California’s Legal Marijuana Market Outnumbered Three to One by Illegal Dispensaries
California has always been notorious for its massive grey market presence. High cannabis taxes and overhead costs make it impossible for legal establishments to compete with their illegal counterparts. This leaves the onus on the public to support legal dispensaries.
Unfortunately, not everyone is that idealistic. For most customers, demand for lower-priced marijuana constantly takes priority over supporting legitimate businesses.
Consequently, the state continues to miss out on lucrative sales and tax revenue. More importantly, however, legalization’s goal of snuffing out the black market is failing miserably.
According to KTLA News, grey market storefronts continue to dominate the market with impunity, much to the frustration of legitimate owners.
Although we can definitely blame price differences for giving the illegal dispensaries so much momentum, they are not the only ones to blame in this messy situation.
Almost 3,000 Illegal Storefronts
Illegal dispensaries are a thorn in the side for every legal market, be it Canada or the U.S. However, California’s is arguably the worst. It can only be compared to a highly contagious disease for which, so far, there appears to be no cure.
What we did not know until now, is just how bad this metaphorical infection is. A September 11th audit published by the United Cannabis Business Association reveals something truly startling:
“The audit…found approximately 2,835 unlicensed dispensaries and delivery services operating in California. By comparison, only 873 cannabis sellers in the state are licensed, according to the Bureau of Cannabis Control.”
Naturally, this means the illicit market wins in every category. Aside from pricing, their prominence means greater accessibility, especially in “dry areas” where the municipalities banned legal sales.
Lack of Action by Authorities
Since legal marijuana cannot compete with the grey market, the responsibility falls upon the state regulators and authorities to keep these businesses in check.
Unfortunately, their response to date has been underwhelming, to say the least. Despite promising stronger enforcement and regulatory control in 2018, store owners are very dissatisfied.
According to KTLA News:
“Legitimate marijuana businesses have repeatedly criticized state leaders and law enforcement for failing to curb unlicensed dispensaries and delivery services, which sell cannabis at a much lower price by skirting state and municipal cannabis taxes.”
But even if authorities were to step up their game, history shows us that illegal storefronts are like roaches. When one closes down, it either reopens shortly or is replaced by another. Taking them down would require a massive operation and a lot of resources.
Of course, California has no right to complain. They allowed things to get out of hand and it is their responsibility to fix the situation.
Huge Illegal Profits
While the legal cannabis market in California takes in a healthy profit, its illegal competitors dwarf it by leaps and bounds.
Although customers spent $3.1 billion on legal cannabis in 2019, illicit storefronts took in $8.7 billion – almost three times more money.
WeedAdvisor’s Frustration with Illegal Storefronts
As a provider of business solutions for the legal marijuana industry on a global scale, we find it disappointing to see the legal industry barely treading water.
However, we are forced to admit that, while the illegal industry is the perpetrator, the state and law enforcement are essentially enablers. Their inaction is still a form of action, which let these places go virtually unchecked.
If this continues, legitimate dispensaries will continue to struggle and possibly even give up. As service providers and educators, we remind everyone that agencies either cannot or will not help in many areas. It is therefore the public’s job to support the open market as much as possible.
If the legal system will not help, average consumers need to fight using their wallets.