The Evolution of the California Cannabis Market
For decades, California has led the effort throughout the United States to legalize cannabis, resulting in the state being the first to legalize it for medicinal use on November 5, 1996 (see Proposition 215). Then in November of 2016, voters passed the Adult Use of Marijuana Act (Proposition 64) leading to the legalization of recreational marijuana, which then went into effect on January 1, 2018.
California is now one of eight states plus the District of Columbia to adopt laws legalizing cannabis for both medical and recreational use, while 21 additional states have adopted laws legalizing cannabis for medical use only. There are 17 states that allow for the use of Cannabidoil hemp oil (CBD hemp oil), which is a cannabis extract that contains only trace amounts of THC and is non-psychoactive, and the 4 remaining states have no designation at all. 2018 looks to continue the evolution of marijuana legalization throughout the United States.
History at a Glance
Historical records show that hemp was most likely the first plant cultivated for textile fiber, referring to a remnant of hemp cloth found in ancient Mesopotamia dating back to 8,000 BC. Jumping thousands of centuries ahead to the early colonization of the Americas, the plant was widely used throughout the English navy for rope and sails due to its strength and durability, and is a major reason why American colonists were required to devote a share of their acreage to hemp growth.
It wasn’t until the late 18th century that California began to cultivate hemp for fiber and rope, mainly in the Southern California regions. When Mexico rebelled against the Spanish crown, subsidies for growing the hemp were cut off and the crop almost disappeared. It wasn’t until Arabs, Armenians, and Turks arrived in the late 19th century that the plant started being consumed for recreational use next to opium, and the habit became undesirable for the state.
California enacted the Poison Act in 1907 which made the possession of narcotic preparations of hemp illegal, but the law was never intended to block the legal use of pharmaceutical cannabis. From the 1920’s to the 1930’s, the state cracked down and applied much stricter laws forbidding the possession and use of recreational cannabis. It wasn’t until the 1950’s and 1960’s that California started seeing popularity in cannabis usage by students and professionals as an integral part of their daily lives.
Oregon became the first state to decriminalize cannabis in 1972, and California followed in 1975, making possession of the plant a civil rather than criminal offense. Then on September 30, 2010, Governor Schwarzenegger signed a bill dropping the recreational possession of an ounce of cannabis from a misdemeanor to an infraction, similar to a traffic violation.
Proposition 215 – Medical Marijuana
The Compassionate Use Act of 1996 (Proposition 215) was passed on November 5, 1996, making California the first state to establish a medical cannabis program. This modifying of state law allows people the right to:
- Ensure that seriously ill Californians have the right to obtain and use marijuana for medical purposes in the treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraines or any other illness for which marijuana provides relief.
- Ensure that patients and their primary caregivers who obtain and use marijuana for medical purposes upon the recommendation of a physician are not subject to criminal prosecution or sanction.
- Encourage the federal and state governments to implement a plan to provide for the safe and affordable distribution of marijuana to all patients in medical need.
Under this law, doctors could not be punished for recommending the use of medical marijuana to treat ailments, but differentiating patients from non-patients was a whole different story. Enter Senate Bill 420 on September 2003, establishing an identification card system for medical marijuana patients and giving authorities peace of mind in knowing who they’re speaking with. These identification cards are issued through the California Department of Public Health’s Medical Marijuana Program (MMP). Since 2010, all possession limits on medical marijuana have been lifted, authorizing patients to possess cannabis in their private residence if the cannabis is strictly for the patient’s own use.
Proposition 64 – Legalization
The Marijuana Control, Regulation, and Education Act was introduced in February 2009 during the California Budget Crisis and was intended to regulate the sale and use of marijuana throughout the state. If passed and signed into law, marijuana would be sold and taxed to adults aged 21 and older, bringing in over $1 billion in revenue annually. Tom Ammiano, who introduced the bill, was quoted saying:
“With the state in the midst of an historic economic crisis, the move towards regulating and taxing marijuana is simply common sense. This legislation would generate much needed revenue for the state, restrict access to only those over 21, end the environmental damage to our public lands from illicit crops, and improve public safety by redirecting law enforcement efforts to more serious crimes. …California has the opportunity to be the first state in the nation to enact a smart, responsible public policy for the control and regulation of marijuana.”
Unfortunately, the bill failed to meet the Assembly floor, effectively killing it until another opportunity arrived. That chance came in November of 2010 when the Regulate, Control & Tax Cannabis Act (Proposition 19) ballot initiative arrived, once again legalizing various cannabis-related activities, allowing local governments to regulate these activities and to impose and collect marijuana-related fees and taxes. Once again, the initiative was rejected by California voters.
It wasn’t until November 8, 2016, that the Adult Use of Marijuana Act (Proposition 64) passed by a vote of 57% to 43%, legalizing the sale and distribution of cannabis in both a dry and concentrated form for adults 21 and older. For a full list of what’s legal and what isn’t, visit California NORML. On January 1, 2018, the country’s largest recreational cannabis market opened its doors, allowing California state residents to legally buy marijuana without a doctor’s approval.
The California Department of Public Health (CDPH) Manufactured Cannabis Safety Branch (MCSB) is currently required to develop statewide standards, regulations, licensing procedures, and to address policy issues in support of medical cannabis manufacturers and testing laboratories. The California Bureau of Cannabis Controlis responsible for regulating commercial cannabis licenses for retailers, distributors, microbusinesses, testing laboratories, and temporary cannabis events.
What This Means for California’s Economy
The latest report from Arcview Market Research states that retail cannabis sales throughout the United States grew 33% from 2016 to nearly $10 billion in 2017, and that by 2021 they project the legal market to reach $24.5 billion.
“Aside from cryptocurrency, there is simply no other industry changing as rapidly or as unevenly as the cannabis sector.” – Troy Dayton, CEO of TheArcview Group
California’s medical marijuana market is already as big as the total markets in Colorado, Washington, and Oregon combined, according to cannabis industry research firm BDS Analytics. A recent report estimates that sales of cannabis could hit $3.7 billion in 2018, and that number could easily increase to $5.1 billion in 2019 as more dispensaries come online.
With all of this being said, projections for the medical and adult-use cannabis market in California will substantially boost its economy, though the first year will be a bit unstable as new businesses try to become legal entities and larger established businesses attempt to corner the market. However, even as the market figures itself out, Green Wave Advisors projects California should reach $5.3 billion in retail sales its first year, doubling that of medical cannabis sales. Green Wave Advisor’s 2018 California Cannabis Forecast provides a full review of the economic impact on California’s economy.
Cannabis tourism will also boost the state’s economy as visitors flood in from states and countries that don’t allow the sale and use of marijuana. The state of California has commissioned a study that reports:
- Currently, there are more than 260 million visits to California from people from out of state each year, and the visitors spend more than $122 billion in California, much of it on leisure goods and services.
- Given that adult-use cannabis remains illegal in most other states, California’s legalized adult-use industry may attract some new visitors whose primary reason for visiting the state is cannabis tourism, as has been observed in Colorado.
The world has been waiting for California to step in and embrace the recreational cannabis market, and that time has come. As the cannabis movement pushes forward in California, recent licensing throughout the state is allowing companies the opportunity for growth, and they’re are taking full advantage. California is poised for not only substantial economic growth, but also for a substantial decrease in the sales of illegal cannabis and therefore lower crime rates. Time will tell how much of an impact this new industry will have, but the masses will learn from the state’s actions and therefore progress the legalization of cannabis throughout the world.