The adult-use cannabis market has been up and running in California for less than two weeks, and even though many cities have not yet allowed retail pot shops to open, the demand for weed has been so strong that some experts have predicted the state's cannabis distribution infrastructure may not be robust enough to meet the demand.
Regardless of these potential constraints, the state's Department of Finance has predicted that retail cannabis stores will sell over a million pounds of weed during the first full budget year of legalization, from July 2018 until June 2019. Officials expect this unprecedented amount of product to net $3.4 billion in sales, $643 million of which would go directly to the state in the form of tax revenue, The Hill reports. Some of this tax income will be directed to fund the agencies tasked with regulating and overseeing the industry. The rest of the revenue will go towards funding substance abuse treatment programs as well as research into the economic and environmental impact of legalization.
Finance officials said that they expect pre-tax retail costs of cannabis to fall from $3,800 per pound during the upcoming budget year to $3,000 per pound by the 2020-21 budget year. Despite the decrease in price, officials believe that the tax revenue collected by the state will remain constant, as the falling costs will be offset by increased demand for weed. Even though these predictions would make California the most lucrative U.S. state for the cannabis industry, the Finance Department estimates that the market will only grow by 22% each year, significantly slower than other rec-legal states.
The state's financial analysts arrived at these figures after consulting finance officials from other canna-legal states. Colorado officials reported that their recreational market grew by 40 percent during the first three years of sales, from $76 million in 2014 to $198 million in 2016. Washington's legal cannabis market has grown even faster, breaking a record of over $1 billion in sales during the 2017 fiscal year. Recreational sales in Nevada have only been legal for six months, but the state is already reporting record growth, selling over $27 million during the first month of sales, and $33 million the following month.