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Legal Cannabis Could Mean A $5-Billion Boost For California Economy: Study

California’s impending legal cannabis market could mean a $5 billion boost for its economy, a new state-sponsored study by the University of California Agricultural Issues Center has revealed.

About 29 percent of all cannabis consumers, however, may continue to fuel the illegal market at the get-go to avoid the costs of new regulations that require cannabis to be tested, tracked and taxed at 15 percent of its retail value.

Officials hope to eventually bring the grand majority of consumers on board with the legal market, according to Lori Ajax, director of the state Bureau of Marijuana Control.

“It’s going to take some time,” said Ajax, whose department hired the center to predict the economic impact of the new regulations.

“While it’s unlikely that everyone will come into the regulated market on Day One, we plan to continue working with stakeholders as we move forward to increase participation over time.”

State officials are on track to start issuing licenses in January to businesses hoping to grow, transport, test and sell cannabis following voter approval in November to legalize the plant for recreational use.

As of November, the study estimated that aggregate annual sales in medical marijuana were $2 billion a year, while sales in the illegal market were $5.7 billion.

According to government estimates, a fully legalized cannabis system may garner state and local governments $1 billion in tax revenue. The study predicts that more than 1,200 jobs will be created in the legal market for testing and handling cannabis. Researchers also believe that new rules allowing for the purchase of recreational cannabis will reduce medical sales from $2 billion to $600 million. 

“Revenues for medical cannabis in Washington State, for instance, fell by one-third in the first year after the legal adult-use cannabis system took effect, and by more subsequently,” the study said.

Once the legal market is in place, the study estimates, legal recreational use will make up 61.5 percent of the overall market, illegally purchased cannabis will make up roughly 29.5 percent and legal medical marijuana use will make up about nine percent.

“We projected that when legally allowed, slightly more than half of the demand currently in the illegal adult-use segment will quickly move to the legal adult-use segment to avoid the inconvenience, stigma, and legal risks of buying from an unlicensed seller,” the study says.

Legalization will also be hugely beneficial for the state’s tourism industry, the study predicts. As it stands now, more than 260 million visits to California every year account for more than $122 billion spent within the state – largely on leisure goods and services. It’s estimated that tourists spend $7.2 billion a year on wine in California alone.

“Given that adult-use cannabis remains illegal in most other states, California’s legalized adult-use industry may attract some new visitors whose primary reason for visiting the state is cannabis tourism, as has been observed in Colorado,” the study said, citing a survey commissioned by the Colorado Tourism Office in 2015 by Strategic Marketing and Research Insights.

The survey of 3,250 tourists from Chicago, Dallas, Houston, San Diego and elsewhere found that eight percent visited a recreational-use cannabis store. Of those, 85 percent said cannabis was a “primary motivator” for their visit to Colorado.

h/t Los Angeles Times


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