California or New York? Which One Has the Biggest Marijuana Mess?

Colorado, Illinois, Oregon, Michigan, and seventeen other states have adopted recreational marijuana. None given the ongoing drama between California and New York. The two have provided fodder for industry (and mainstream) business media, gnashing of teeth for investors, tears and heartache for legitimate business owners, and confused consumers.

The legal marijuana industry was worth $28 billion in 2022, with an expected increase in 2023. Currently, 23 states have recreational marijuana and 40 states have medical marijuana, and over 48 million Americans use cannabis annually. It’s becoming big business, and the two most important states are California and New York. Both undermine the industry, fuel drama and impede federal legalization.

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California is the original key player and home to the largest legal market in the country, if not the world. It is estimated that California will have $5.3 billion in revenue in 2022 and that is exactly what is being reported. The state is home to medmen, high times and other players who have integrated into the mainstream media. Medmen was even mocked by the South Park series. But what’s really undermining the California market is taxes. Early on everyone saw it as a cash cow and everyone wanted a piece of it. Local, regional and state governments are deeply involved in the industry and demanding a part of it.

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California has an excise tax, state sales tax, business tax, and local tax. The revenue was good for the state, but they forgot one thing. They didn’t build a system to eliminate the unauthorized (illegal) businesses, so customers and businesses across the state resorted to “old-school” black markets.

The legal market in California has lost nearly a quarter of its total acreage since early 2022. Legal, high-priced indoor growing competes with cheap outdoor growing. Gov. Newsom, the state legislature and the industry have forgotten that customers care about price. For the first time, legal sales in the state fell as usage stayed the same or trended upwards.

Green Market Report broke the news that California-based Glass House Brands Inc. is being indicted as “one of the largest, if not the largest, black marketers of cannabis in the state of California, if not the entire country.” They have been transporting cannabis across state lines, according to a new lawsuit filed by a retail competitor to the company.

Where do you send the hot goods? Some go to New York State, which has been hit by its own pandemonium.

In 2021, New York State transitioned from a medical to a recreational offering, but the rollout came in 2022 after a chaotic overhaul of the original plan that involved mass buying of existing players. There are currently about 1,500 unlicensed retailers in New York City, which are working with the state to close several a month. These stores sell legal, semi-legal, locally illegal, and California illegal products on a daily basis.

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This week, the New York Cannabis Control Board met and was able to prevent significant action. One of the items on the agenda was the resignation of Reuben McDaniel, who found himself in a unique, if not difficult, position as CEO of the Dormitory Authority of the State of New York (DASNY). McDaniel had made no friends by helping to introduce legalization.

As stated by Green Market Report, “Members opened the meeting with the unanimous approval of 36 new conditional adult retail pharmacies, bringing the total number of retail licensees to 251. The new licensees included seven in the Finger Lakes region that had previously been stalled by litigation. But as of Thursday, there were just 13 operational retailers, according to OCM officials, with two more set to open in the Bronx and Syracuse in the coming days. One of OCM’s top priorities is to become even more open as soon as possible. Chief Equity Officer Damian Fagon informed the board that his office was reviewing more than 300 pharmacy site applications as quickly as possible, of which 146 have already been approved.”

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That would be 146 legal businesses nationwide compared to more than 1,500 illegal businesses in NYC that don’t abide by rules and taxes. The more than 1,500 shops do good business for the population. Unfortunately for the legal breeders and product makers, these customers are unavailable thanks to the 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 a constant tendency for government to overlook the vox populi (popular mood or opinion).