By Alicia Wallace

About 170 years after California’s gold rush came the promise of the green rush.

California’s legalization of cannabis for adult recreational use was expected to be massive. In 2016, industry investors claimed sales could top $6.5 billion by 2020.

And as 2019 comes to a close, California is indeed home to the world’s largest cannabis market, totaling close to $12 billion in estimated sales. But here’s the rub: $8.7 billion of that is changing hands in the illicit market.

Now, members of California’s cannabis industry are sending an S.O.S. to the state capitol, saying they’re struggling to compete against black market operators who don’t have to meet stringent regulations or pay taxes and fees. They’re urging leaders to make swift regulatory changes or risk the collapse of their emerging industry.

“The hard truth is that until legislative changes are made, our industry will continue to wither away,” said Michael Steinmetz, CEO of cannabis distributor Flow Kana, which recently joined a growing list of California cannabis firms that have cut their workforces.

Following the job cuts, which were first reported by the Sacramento Bee and described as an an “epidemic” of layoffs, Steinmetz cobbled together an informal coalition of more than a dozen leading companies and business associations to lobby the state.

California cannabis businesses that have cut their workforces or scaled back growth plans say their woes aren’t limited to the capital markets turbulence and the growing pains ricocheting through the broader cannabis industry. Their challenges, they say, are homegrown: California has too few licensed cannabis businesses, too much taxation and overly onerous regulation.

The group is calling for an emergency summit between industry leaders, state regulators and Governor Gavin Newsom to address those three key concerns.

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