Throughout 2017, people couldn't stop talking about California legalizing recreational marijuana in 2018. People assumed it would become a dramatic moment that would transform the entire industry. But that may not entirely be the case.
Some experts believe that California may not dominate the marijuana industry as much as previously thought. While it's currently estimated that about 80 percent of illegal marijuana grown in the United States is in California, that doesn't mean the state will dominate the legal cannabis market to the same degree. Even though growing marijuana with a license is legal in California, it's still illegal to sell cannabis grown in one state to another, even if that other state also has legal marijuana. So while California's supplying much of America's illegal marijuana sales, it may not do so for legal sales.
The other issue is taxes. Many worry that while California will certainly see large growth in the cannabis industry, a lot of people (both growers and sellers) will stay in the state's black market. Right now, taxes on marijuana sales can be around 30 percent or higher in many California cities. That means it could be significantly cheaper for customers to stay in the black market rather than buy into the recreational market. In Washington, for example, taxes on marijuana are over 35 percent, and it's estimated that about 50 percent of the state's cannabis sales occur in the black market. So California could be leaving a lot of sales to the black market.
And finally there is the pain for growers. While the taxes may not hurt marijuana cultivators in the short-term, the issue is what happens when the state is flooded with legal marijuana and suddenly the price of cannabis decreases. Suddenly the profit margin for growers will decrease while still paying the same high tax rate. That could lead to some growers shutting down shop or possibly going back to the black market.
So while California's cannabis industry will certainly see some growth this year, there's also a lot of growing pains that accompany it, and it will take some time for the state to figure everything out.
(h/t NBC News)