California officially legalized recreational marijuana at the beginning of the year, and the state is still learning how exactly to handle the industry. But one thing is clear is they're trying to avoid some of the mistakes made up in Oregon.
When Oregon launched their legal marijuana market, they wanted to end the black market cannabis trade in the state. Therefore, they instituted very low barriers of entry to make it easier for the newly legal market to thrive. And while that worked initially, it also led to a huge overproduction problem that's caused prices to plummet in the state. Now, some cannabis entrepreneurs say they may have to go out of business because the problem is so bad.
To put in perspective how bad the overproduction problem is, it's estimated that the state of Oregon has around one million pounds of cannabis currently in inventory. The state only has four million people. The price of marijuana per gram has dropped from $14 in 2015 to $7 in 2017.
The reason for this overproduction is licensing. To eliminate the black market and convince illegal growers to enter the legitimate industry, Oregon implemented no caps on licenses, allowed businesses to apply for multiple licenses and instituted very little fees. The result was a massive amount of applications for licenses.
Now the Oregon Liquor Control Commission is putting a temporary freeze on handing out licenses and wants the state government to address this issue soon.
In California, the desire to end black market marijuana may be strong. But they need to learn that taking drastic steps to do so will only harm the newly legal industry.