Colorado, Illinois, Oregon, Michigan, and seventeen other states have rolled out recreational marijuana. None with the ongoing drama of California and New York. The two have provided fodder for industry business media (and mainstream media also), the gnashing of teeth for investors, tears and anguish for legal business owners and confused consumers.
The legal marijuana industry was worth $28 billion in 2022, with an expectation to rise in 2023. Currently, 23 states have recreational and 40 have medical with over 48 million Americans consuming cannabis annually. It is becoming a big business, and the two most important states are California and New York. Both undercut the industry, feed drama and stymie federal legalization.
California is the original major player and home of the largest legal market in the country, if not the world. California is estimated to have done $5.3 billion in 2022, and that is just what is reported. The state is home to Medmen, High Times, and more players who have blended into the mainstream media. Medmen has even been mocked by the show South Park. But what really undercuts the California market is the taxes. Early on, everyone saw it as a cash cow and everyone wanted a piece of the action. Local, regional and state governments dove deep into the industry, all demanding a chunk.
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In California there is an Excise Tax, A State Sales Tax, A Business Tax, and a Local Tax. The revenue has been good for the state, but they forgot to do one thing. They haven’t built a system to eliminate the unauthorized (illegal) companies, so customers and businesses have reverted to “old school” black markets around the state.
California’s legal market lost nearly one-quarter of its total growing area after the start of 2022. Legal high priced indoor grow competes with cheap outdoor grow. Governor Newsom, the state’s legislature and the industry forgot customers care about price. For the first time, legal sales went backwards in the state as use stayed the same or trended up.
Green Market Report broke the news about California-based Glass House Brands Inc. being charged as “one of the largest, if not the largest, black marketers of cannabis in the State of California, if not the country,”. They have been shipping cannabis across state lines, according to a new lawsuit filed by one of the company’s retail competitors.
Where are they shipping the hot goods? Some are going to New York State, which has been rolled with its own pandemonium.
New York State converted from medical to fully recreational in 2021, but the rollout happened in 2022 after a chaotic total overhaul of original plan that had mass buy in from existing players. Currently, New York City has about 1,500 unlicensed retailers operating with the state working to close several a month. These stores sell legal, semi-legal, local illegal and California illegal products each day.
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This week, the New York Cannabis Control Board met and managed to avoid significant action. One of the agenda items was the resignation of Reuben McDaniel who as CEO of the Dormitory Authority of the State of New York (DASNY) was in a unique, if not sticky, situation. McDaniel had not won friends in his helping roll out legalization.
As Green Market Report shared “The members opened the meeting with the unanimous approval of 36 new conditional adult use retail dispensary permits, bringing the total number of retail licensees to 251. The new licensees included seven in the Finger Lakes Region, which had previously been stalled by litigation. But as of Thursday, there are only 13 operational retailers, OCM staff noted, with two more set to open in coming days in the Bronx and Syracuse. Getting even more open as soon as possible is one of the OCM’s top priorities. Chief Equity Officer Damian Fagon told the board his office is sifting through more than 300 dispensary location applications as quickly as possible, with 146 that have already been approved.”
That would be 146 legal stores statewide versus 1,500+ illegal stores in NYC who are loose on rules and taxes. The 1,500+ stores have been doing a solid business to the population. Unfortunately for the legal growers and product makers, those customers are unreachable thanks to New York Cannabis Control Board.
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New York and California are important markets and key to federal approval. In an ever-changing world there seems to be constant, government trend to overlook the vox populi (popular sentiment or opinion).