Alex Halperin: Illegal Weed Is Killing Licensed California Bud Shops—NY May Be Headed For Similar Fate

Not even Jerry Garcia, it seems, can make it in California’s chaotic weed market.

Garcia Hand Picked, a brand named after the legendary singer and guitarist, was recently launched It would cease to sell cannabis products in the Grateful Dead’s home state. Hand Picked, owned by Holistic IndustriesCalifornia’s latest pro-pot venture,, has just been announced. 

Companies, it seems, may be eager to reach the world’s largest legal pot market. It’s difficult to make a profit in California due to high taxes, complicated regulations and the booming illegal marijuana trade. And cannabis firms in New York’s new legalized marketplace are already facing similar concerns.

Wana Brands’ gummies edibles There are more than a dozen available, but California was the last to get them. It’s the only market they’ve abandoned. Curaleaf, one of the country’s largest pot concernsCalifornia, a few weeks back. The legal industry “simply cannot compete with the illicit market that is paying no taxes,” Nancy Whiteman, Wana CEO, stated.

Los Angeles has a high tax rate of 30 percent on legal marijuana. Buyers often source their cannabis from illegal shops or delivery services that offer similar products, rather than paying taxes. It can be difficult to distinguish legal cannabis from illegal cannabis, aside from the price.

Further complicating matters, nearly six years after California’s legal market opened, vast swaths of the state are still closed to dispensaries. State law gives cities and counties power to decide what kinds of pot businesses they’ll permit. According to the state Department of Cannabis Control (DCC), 61% of local governments don’t allow pot shops. 

In conservative-ish Orange County, for example, most of its 3 million residents don’t have dispensaries in their city. The illegal market is becoming a de facto monopoly by shutting down legal businesses. 

“Regulations meant to protect public health are accomplishing the exact opposite as millions of consumers turn to the cheaper, but untested and unsafe illegal products,” Wesley Hein, the president of the state, said this Cannabis Distributors Association.

California, New York and other states have spoken loudly about the support for small, minority-owned cannabis enterprises. But if large, well-capitalized companies can’t make a market work, legal mom and pops (of all colors) have little chance either.

In the past, illegal markets were a source of income for small-scale farmers who had small trees to grow. Today, large, unlicensed criminal organizations hide in plain view alongside licensed growers in California’s desert or other mostly rural areas. These farms are run by armed criminals and guzzle illegally. They also dump pollutants without any consequences.

In 2021 California’s legal market did more than $5B in sales. All estimates suggest that the illegal market is much larger. DCC-led search warrants seized $77 million in illegal cannabis in 2021, perhaps one percent of the state’s total illegal market. California and other legal states lack both the political will and the resources to go after illegal operators. It would be counterproductive to legalize illegal activities by imposing harsh penalties on them.

Similar enforcement issues have been faced in New York City, which allowed pot sales only in 2021. The city’s first legal bud boutique, for instance, opened in late December – faced, from day one, with an There are approximately 1,400 NYC shops. Illegally selling bud

These businesses, which include many bodegas and smokeshops, mostly sell unlicensed marijuana imported from California and other countries. “The illegal market is shipping in tractor-trailers of cannabis products,” Whiteman is Wana CEO. “There’s no enforcement, making New York just as challenging as a market like California.”

Not only are you exempt from paying pot taxes but also Credit cards are also accepted in unregulated shops. It may seem that this is merely a convenience to consumers. But, with cannabis still being licensed but not connected to the banking system and illegal shops accepting all forms payment, this gives them an edge.  

Industry’s hurdles, like access to mainstream banks, will only be resolved via federal cannabis reform. The House of Representatives has passed such a bill with bipartisan support. Senate Republicans block the legislation. 

States have the power to stop illegal markets from suppressing their legal counterparts. Reduce pot taxes, which currently stand at 13% in New York State, would be the fastest way to support legal operations. But folks are counting on that tax revenue – for law enforcement, youth programs and the racial justice initiatives heavily baked into New York’s push to decriminalize cannabis. You will always be left out if you reduce the tax pool.

New York’s legal weed market is in an uneasy early stage, clamoring for a foothold in an unfair arena where illegal competitors clearly have the upper hand. Overtaxed and in many ways over-regulated – for instance, New York is unique in that it charges distributors an extra potency tax –  New York’s pot market is already, well, going to pot as consumers flock to more convenient dealers and depots. 

Envisioned as a way to compensate for racial injustices — 40 percent of legal cannabis tax revenue is earmarked for communities impacted by pot busts — New York’s nascent cannabis industry might very well wind up like gimmicky Garcia Hand-Picked. Because as long as unlicensed dealers sell their products for less, they’ll thrive at the expense of both legal operators and the social causes they so loudly champion.

Alex Halperin is the author of the newsletter WeedWeek.