California's struggling legal cannabis market is shrinking faster than ever, according to new tax data released this week. Taxable sales at California's legal cannabis stores amounted to $1.088 billion in the first quarter of 2025, the lowest figure in five years and an 11% drop in sales compared to the same quarter a year earlier, according to an SFGate analysis of tax data. That's the largest such drop in the history of legal cannabis sales in California.
Tamma Adamek, a spokesperson for the California Department of Tax and Fee Administration, did not dispute SFGate's analysis of the drop. However, she said comparing the latest figures to earlier reported taxable sales is like comparing "apples to oranges" because the tax figures are constantly being updated as more cannabis stores file their tax reports.
"We know that the gap will shrink," Adamek said, without providing an estimate for how much the agency expects the reported sales to change.
Experts have been warning for years that California's legal market is in dire straits, as legal operators face extraordinarily high regulatory fees, taxes and competition from the unlicensed market. Legalization has also increased competition within the legal market, which has dropped wholesale prices, reduced profit margins and made it harder for businesses to survive.
Read more at SFGate