5 Problems Facing California’s New Cannabis Economy

The harvest is in and the first day of legal commercial sales of adult-use marijuana has passed. But the California cannabis industry is not saved. There are problems facing California’s new cannabis economy

Uncertainty and speculation take the place of facts and figures. Many of the same problems that plagued us way back in December, when everything was “still just medical,” harry us still. And they demand answers.

Lost in nearly all of the heady coverage from Jan. 1, when crowds lined up in the darkness a few hours into the New Year to buy a taxed-and-(somewhat)-regulated gram of legal marijuana, are the unfinished business and unresolved questions looming in the shadows. They’re too big to ignore and could make the marijuana industry too unwieldy, problematic, or expensive to succeed.

In terms of problems facing California’s new cannabis economy, here’s what’s keeping us down:

1. Legal Marijuana Is Really Expensive—Too Expensive?

It didn’t take long after the first legal sales on Monday morning for the joy and novelty to clear. And once those vapors dissipated, the sticker shock to set in. 

The first gram sold at Oakland’s Harborside—sold to Harborside’s lawyer—cost $20 and change. At Berkeley Patients Group, once state and local taxes factored in, top-shelf eighths were $75 out the door. In cannabis-growing country in Sonoma County, the asking price for an eighth of Sapphire Kush was $70. Before taxes.

Admittedly, this is for the best (and, ergo, priciest) cannabis on the market. But these price points are rightfully stoking fears of a black market lingering around for quite a while after legalization. And, quite possibly, becoming a permanent fixture, unless prices can become competitive.

Once you add in all the various levies, there’s an effective rate of around 40 percent. California’s pot taxes may be the highest in the nation. Marijuana sellers know they’re not the only game in town even if they’re the only licensed operation. And they are absolutely aware that consumers won’t cheerfully fork over 40 percent more money for the same product forever.

As it always does, time will tell if these open and serious concerns prove prophetic warnings, but consumers don’t typically react well to sudden, sharp increases in prices (but, just as often, markets don’t care). And high prices is just one of the problems facing California’s new cannabis economy.