8-minute read
Let's start with a number: $1.2 billion.
That's how much illegal cannabis California has seized since Governor Newsom launched his Unified Cannabis Enforcement Task Force (UCETF) in 2022. In 2025 alone, the state nabbed over $609 million worth of illicit weed — an 18-fold increase since the task force's first year. Nearly 400 tons were destroyed. Over 670 search warrant operations. 75 arrests. Sounds impressive, right? Sounds like the system is working?
It's not.
Because here's the number nobody in Sacramento wants to talk about: roughly 60% of the cannabis consumed in California is still purchased from the unlicensed market. The state's own Department of Cannabis Control estimates that of the 3.8 million pounds consumed annually, only about 1.4 million comes from legal operators. The rest — 2.4 million pounds — flows through a shadow market worth an estimated $10 billion a year. California's licensed dispensaries, by comparison, sold about $4.7 billion in 2024.
So let's be clear about what's happening. California is spending enormous resources — multiagency task forces, hundreds of search warrants, SWAT-style operations across dozens of counties — and all it's managed to do is skim roughly 5% off the top of the illegal market each year. Meanwhile, the legal operators who played by the rules, paid their taxes, and jumped through every conceivable regulatory hoop? They're getting crushed from both sides.
The Great Exodus
The licensed cannabis industry in California isn't just struggling. It's hemorrhaging.
As of early 2025, the state had only 4,805 active cultivation licenses — down 43% from the 8,493 licenses that were active at the end of 2021. In the most recent 12-month reporting period, California lost 740 cultivation licenses — to put that in perspective, that's more licenses than Arizona and Nevada have licenses now outnumber active ones by a ratio of roughly 10,800 to 8,500.
And what does the state do in the face of this collapse? It raised the excise tax.
On July 1, 2025, combined. Inactive California bumped the cannabis excise tax from 15% to 19% — a 26% hike triggered automatically by a 2022 law that was supposed to "stabilize" things. Genine Coleman, founder of the Origins Council, which represents small growers in the Emerald Triangle, described the mood as a level of collective malaise she'd never experienced before. The timing was almost comical in its cruelty: taxable cannabis sales had already dropped to $1.09 billion for the first quarter of 2025, a 30% decline from their peak in early 2021 and the lowest quarterly figure in five years.
For context on just how absurd the taxation situation is, consider what Cal NORML pointed out: the excise tax on a single cannabis pre-roll is $1.24. On a glass of wine? One cent. A glass of beer? Two cents. A shot of liquor? Five to eight cents. A cigarette? Fourteen cents. And when you stack state excise, sales tax, and local cannabis taxes on top of each other, consumers in some California cities were paying up to 48% in total taxes on a legal cannabis purchase during the three months that the 19% rate was in effect. At that rate, it's honestly surprising that anyone was still buying legal.
Credit where it's due: Governor Newsom did sign AB 564 in September 2025, rolling the excise tax back to 15% effective October 1. The bill passed the Assembly 76-0 and the Senate 39-1, which tells you just how obviously necessary the rollback was. But the damage from those three months at 19% — and the years of regulatory pain that preceded them — had already been done. As one industry advocate put it: "You can't fund social programs with revenue that doesn't exist."
And Then Came the Raids
If the tax situation is the slow bleed, the Glass House Farms raid on July 10, 2025, was the gunshot wound.
Glass House Brands is — or was, depending on how you look at it — one of California's great cannabis success stories. The company operates up to 6 million square feet of cultivation across its Southern California facilities, making it one of the largest licensed cannabis operations in the state. Its Q1 2025 earnings had impressed analysts, with retail sales up over 18% year-over-year at a time when the broader California market was declining 13%. They were, by most accounts, doing everything right within the legal framework.
Then ICE showed up with the National Guard.
