Double dealing: Legal, illicit blur in California pot market
LOS ANGELES (AP) — On an isolated farm, greenhouses stand in regimental order, sheltered by a fringe of trees. Inside are hundreds of head-high cannabis plants in precise rows, each rising from a pot nourished by coils of irrigation tubing. Lights powerful enough to turn night into day blaze overhead.
In the five years since California voters approved a broad legal marketplace for marijuana, thousands of greenhouses have sprouted across the state. But these, under their plastic canopies, conceal a secret.
What You Need To Know
- California is entering its fifth year of broad legal marijuana sales
- Industry insiders say the practice of working simultaneously in the legal and illicit markets is all too commonplace in the struggling pot economy
- Legal businesses have long complained that heavy taxes and regulation make it impossible for licensed shops to turn a profit
- Leading companies recently warned Democratic Gov. Gavin Newsom the legal market could collapse
The cultivator who operates the grow north of Sacramento holds a coveted state-issued license, permitting the business to produce and sell its plants. But it’s been virtually impossible for the grower to turn a profit in a struggling legal industry where wholesale prices for cannabis buds have plunged as much as 70% from a year ago, taxes approach 50% in some areas, and customers find far better deals in the thriving underground marketplace.
So the company has two identities — one legal, the other illicit.
"We basically subsidize our white market with our black market," said the cultivator, who agreed to speak with The Associated Press only on condition of anonymity to avoid possible prosecution.
Industry insiders say the practice of working simultaneously in the legal and illicit markets is all too commonplace, a financial reality brought on by the difficulties and costs of doing business with a product they call the most heavily regulated in America.
For the California grower, the furtive illegal sales happen informally, often with a friend within the tight-knit cannabis community calling to make a buy. The state requires legal businesses to report what they grow and ship, and it’s entered into a vast computerized tracking system — known as "seed to sale" monitoring — that’s far from airtight.
"It’s not too hard" to operate outside the tracking system’s guardrails, the grower said. Plants can vary widely in what each one produces, allowing for wiggle room in what gets reported, while there is little in the way of on-site inspections to verify record-keeping. The system is so loose, some legal farms move as much as 90% of their product into the illicit market, the grower added.
The passage of Proposition 64 in 2016 was seen as a watershed moment in the push to legitimize and tax California’s multibillion-dollar marijuana industry. In 2018, when retail outlets could open, California became the world’s largest legal marketplace and another steppingstone in what advocates hoped would be a path to federal legalization after groundbreaking laws in Colorado and Washington state were enacted in 2012.
Today, most Americans live in states with at least some access to legal marijuana — 18 states have broad legal sales for those 21 and older, similar to alcohol laws, while more than two-thirds of states provide access through medicinal programs.
Kristi Knoblich Palmer, co-founder of top edibles brand KIVA Confections, lamented that the migration of business into the illegal market was damaging the effort to establish a stable, consumer-friendly marketplace.
"To have this system that now appears to be failing, having people go back into the old-school way of doing things . it does not help us get to our goal of professionalizing cannabis and normalizing cannabis," she said.
In California, no one disputes the vast illegal marketplace continues to dwarf the legal one, even though the 2016 law boldly stated that it would "incapacitate the black market." Democratic Gov. Gavin Newsom, who was lieutenant governor when the law was approved, called it a "game changer."
But California’s legalization push faced challenges from the start. The state’s illegal market had flourished for decades, anchored in the storied "Emerald Triangle" in the northern end of the state. Not since the end of Prohibition in 1933 had an attempt been made to reshape such a vast illegal economy into a legal one.
In October, California law enforcement officials announced the destruction of over 1 million illegal plants statewide but said they were finding larger illicit growing operations. In the cannabis heartland of Humboldt County, many illegal growers are moving indoors to avoid detection. Investigators are making arrests and serving search warrants every week, but with so many underground grows, "we may never eliminate the illegal cultivation," Sheriff William Honsal said in an email to the AP.
