1st year of recreational marijuana sales in California impacted by growing black market

BEVERLY GROVE, LOS ANGELES (KABC) -- As we approach the one year anniversary of legalized recreational marijuana in California, there's no doubt the market is more visible than ever with retail shops all over Southern California.

But the state estimated 6,000 cannabis shops would be licensed in the first few years, and so far, that number is closer to 600. The total sales in the state are also expected to be lower than predicted.

"We might even be reaching and obtaining those sales goals, but none of that revenue is actually going to the state because of all these illegal operators. From what I've heard, a lot of these illegal guys are really busy, where sometimes these legal operators don't have enough money to cover the costs," said Michael Ashbel, who owns The Green Easy on Beverly Boulevard.

Ashbel and his brother Steve operate The Green Easy Dispensary and said they welcomed regulation of the industry, but believe there's been a lack of enforcement.

"Six hundred shops over the period of a year in the most mature cannabis market in the world is definitely not something that anyone would consider a win. It's hard to operate as a smaller business. You need a ton of capital in order to weather the storm of the over-regulation," said Adam Gillman, the CEO and co-founder of the cannabis company FIELD.

Over-regulation and high taxes on manufacturers and distributors has driven up the price on marijuana for consumers. Therefore, the black market has thrived in an environment that was designed to do the opposite.

In a statement, Alex Traverso with the Bureau of Cannabis Control said it also depends on local jurisdictions.

"We'd all like to have more businesses licensed at the end of the first year of legalization in California, but the reality is that our system is built on dual licensing and local control. And the fact is that most local jurisdictions decided to take more of a wait-and-see approach to legalizing in their area," it said.

Gillman's company FIELD, which distributes to 80 shops in California, said over-regulation has driven up the price for the customer.

"You'll get one testing facility that gets totally different results than another and it's created an environment where businesses often have to pay multiple times for tests because the results are unreliable and again, when the business is paying, ultimately all of those costs get passed onto the end consumer," he said.