When, in 2016, voters approved Prop 64 legalizing adult-use cannabis, those who produce the product thought their ship had come in. It has not quite worked out that way. For the industry, this was supposed to be a golden age for cannabis, accepted by the public and officially sanctioned by state government. Instead, many growers are on the verge of economic collapse, left wondering what Prop 64 was all about.
“It absolutely was not legalized,” said Michael Katz, executive director of the Mendocino Cannabis Alliance. “We are in a regulated environment. We are not in a legal environment. There is nothing 'free' about the cannabis market.”
Prop 64 limited cultivation to one acre to favor small farmers, but the state made a change to accommodate large corporate farming interests. Then there is the regulation. Farmers cannot sell their product directly to consumers: they must sell through a licensed retailer, and the product cannot be transported except by a licensed hauler, adding costs. “All of these things are combining to create what’s really an existential crisis and another in a series of extinction events for these small cannabis operators,” Katz said.
Legalization was supposed to cut crime by eliminating the illegal market for cannabis, but, with the added expense of regulations and taxes, illicit sales are booming. It is estimated that 2/3 of cannabis sales are happening outside the legal marketplace. Some in the industry suspect the system has been engineered to eliminate small operators who cannot afford to hang on. Katz says that of the 10,000 growers in operation when Prop 64 was passed, only 2,000 remain.
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