California's Assembly Bill 97 Is The State's Latest Attempt To Curtail The Illicit Market

In May 2019, California significantly cut its cannabis tax revenue projections through June 2020. In just four months, state projections decreased by $223 million.

Much of the blame is often placed on the state's rampant illicit market. Since the legalization of adult use cannabis, California has struggled to convert or shut down noncompliant businesses.

Despite the risk of untested cannabis products, consumers continue to use illicit options to avoid excise taxes that can reach 50%. Some estimations have projected that for every one compliant shop in the state, there are five that are noncompliant.

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The state has continued to push consumers toward legal options while attempting to curtail black market actors. The state Bureau of Cannabis Control recently launched the #weedwise campaign, encouraging people to buy from licensed businesses. The campaign also urges noncompliant businesses to obtain licensing and become compliant.

Governor Gavin Newsome approved another measure on July 1, Assembly Bill 97, which aims to cut into the illicit market.

The bill is highlighted by a fine for illicit operations totaling $30,000 per day. The move could steer businesses toward licensing, although smaller fines have been disregarded by businesses for years.

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'The Illicit Market Undercut The Legal One' 

Lauren Estevez is a Los Angeles-based attorney who has appeared on CNBC and Bloomberg, in addition to other cannabis endeavors, including the completion of over 100 global cannabis projects.

In an email, Estevez touched on California’s struggles with revenue due to the illicit market and other factors.

“California's collected tax revenues for 2018 were lower than initially projected — one reason for this was that many local jurisdictions banned commercial cannabis, another is that the illicit market undercut the legal one.”

Another key provision in the new law extends the sunset date for provisional licenses to Jan. 1, 2020. 

"[AB 97] shows that the state's priority is to get as many cannabis operators into the legal market as possible," Estevez said. 

Attorney Says Law Raises Standards

Anne van Leynseele, an attorney at Los Angeles-based Zuber Lawler, told Benzinga that AB 97 is a "bold statement."

The bill "creates and extends authority to ensure better standards in enforcement, cultivation, manufacturing, environmental considerations and public protections related to cannabis products," van Leynseele said. 

There is no indication of when figures could reveal the impact of AB 97’s passing. The next hint may come when the state releases its next round of revenue projections.

Related Links: 

California Reports Cannabis Sales Tax Revenue: Massive Growth, But Still Below Expectations

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