California Cannabis Operators Face New Obstacles in 2025 as Governor Touts Seizures

California Gov. Gavin Newsom ended 2024 by trumpeting the state’s roughly $23 million seizure of illicit cannabis in East Oakland.

The state’s Unified Cannabis Enforcement Taskforce (UCETF) seized more than 21,000 plants that state officials estimated to be worth $17.8 million, or $850 per plant, as well as 3,000 pounds of cannabis flower they valued at $5 million, or 1,670 per pound, according to the governor’s office. The enforcement also led to more than $10,000 in cash being seized.

“The recent operations in East Oakland are a further proof point of California’s dedication to protect consumers and legal cannabis growers while holding those who attempt to undermine the state’s cannabis market accountable,” Newsom said in a press release on Dec. 31, before ringing in the new year.

The California Department of Fish and Wildlife (CDFW) led the enforcement operations with support from the Department of Cannabis Control (DCC), the California Department of Tax and Fee Administration (CDTFA) and the Oakland Police Department.

Since its 2022 inception, the UCEFT has seized and destroyed more than 162 tons of illicit cannabis worth an estimated $536 million and eradicated more than 526,000 plants through more than 350 operations that resulted in 59 arrested individuals, according to the governor’s office.

The program’s $536 million multiyear total represents roughly 5% of California’s estimated $10 billion annual market for unregulated cannabis, a figure that’s commonly cited by local media outlets.

While the exact value of the unregulated market is difficult to estimate, the $10 billion figure is calculated on the premise that two of three cannabis purchases in California are made outside the licensed marketplace in large part due to prices and availability. California’s licensed dispensaries sold roughly $4.7 billion of cannabis in 2024, according to the DCC.

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The San Bernardino Marijuana Enforcement Team, County Code Enforcement and California Fish and Wildlife Department seized more than 3,000 trash bags filled with processed cannabis, stacked over 12 feet high, from end to end of the 120-by-40-foot metal building in Oak Hills.San Bernardino County Sheriff’s DepartmentAlso last month, the San Bernardino County Sheriff’s Department along with state enforcement officials seized more than 93,000 pounds of harvested cannabis flower they found on Dec. 9 stored in a newly built metal structure on a 5-acre property in the High Desert community of Oak Hills, ABC7.com reported. Officials valued the cannabis at $100 million, or $1,075 per pound.

The state’s eradication efforts are “to safeguard public health, protect the environment, and preserve the integrity of California’s regulated cannabis market,” CDFW Chief of Law Enforcement Nathaniel Arnold said in the Dec. 31 press release from the governor’s office.

Arnold and Newsom did not mention the new challenges awaiting California’s licensed cannabis operators in the new year, as cultivators can no longer renew their provisional licenses and as the state’s excise tax at retail is set to increase from 15% to 19% on July 1, 2025.

As of Jan. 1, the DCC had 874 cultivation licenses listed as provisional—including 41 that are expiring in January and another 51 in February—meaning if these license holders don’t transition to annual permits that comply with the California Environmental Quality Act (CEQA) before they expire, then they’ll lose their ability to operate.

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Also as of Jan. 1, the DCC listed 4,805 active cultivation licenses total in California’s market—down 12.5% from the 5,491 active cultivation licenses from one year ago, down 37% from the 7,671 licenses from two years ago, and down 43% from the 8,493 licenses from three years ago.

In addition, California’s licensed dispensaries are facing the upcoming tax hike under current law.

The tax hike comes as a result of Newsom signing Assembly Bill 195, which was attached as a trailer to the California 2021-2022 budget. Although A.B. 195 eliminated the state’s weight-based cultivation tax on July 1, 2022, it included a compromise with various beneficiaries of cannabis tax money to raise the cannabis excise tax rate to as much as 19% to make up for any losses from the cultivation tax being eliminated.

Specifically, the legislation determined a minimum baseline in annual cannabis tax revenues that would be allocated to Tier 3 programs—such as child care programs, environmental groups, youth prevention groups and law enforcement—to avoid the tax hike.

Last month, the California Legislative Analyst’s Office (LAO) estimated that the $653 million in cannabis tax revenues that would be available for Tier 3 programs in the 2024-25 budget would be $42 million below the budget package assumption.

This means the statute that eliminated the cultivation tax will require the governor’s administration to increase the retail excise tax rate on July 1, 2025, despite the state’s licensed cannabis dispensaries being in tens of millions of dollars in default to the CDTFA.