The state of California is preparing to enter the new year with a radical change in its cannabis market. On January 1, weed smokers can celebrate as legal marijuana sales for recreational use will be allowed in the Golden State.
Although Proposition 64, which legalized adult use of the plant, was passed over a year ago, California lawmakers are just now finalizing the legal guidelines that will regulate the market. Residents of the state will be able to purchase marijuana legally without a doctor’s approval.
Currently, the cannabis black market is worth $13.5 billion in California, according to cannabis financial firm GreenWave Advisors, while the legal market could be worth $5.1 billion in 2018. The state’s huge population will potentially contribute to lower prices for consumers and generate hundreds of thousands of dollars in taxes.
The laws in California remain strict on advertisement of the plant, forcing dispensary owners to get creative and discover new ways to promote. “You’re seeing a lot more sophisticated people from other industries starting to move into the space,” said B.J. Carretta, chief marketing officer of the medical dispensary. “If traffic doubles in January, it can’t be amateur hour.”
However, long-time farmers are struggling with the idea of going legal. GreenWave Advisors notes that half of all the cannabis grown in California is illegally shipped across the country and sold at two to three times more than if sold at a dispensary. Farmers have thrived in an underground market that essentially has no rules.
Consumers often have little choice in what they can purchase from a dealer or farmer, but with legalization, different forms of cannabis (like edibles and liquid vapor) will flood the market. “What we are going to see is not only a legal shift but a cultural shift,” said Michael Steinmetz, the CEO of cannabis distribution company Flow Kana.
Business owners are worried that new regulations could in fact limit supply and consequently raise prices. “Cannabis consumers deserve the same choices enjoyed by shoppers at the grocery store. While everybody would like to be able to afford heirloom tomatoes, meticulously tended in small patches and selling for $5.99 a pound — most families can’t afford them,” said DeAngelo, the CEO of Oakland-based Harborside cannabis dispensary. “Most can only afford the lower-priced tomatoes grown by larger, more efficient farms. And thankfully for these consumers, regulations allow the existence of such tomato farms.”
Despite the fact that eight states and the District of Columbia have passed laws approving legalization, only Colorado, Oregon, Nevada, Alaska and Washington have functioning cannabis marketplaces with Maine and Massachusetts looking to start their operations in 2018. While marijuana remains illegal on a federal level, the Trump administration has not publicly punished any states with pro cannabis laws.