Since January, the Governor's cannabis enforcement task force  has seized over $61 million in illegal cannabis products, including nearly 36,600 pounds of unlicensed cannabis and eradicated over 62,000 illegal plants in law enforcement crackdowns, according to a press statement released by Governor Gavin Newsom (D). 

The initiative is part of the broader strategy to support the state’s legal cannabis market, said to be the largest in the world.

“While we watch California's legal cannabis market grow, we are taking down those who operate outside the law,” Newsom said. These enforcement actions not only protect the regulated market but also aim to stop organized crime, human trafficking, and the distribution of harmful illegal products.

From January 1 to April 30, operations conducted by the Governor's Unified Cannabis Enforcement Taskforce targeted counties including Alameda, Fresno, Humboldt, Kern, Los Angeles, Riverside, San Joaquin, Trinity and Orange. 

Since its establishment in 2022, the task force has executed 256 search warrants, resulting in the seizure of $406 million in unlicensed cannabis and the eradication of over 400,000 plants. Participating state agencies include the Department of Cannabis Control, Department of Fish and Wildlife, California National Guard, Department of Tax and Fee Administration, and the State Water Resources Control Board Division of Water Rights, with support from multiple federal and local partners.

To learn more about how regulators deal with illicit cannabis operations, don’t miss the opportunity to join us at the 19th Benzinga Cannabis Capital Conference in Chicago this October 8-9. Engage with top executives, investors, policymakers, and advocates to explore the industry’s future. Secure your tickets now before prices increase by following this link.

A Resilient Black Market

Newsom has championed other cannabis undertaken policy reform legislating to erase past cannabis convictions and reducing discrimination against off-the-job marijuana use. Further efforts include ensuring statewide access to medicinal cannabis and facilitating the creation of legal interstate cannabis markets. These actions complement the administration’s budget move to provide historic tax relief for equity operators. 

In 2023, cannabis sales in California amounted to $4.89 billion with total taxes paid by the industry reaching over $1 billion, explaining 0,23% of tax revenue perceived by the state in Q4.

However, this might just not be enough to help a struggling environment. In 2023, sales decreased by 5% both sequentially and year-over-year, with taxable sales decreasing by 8%. Early 2024 data suggests a further decline. Although wholesale prices increased, retailer margins became considerably tighter, leading to reduced profitability across various product categories. In the this scenario, the industry is having a hard time staying ahead of its tax burden while competing with illicit sales.