California’s illegal market is estimated at $8 billion, said Tom Adams, chief executive officer of research firm Global Go Analytics. That’s roughly double the amount of legal sales, though some estimates are even larger.
In September, a cannabis company sued government regulators in state court in Orange County, alleging so-called burner distributors were using shadowy "front men" to get licenses to buy wholesale cannabis, then selling it in the illegal market to sidestep taxes.
No state is claiming to have eliminated illegal operators. U.S. Rep. Earl Blumenauer, an Oregon Democrat who co-chairs the Congressional Cannabis Caucus, said he saw little prospect for undercutting illegal markets without federal legalization, which has been stalled in Congress despite having Democrats in control of Congress and the White House.
The thriving illegal markets in California, Oregon and elsewhere are a "product of the dysfunction, the lack of resources and the fact that we don’t have a national market that is regulated," he said.
Like the California cultivator, many businesses do some transactions in the illicit market to help make ends meet, but others have given up on the legal economy or never bothered to enter it.
While California’s legal market tightly controls how and where pot is sold, the illegal industry is easy to access and offers a doorway into a vast and profitable national market.
"Licensed players are the good guys. Yet it just never feels like we’re being treated like we’re on the right side of history," Knoblich Palmer said.
California’s effort to establish itself as the preeminent player in the legal cannabis economy has never felt more imperiled, and talk is spreading of a Boston Tea Party-like rebellion against state policies. In a December letter to Newsom, about two dozen industry executives said the state was crippling the marijuana economy.
"The California cannabis system is a nation-wide mockery, a public policy lesson in what not to do," the business leaders wrote. Newsom has signaled he’s open to change.
The anonymous grower said the burden of competing in the regulated economy simply doesn’t make sense to many longtime operators who came up in the pre-Proposition 64 marketplace. There is a widespread mindset — "Why bother?" — when the illegal economy is booming and there is little law enforcement to fear.
In Los Angeles, for example, opening a retail operation can cost $1 million or more with licensing fees, real estate costs, attorneys and inspections — if you can get a license at all. Promises of social equity programs that would assist businesses run by people of color who were targeted during the war on drugs have gotten off to an uneven start.
For the struggling legal market, "when you have quality, price and convenience working against you, that’s a challenge," said Adams, the cannabis analyst. "The illicit market has all three of them."
An irony in the legal market is that wholesale prices have plummeted, shaking the supply chain. A year ago, a cultivator could get about $1,000 a pound wholesale. Now that’s dropped as low as $300, with the market saturated.
Slap $150 in cultivation taxes on a $300 pound, and that’s a stunning 50% rate.
Part of the problem for the industry is about two-thirds of California cities do not allow legal sales or growing — local governments control when, or if, to create legal markets, and many have banned it or failed to set up rules. Even in places that do, cities have been slow to permit storefronts to sell legal products, with less than 1,000 brick-and-mortar shops in a state with nearly 40 million people.
Meanwhile, wholesale prices for buds in the underground are significantly higher. The legal market, with limited outlets to sell it, is flooded with pot from corporate-scale growers.
Few know the industry as well as dispensary owner Jerred Kiloh, who also heads the United Cannabis Business Association, a Los Angeles-based trade group.
"No one is making money anywhere in the (legal) supply chain," he said, noting his own sales have nosedived. Kiloh sees few bright spots in the law that established California’s legal market, beyond a testing program that safeguards quality and programs to expunge old criminal records for marijuana.
Cannabis Seeds in California
Trying to buy cannabis seeds in California? Well, you’re in luck, then, because the Golden State’s laws are one of the most relaxed in the world for those desiring to have legal access to marijuana. In this open-minded sun-rich state you can legally plant your own weed and enjoy the harvest. DutchSeedsShop.com and its seed bank full of high-yielding cannabis strains are always here to facilitate your aspirations by providing you with the finest seeds designed for planting in California. Choose the preferred number of seeds in our online store and receive your order in a matter of days.
