On Jan. 26, 2022, cannabis plants were seen at the Pure Beauty site in Sacramento. Miguel Gutierrez Jr. Photo, CalMatters

It was also a victory to Gavin Newsom, who spent months touring the state in his role as campaign face when California voters legalized recreational marijuana use in November 2016. The then-lieutenant governor celebrated the "point of pride" at a San Francisco nightclub and told attendees California had "sent a powerful message to the rest of America."

Newsom was already in the midst of his first run for governor. He has been a leader in political change for decades, and this was an excellent opportunity to build his resume. In a profile published by Billboard magazine, He acknowledged that his legacy and Proposition 64, the legalization act, were now interconnected.

"Put it like this: Everything that goes wrong is the poster child."

Five years later, Newsom has become governor. Farmers, dispensary owners, and advocates call on him to save a legal market that they claim is being pushed to the edge of collapse by steep drops in prices and the inattention shown by a man who once was its most prominent advocate.

Michael Steinmetz, the cofounder of Flow Cannabis Co. (a distributor and manufacturer), said that "he championed our message" and "he rode our coattails all to the top." However, we feel that he has been a bit selfish."

The appeal to help for the cannabis industry is aggressively directed at the slew of taxes that puts it at a disadvantage against the strong illicit market in California. Steinmetz proposed that the cultivation tax be boycotted unless financial relief is provided in the state budget.

Newsom supported unspecified steps to stabilize the market while presenting his budget proposal on Jan. 10. However, he appears unlikely to accept radical changes to the system he signed up for with Prop. 64. His office has declined to interview him because of the inability to develop a plan.

Nicole Elliott, Director of Newsom's Department of Cannabis Control, told CalMatters that it is an exaggeration to claim that tax reductions will solve all of the industry's problems. It's a gross oversimplification of all the variables that affect the health of the legal cannabis market and those that support or encourage illegal activity. It's not just tax.

Pro-legalization but not pro-marijuana

Newsom was once a cautious leader in California's legalization movement. At the time, he declared that he wasn't "pro-marijuana." He says he hasn't tried it but that he is "vehemently against prohibition."

He was appointed lieutenant governor and formed a blue-ribbon commission on marijuana policy which published a report warning that legalization would take place over many years and require sustained attention. Newsom followed 64 in the following year. Pitched Newsom more for social justice -- to undo the harm of a drug war that had disproportionately targeted Blacks, Latinos, and Latinos -- rather than tax revenue.

The measure was approved by 57% of California voters. Since then, Newsom has been focusing on health care, homelessness, and early childhood education. Newsom did not discuss marijuana policy publicly in his three years of governorship, even though he faced a coronavirus pandemic.

Many in the cannabis industry were disappointed by his silence. They had hoped he would continue to lead the charge on the issue.

Cannabis products are available for sale at the Bloom Room at Union Square, San Francisco, on January 11, 2022. Photo by Martin do Nascimento of CalMatters

Some steps can be viewed positively, such as consolidating the state's three cannabis licensing programs into one department and declaring that marijuana dispensaries, delivery services, and other essential businesses could remain open during the pandemic.

However, Newsom's inaction regarding the issues that prevent the licensed system from competing with the dominant illegal market is causing widespread dissatisfaction. According to MJBizDaily industry publication, legal sales in California were $4.4 billion by 2020. Experts estimate that illegal sales could reach at least twice that amount.

Transition to the market is difficult.

These problems are not Newsom's fault.

The Emerald Triangle of Mendocino and Humboldt counties, which was established as the main base for marijuana cultivation in the country long before legalization, made the transition to a regulated system in California difficult. Long-established farmers are reluctant to make this transition. Even though Newsom stated his intention to give small growers a five-year head start, regulations regarding acreage limits were adopted before Newsom became governor. However, he did not oppose them. This opened up the possibility for investors to link parcels to megafarms to flood the market with their crops.

Prop. 64 requires that local governments opt into recreational sales. California has 866 dispensaries and 374 licensed marijuana delivery companies. This is just a fraction of what you will find in legal cannabis states like Oregon, Washington, Colorado, Colorado, and Oklahoma. Distributors and growers say that there are fewer places to sell their products than in the past when medical marijuana was legal. Licenses for dispensaries were more restrictive.

Taxes imposed by the state and local authorities to grow, distribute, and sell legal marijuana can increase the price for consumers by up to 50%.

"It would be a mistake to assume that tax reduction will solve all the industry's problems."


Advocates for the industry argue that Newsom has not done enough to reduce licensing costs or expand the legal market.

Imelda Walavalkar is the chief executive officer at Pure Beauty, an "environmentally-conscious" marijuana brand with indoor growing and production facilities in Sacramento. But, unfortunately, it doesn't seem like an important priority for them.


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