State Sen. Nancy Skinner, D-Berkeley, announced the introduction of new legislation today designed to expand California’s legal cannabis market. Currently, many cities and counties have no legal cannabis businesses operating in their jurisdictions because those local governments don’t have the resources or wherewithal to manage the licensing and regulations required by state law. SB 398 would allow cities and counties to opt in to a state program that will manage those bureaucratic functions for them, enabling cannabis businesses to obtain their license through the state.
“Californians legalized cannabis four years ago, yet the state is still plagued by a multibillion-dollar illicit cannabis market. Why? Too many cities and counties don’t have the bandwidth to set up cannabis licensing and regulations,” Sen. Skinner said. “SB 398 will help cities and counties greenlight legal cannabis by allowing cannabis businesses to get their local licenses through the state.”
In November 2016, California voters approved Proposition 64 by a 57%-43% margin, legalizing the adult use of cannabis statewide. Prop 64 was designed to replace California’s huge underground cannabis market with an above-ground legal one that ensures the production and sale of safe, regulated cannabis.
But most cities and counties — 68% — have not allowed legal cannabis businesses to open, in part because of the complicated regulatory framework Prop 64 requires local governments to administer. As a result, the Legislative Analyst’s Office estimates that legal cannabis businesses operate today in less than one-third of jurisdictions statewide. According to a 2019 study, California’s illegal cannabis industry is valued at $7.8 billion annually. By contrast, the legal market was worth only about $3.3 billion, according to state estimates.
By relieving cities and counties of regulatory responsibilities if they opt in to a state program, SB 398 is designed to grow the state’s legal cannabis market and slash the illegal one.
SB 398 is also designed to boost cannabis tax revenues, which have been a disappointment so far. California collected a total of about $900 million in revenues in the past year, according to the LAO. If signed into law, SB 398 is expected to generate up to an additional $1 billion in state revenues. Under SB 398, a portion of the state cannabis tax revenues would be shared with the cities and counties that opt in to the program.
“Prop 64’s good intentions to bring cannabis sales above ground and generate healthy tax revenues are undermined when cannabis businesses can’t get a license,” Skinner added. “With SB 398, California will be able to deliver on Prop 64’s promise.”
Sen. Nancy Skinner represents the 9th Senate District and is chair of the Senate Budget Committee and vice chair of the Legislative Women’s Caucus.