Legality of Purchasing Seeds and Planting Cannabis in California
Even though cannabis is still federally illegal, buying, and selling cannabis seeds in California is lawful. The easiest way to get a rare, but desirable strain is to order the seeds online from a reputable seed shop located in Europe. The discreet package will arrive safely without causing you any trouble. Here you can order such popular cultivars as OG Kush, Jack Herer, Girl Scout Cookies, and grow your own female plants.
How did all that become possible? The long-awaited law came into effect on the first day of 2018. Since then, California residents over 21 have been allowed to store up to one ounce of cannabis or grow up to six cannabis plants in their homes for their own consumption. This is despite the fact that the US federal authorities still perceive marijuana as a prohibited drug and put it on a par with heroin and cocaine.
All commercial cannabis is taxable (this doesn’t include recreational cannabis that you grow for personal use). The only exempt plant is industrial hemp; but it must be a very specific type, with no more than 0.3% THC in the dried flower.
A few more interesting points regarding California’s law:
- Anyone over the age of 21 can buy no more than 1 ounce of marijuana a day;
- MMJ cardholders can carry up to 8 ounces;
- You can smoke marijuana everywhere except in public places;
- You also cannot use marijuana products in the car, either as a driver or as a passenger;
- You cannot transport marijuana between states by any means of transport;
- You cannot carry an open bag of marijuana in your car.
Conditions Eligible by California Medical Marijuana Law
The primary benefit for medical marijuana cardholders is that they can grow more plants if they successfully apply for the cultivation license.
California Medical Marijuana Law affords legal protection to patients suffering from various conditions. Here are a few of them:
- Chronic pain (the most common reason to get an MMJ card)
- Post-Traumatic Stress Disorder (PTSD)
- Radiation therapy side-effects
- Chemotherapy side-effects
- Multiple sclerosis (MS)
To sum up, you can get an MMJ card for persistent or chronic symptoms that seriously harm your physical or mental health. It can be any condition that impedes your daily life activities such as eating or sleeping. The most popular choice, in this case, is CBD seeds.
Buying Marijuana Seeds for Commercial Cultivation in California
If you want to take up agribusiness and get down to growing marijuana for selling the produce, then get ready for the real challenge. There are at least 14 types of licenses to acquire: all the way to the soil in which you will sow your weed seeds. As part of obtaining these licenses, the regulatory authorities in California will ask you for a great lot of information.
- Be prepared for the fact that some activities are subject to mandatory regulation by two types of licenses at once;
- On top of everything else, you must have a surety with at least $5000, but the limit jumps from state to state;
- Your company must have a registered agent – a representative of your business residing in California;
- Provided documentary evidence of future security and access control system for employees in recreation areas;
- There must be a water source nearby for the irrigation of plants;
- Your manufacturing facility must be at least 1000 feet from a school, church, or kindergarten.
- Not only a company but also a private person, who has been formalized in keeping with all the requirements and has received a license, can also be a commercial cultivator. But the area of the cultivation site must not exceed 900m2 (9687,52 ft2).
As a professional grower, once the production cycle is complete, all you can do is sell the processed and dried product to distributors. You can not only legally find feminized cannabis seeds for sale in the state of California but also sell them after spending some money to get them tested.
Shipping Seeds to California
Many potential buyers residing in California eschew the idea of ordering seeds online due to recreational marijuana still being illegal under federal law. However, by ordering from DutchSeedsShop.com, you can rest assured that you will receive your seeds in safe and stealthy packaging, just like thousands of our customers before. To pay for your order you can use one of these methods:
- Credit Card
- Bank Transfer
- Western Union
Cannabis seeds are sold to customers over the age of 18 and are sold strictly for souvenirs or storage purposes only. The cultivation and germination of cannabis seeds is illegal in most countries. We advise customers to check the laws in their country before ordering.