California is on the verge of creating a legal market for marijuana worth more than $5 billion that will help make the state a destination for pot-loving tourists, according to a new state-sponsored economic study.
But about 29% of all cannabis consumers may stay in the illegal market at first to avoid the cost of new regulations requiring the pot to be tested, tracked and taxed at 15% of its retail value, according to the study by the University of California Agricultural Issues Center.
State officials developing the regulations hope to gradually persuade the vast majority of cannabis users to go through the legal market, said Lori Ajax, director of the state Bureau of Marijuana Control, which hired the center to look at the economic impact of the new rules.
“It’s going to take some time,” Ajax said. “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.”
The economic projections are both encouraging and daunting to state officials who hope to begin issuing licenses in January to thousands of businesses that will grow, transport, test and sell marijuana, following voter approval in November of an initiative legalizing recreational use.
The analysis estimated that as of November, aggregate annual sales in medical marijuana were $2 billion a year (about 25% of total marijuana sales) and sales in the illegal market were $5.7 billion (75%).
Voter approval of Proposition 64 has set in motion a system for fully legalized marijuana, which may bring state and local governments $1 billion in tax revenue, according to government estimates. The study estimated that more than 1,200 jobs will be created for testing and handling cannabis in the legal market.