One of the most diverse law enforcement associations in the nation is calling on its 7,000 members to help California’s licensed cannabis operators generate more tax revenue by suppressing their unlicensed peers.
The California Statewide Law Enforcement Association (CSLEA), whose members come from more than 100 job classifications – from special agents to fish and wildlife wardens, fire marshals, investigators and inspectors – highlighted the need to step up illicit cannabis enforcement actions on Sept. 10 following a tax revenue update from the governor’s office.
Gov. Gavin Newsom’s office announced on Sept. 2 that the state’s regulated cannabis market has generated nearly $8.4 billion in tax revenue since adult-use sales commenced in January 2018, including nearly $4.5 billion in excise taxes and $3.4 billion in sales taxes.
But as the state’s illicit marketplace continues to run rampant, California’s licensed cannabis operators have generated fewer tax dollars in recent years, falling 22% from nearly $1.36 billion in 2021 to $1.06 billion in 2025, according to the California Department of Tax and Fee Administration.
This tax revenue supports child care programs and youth groups, environmental programs, medical research, law and justice organizations, and drug treatment and prevention centers, among other Tier 3 tax beneficiaries.
CSLEA President Alan Barcelona pointed this out in Thursday’s call for its members to step up their enforcement actions.
“Stop and think for a moment how many more billions of dollars the state would receive in tax revenue if the illicit cannabis market completely disappeared,” Barcelona said. “The tax revenue generated by California’s regulated cannabis market highlights the need for continued enforcement against illegal operations. The illegal operations in this state far outnumber the legal ones; this is why the state must continue to employ law enforcement agents to target this.”
Barcelona is not wrong.
In 2024, Californians consumed an estimated 2.4 million pounds of cannabis from unlicensed sources (63% of the overall market) and 1.4 million pounds from the state’s regulated and taxed marketplace, according to an ERA Economics report that was commissioned by the state’s Department of Cannabis Control (DCC).
By this metric, California could have generated $22.7 billion in tax revenue – versus the $8.4 billion cited in Newsom’s announcement – if it had captured the entire cannabis marketplace into the regulated program.
Not to mention, unlicensed cannabis cultivators produced an estimated 11.4 million pounds of unregulated cannabis in 2024, with 9 million pounds that illegally left the state, according to the report.
These unlicensed operations not only evade taxes and regulatory requirements, but they also undermine DCC-licensed businesses that play by the rules and invest in compliance, consumer protections and their communities.
California Association of Criminal Investigators (CACI) President George Tiongson said the DCC works with federal, state and local law enforcement partners to investigate illegal cannabis operations. He indicated that those efforts have only gone so far.
“California is a big state, and the number of suspected illegal operations continues to grow,” Tiongson said. “Investigating these operations for meaningful impact takes careful planning, which involves officer, public and environmental safety. If we increase law enforcement resources, we have a better advantage of shutting these illegal operations down.”
CSLEA officials said that shutting down illegal cannabis operations remains a priority to ensure public safety and protect the environment, as well as protecting the integrity of the licensed cannabis market “so that businesses that follow the rules are not undercut by operators who do not.”
While the state continues to crack down on illicit operations through Newsom’s Unified Cannabis Enforcement Task Force (UCETF), some industry stakeholders believe the unregulated market is too big to eradicate through enforcement efforts alone.
Since Newsom established the task force in 2022, California has seized and destroyed more than 841,000 pounds of illicit cannabis valued at more than $1.3 billion, according to the governor’s office. Based on the ERA Economics’ estimates, this represents less than 2% of the state’s illicit cannabis market over a four-year enforcement period.
Still, Newsom continues to tout these enforcement actions every quarter.
“We are building a legal cannabis market that generates billions for Californians, and going after the illicit operators who undermine it,” Newsom said last week. “That’s public safety – protect consumers, support the businesses playing by the rules and put the revenue to work in our communities.”
In addition to enforcement actions, industry participants say more business-friendly regulations and reduced tax burdens would help regulated operators better compete with their unregulated counterparts.
For instance, 56% of California cities and counties still prohibit cannabis retail businesses from operating in their jurisdictions, according to the DCC, leaving consumers the choice of driving far away to access a licensed dispensary or to purchase products from unregulated, untaxed sources in their hometowns.
Tax burdens are another major barrier for California’s regulated operators, who scored a small victory last year when state Assemblymember Matt Haney, D-San Francisco, championed legislation to avert the cannabis excise tax rate from increasing from 15% to 19%.
This excise tax rate is in addition to state and local sales taxes that vary by region. In some cities, cannabis dispensary products are taxed more than 40% when the three rates are compounded.
When pushing for the eventual passage of his legislation last year, Haney said higher tax rates could generate less revenue, because fewer businesses would survive and more consumers would seek out cheaper, untaxed alternatives.
“California’s cannabis economy can bring enormous benefits to our state, but only if our legal industry is given a fair chance to compete against the untaxed and unregulated illegal market,” Haney said. “A.B. 564 helps level the playing field. It protects California jobs, keeps small businesses open and ensures that our legal cannabis market can grow and thrive the way voters intended.”
Newsom signed that legislation in September, but the threat of the excise tax hike was merely kicked down the road: to 2028.
