In the California pottery market, there is a blurred line between legal and gender

Los Angeles – On an isolated farm, the greenhouses are in order, protected by the edges of trees. Inside, there are hundreds of head-tall cannabis plants in precise rows, each emerging from a pot fed by coils of irrigation pipes. Lights strong enough to turn night into day.

In the past five years since California voters approved a broad-based legal marijuana market, thousands of greenhouses have grown across the state. But they hide a secret under their plastic canopies.

The cultivator, which operates cultivation north of Sacramento, has a state-issued license that allows the business to produce and sell its crops. But it was virtually impossible for the producer to make a profit in a struggling legal industry, where the wholesale price of cannabis buds fell 70% from a year ago, taxes are approaching 50% in some areas and buyers are finding much better deals in a thriving underground marketplace .

So the company has two identities – one is legal and the other is illegal.

“Basically, we support our white market with our black market,” the cultivator said, agreeing to speak to the Associated Press only on condition of anonymity to avoid possible prosecution.

Industry insiders say the practice of working in the legal and illegal markets at the same time is all too common, a financial reality caused by the difficulty and cost of doing business with what they call the most tightly regulated product in America.

For a California producer, covert illegal sales take place informally, often by a friend from the tightly knit cannabis community calling to buy. The state requires legal businesses to report what they grow and transport, and this has been incorporated into a huge computer tracking system – called “seed to sale” surveillance – that is far from airtight.

“It’s not too hard” to operate outside the protective limits of the tracking system, the producer said. Crop production can vary widely, giving room for maneuver in reported quantities, while there is little on-the-spot inspection to verify records. The system is so loose that some legal farms supply 90 percent of their products to the illegal market, the producer added.

The adoption of Proposal 64 in 2016 was seen as a watershed moment in an effort to legitimize and tax California’s multibillion-dollar marijuana industry. In 2018, when retail units were allowed to open, California became the world’s largest legal market and another step on the road to federal legalization was hopefully after lawmakers passed breakthrough laws in 2012 in Colorado and Washington state.

Today, most Americans live in states that have at least some access to legal marijuana — 18 states have a wide range of legal outlets for those over the age of 21, similar to alcohol laws, while more than two-thirds of states provide access through medical programs.

Kristi Knoblich Palmer, co-founder of KIVA Confections Best Edible Brand, expressed regret that the migration of businesses to the illegal market was hampering efforts to create a stable, consumer-friendly market.

“The fact that this system, which now seems to have failed, is getting people back to old school things – it doesn’t help us achieve our goal of professionalizing cannabis and normalizing cannabis,” he said.

In California, no one disputes that the huge illegal market continues to dwarf the legal market, even though the 2016 law boldly stated that it would “make the black market unfit”. Gavin Newsom, a Democratic governor who was governor-general at the time the law was passed, called it a “game changer”.

However, legalizing California has faced challenges from the beginning. The state’s illegal market has flourished for decades, located at the north end of the state, anchored in a fabulous “Emerald Triangle”. Since the end of the ban in 1933, there has been no attempt to legalize such a huge illegal economy.

In October, California law enforcement officers announced the destruction of more than 1 million illegal plants nationwide, but said major illegal cultivation operations were found. In Humboldt County, the heart of cannabis, many illegal growers move into homes to escape detection. Investigators arrest him weekly and issue a search warrant, but with so much underground growth, “we may never eradicate illegal cultivation,” Sheriff William Honsal said in an email to the AP.

The illegal market in California is estimated at $ 8 billion, said Tom Adams, CEO of research firm Global Go Analytics. This is roughly twice the amount of legal sales, although some estimates are even higher.

In September, a cannabis company sued government regulators in an Orange County state court alleging so-called incinerators used shady “frontmen” to obtain permission to wholesale cannabis and then sell it on the illegal market to evade taxes.

No state claims to have eliminated illegal operators. U.S. MP Earl Blumenauer, co-chair of Congressional Cannabis Caucus in the Oregon Democratic Party, said he didn’t see much prospect of undermining illegal markets without federal legalization, which was stalled in Congress despite Democrats controlling Congress and the White House.

Booming illegal markets in California, Oregon and elsewhere are “the result of disruptions, a lack of resources and the fact that we don’t have a regulated national market,” he said.

Like the California cultivator, many businesses carry out certain transactions in the illegal market to help them make a living, but others have given up the legal economy or never bothered to enter.

While the legal market in California strictly controls how and where the pot is sold, the illegal industry is readily available and offers a gateway to a huge and profitable national market.

“Licensed players are good boys. But we never feel treated like we’re on the right side of history, ”Knoblich Palmer said.

California’s drive to become a prominent player in the legal cannabis economy has never felt in greater danger, and there is growing rumor of a rebellion like state after a tea party in Boston. In a December letter to Newsom, about two dozen industry leaders said the state is paralyzing the marijuana economy.

“The cannabis system in California is a national mockery, a public policy lesson about what not to do,” the business leaders wrote. My news signaled that I was ready for change.

The anonymous producer said that the burden of competing in a regulated economy is simply incomprehensible to many long-established service providers who entered the pre-proposal market. The mindset, “Why bother?”, Is widespread. – when the illegal economy is flourishing and there is little fear of law enforcement.

In Los Angeles, for example, opening a retail business can cost $ 1 million or more in addition to licensing fees, real estate costs, attorneys, and inspections – if you can get a license at all. Promises for social equity programs that would help businesses run by people of color who had become targets during the war on drugs started unevenly.

For a struggling legal market, “if quality, price, and convenience work against you, it’s a challenge,” said Adams, a cannabis analyst. “All three can be found in the illegal market.”

The irony of the legal market is that wholesale prices have plummeted, shaking the supply chain. A year ago, a cultivator could get about $ 1,000 a pound at a wholesale price. It has now dropped to $ 300 while the market is saturated.

There is a $ 150 cultivation tax on the $ 300 pound, and that’s an impressive 50% rate.

Part of the industry’s problem is that about two-thirds of California’s cities don’t allow legal sales or growth – local governments regulate when and when they create legal markets, and many have banned or failed to set the rules. Even in places where they do, cities are slowly allowing shop windows to sell legal products, with less than 1,000 brick-and-mortar stores in a state of nearly 40 million people.

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