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Study: Legal California Cannabis Market Estimated at $5B

A cannabis worker inspects a fresh batch of concentrate as it cools on a sheet of wax paper.

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According to a study by the University of California Agricultural Issues Center, California’s recreational cannabis market could be worth more than $5 billion; however, the benchmark will only be achieved once cannabis consumers fully embrace the state’s legal market, the Los Angeles Times reports.

According to the study, about 29 percent of cannabis consumers may, at first, stay in the illicit market to avoid the costs of new regulations, which will add 15 percent to retail values. The new regulations include taxes and testing and tracking requirements, which Lori Ajax, director of the state Bureau of Marijuana Control, said might prevent consumers from entering the legal market on day one because of the price increases.

“It’s going to take some time,” Ajax said in the report. “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 researchers estimated that, as of November, aggregate annual medical cannabis sales reached $2 billion a year, representing about 25 percent of total California cannabis sales. Illegal sales were $5.7 billion, 75 percent of all cannabis sales in the state. The study estimates that the voter-approved taxed and regulated model could bring in $1 billion in tax revenues and more than 1,200 jobs will be created for testing and handling cannabis under the new regime.

According to the study, medical cannabis sales are expected to decline tremendously from $2 billion to $600 million as people migrate toward the adult-use market to avoid medical cannabis ID fees. The researchers anticipate that in the early days of the program, medical cannabis will comprise 9 percent of the overall market, which recreational sales will make up 61.5 percent of the overall market, and illicit sales will make up the remaining 29.5 percent.

Legal sales are expected to begin in California on Jan. 1, 2018.

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