In California pot market, a hazy line between legal and not – ABC News

Inside are hundreds of head-high cannabis plants in precise rows, each rising from a pot nourished by coils of irrigation tubing.

In the five years since California voters approved a broad legal marketplace for marijuana, thousands of greenhouses have sprouted across the state.

The cultivator who operates the grow north of Sacramento holds a coveted state-issued license, permitting the business to produce and sell its plants.

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.

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 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.

Not since the end of Prohibition in 1933 had an attempt been made to reshape such a vast illegal economy into a legal one.

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.

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.

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 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.

An irony in the legal market is that wholesale prices have plummeted, shaking the supply chain.

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.

Meanwhile, wholesale prices for buds in the underground are significantly higher.

“No one is making money anywhere in the supply chain,” he said, noting his own sales have nosedived.

…Read the full story