend to be goofy stoners, grimacing conservatives, and tax-hungry politicians. Get Agriculture Inc involved, and just watch how low the cost would get. That said, I think backyard gardeners are going to be a hugely important force as time goes by. As they realize more broadly that they can have MJ for a penny on the dollar, the whole game will change.

Inconceivable! I had been assured – by the Very Best and Brightest (TM) – that legal pot would create a huge new industry generating gazillions of tax revenues and save the Universe, or something.

I only hope that marijuana anonymous proliferates quickly so I don’t have to listen to their boooooooring stories. 😉

Economics for $500.00
Question: Name something any 12 year old in Chicago or Baltimore can do but the state of California cannot.
Answer: Make money selling pot.

antisocialjustice | December 22, 2021 at 12:21 am

So, in California, untested = unsafe.

For weed.

For your body

antisocialjustice | December 22, 2021 at 12:22 am

oops, for your body, untested is Science!

Here in Alaska, they legalized pot under the premise that it would bring in regulated safety, dispel crime and raise great amounts of funding for the schools, property tax relief and so on.

The regulatory agency is now costing us more than it is bringing in.

    RandomCrank in reply to snowshooze. | December 24, 2021 at 8:41 pm

    I really don’t care what your opinion of your state’s MJ law and regulations are, but don’t lie about numbers. Liberals do it, and so do you.

    AK’s MJ taxes totalled $24.2 million in FY20.

    AK’s Alcohol and Marijuana Control Office spent $3.4 million in FY20.

      RandomCrank in reply to RandomCrank. | December 24, 2021 at 8:54 pm

      AK’s marijuana taxes made me laugh. They charge $50 per ounce ($800 a pound) tax on bud. My growing cost is $1.70/oz. Add $2 for my uncompensated harvest labor (I’m overestimating), and round it up to $4 an ounce or $64 a pound, and AK’s tax alone is about 12-1/2x my fully-loaded growing cost. Those numbers point toward a very different future. The backyard gardener is going to squash the Department of Revenue.

      RandomCrank in reply to RandomCrank. | December 24, 2021 at 9:08 pm

      Oops, one more thing. I am a former journalist who switched careers and became a financial analyst. In BOTH careers, I swam in a sea of numbers, not being the prototypical innumerate leftist poet that makes up the large majority of reporters, even before the media committed collective hari-kari after roughly 2000.

      I am a conservative independent. I disdain stupidity and lies no matter who tells them. Same standards for everyone, nowhere to hide. You lied through your teeth about the numbers, just as Biden lied about the cost of BBBBB, i.e. Build Back Better Bullshit Bingo. Don’t lie about numbers and somehow expect a pass because we are both wingnuts.