Assembly committee hears DCC market report and industry officials warn illicit market and tax increases are squeezing legal cannabis

Christina Dempsey, Deputy Director for Government Affairs at the Department of Cannabis Control (DCC), told the Assembly Budget Subcommittee 5 that the department licenses activity across the cannabis supply chain and now operates as a standalone regulator since its 2021 formation.

Dempsey introduced the department’s presentations, which included a fiscal request to support implementation of Senate Bill 1064 (combined activities license) and an economist’s market analysis. Natalie Sheeran, the department’s budget officer, described a BCP that would fund one position in the Cannabis Track and Trace Field Support Unit at an estimated cost of $154,000 in 2025–26 and $146,000 ongoing.

Market report findings: Duncan McEwen of ERA Economics presented the California Cannabis Market Report. McEwen summarized the department’s data analysis: licensed production (measured in dry flower equivalent at the farm gate) increased roughly 11–12% between 2023 and 2024 to about 1.4 million pounds, while the illicit market remains far larger by the report’s point estimate (about 11.4 million pounds) though the authors noted a wide uncertainty range around that figure. McEwen said retail units sold rose about 5% in 2024 but average unit prices fell, producing a decline in total retail value and excise tax receipts.

Why it matters: The mismatch—rising licensed supply, falling unit prices and persistent illicit production—helps explain why tax revenue and many licensed businesses are under pressure. McEwen said that, although wholesale prices declined sharply after legalization then stabilized, market integration between the illicit and licensed sectors is evident and exerts downward pressure on prices.

Enforcement and staffing: Committee members pressed DCC on enforcement capacity. Dempsey and other DCC staff said the enforcement division…