Federal immigration agents executed search warrants at two Glass House sites — one in Carpinteria, one in Camarillo — and the day descended into chaos. Over 360 people were arrested at the two locations. Smoke bombs and flash grenades were deployed into crowds of community members and elected officials who had gathered in protest. A U.S. Congressman was denied entry. Twelve people total were hurt, with eight hospitalized.
And a 57-year-old farmworker named Jaime Alanis Garcia was in progress and fell 30 feet from a greenhouse roof while the raid died from his injuries days later. His family said he was hiding from federal agents when he fell. He'd been working on the farm for a decade.
The Department of Homeland Security characterized the raid as an immigration enforcement action and claimed to have found migrant children on site — allegations that Glass House vigorously disputed. The company pointed out that the California Department of Cannabis Control had conducted a site visit in May 2025 and observed no minors. Glass House also stated it had always paid competitive, legal wages, with farm labor contractors averaging about $18.60 per hour — over 12% above California's minimum wage.
None of that mattered when the federal agents came.
The financial fallout was immediate. Glass House executives told investors that third-quarter revenue would be between $35 and $38 million — roughly $25 to $30 million below where the company had been tracking before the raids. Full-year 2025 revenue was expected to drop about 15% from prior projections. Greenhouse expansion plans were delayed. Construction on a new facility was shelved.
And here's the thing that should make every cannabis operator's blood run cold: Glass House was a licensed, state-legal operation. They were one of the good guys, at least by California's rules. But cannabis remains federally illegal, and as long as that's the case, every licensed operator in every legal state is one warrant away from this kind of destruction.
The company has since hired former ICE Director Julie Myers Wood as a compliance consultant, moved all workers to E-Verify, and signed a labor peace agreement with the Teamsters. Glass House's COO told investors he'd rather have "first-mover advantage" on these compliance measures than be caught flat-footed again. Which is a pragmatic move, but also kind of a grim thing to have to say about running a business that's entirely legal under state law.
The Absurdity Machine
So let's zoom out and look at the full picture.
California legalized recreational cannabis in 2016 via Proposition 64 — a law that voters enthusiastically supported. The promise was straightforward: create a regulated market, generate tax revenue for education and public health, and shrink the illegal market. Nearly a decade later, here's where things stand:
The illegal market still dominates. Six out of ten cannabis sales happen outside the regulated system. Cultivation licenses have dropped 43% in three years. Taxable sales are at a five-year low. Over 57% of California cities don't allow any retail cannabis businesses, giving the state one of the lowest dispensary-per-capita rates in the country among legal states. California led the nation with 12,600 cannabis jobs lost in 2023 and another 5,000 in 2024
And while all of this is happening, the state is spending hundreds of millions on multiagency enforcement operations that, by the state's own metrics, seize the equivalent of a rounding error's worth of the total illegal supply. The operations generate impressive-sounding press releases — "Operation Grab Bag" seized 2.2 million pieces of illegal cannabis packaging in LA's Toy District! — but the math doesn't change. Two-thirds of the market is still illicit. Licensed operators keep closing.
Something is very, very broken.
What Would Actually Help
To be clear: the Blazer isn't saying enforcement against genuinely illegal operations is wrong. The unlicensed market creates real problems — untested products, environmental damage from illegal grows, labor exploitation, and the involvement of transnational criminal organizations. All of that is bad.
But the current approach is like trying to drain a swimming pool with a teaspoon while somebody else fills it with a garden hose. You're not going to arrest and seize your way out of a $10 billion illegal market. You shrink the illegal market by making the legal market actually competitive.
That means lower taxes. That means fewer regulatory hurdles. That means opening up the 57% of California that still refuses to allow cannabis retail, which forces consumers in those areas to choose between a long drive to a legal dispensary or a quick text to their dealer. It means federal rescheduling — or better yet, descheduling — so that licensed operators aren't living under the constant threat of federal raids and can access normal banking, insurance, and tax deductions like every other legal business in America.
Michigan, with a 10% state excise tax and no additional local cannabis taxes, is regularly pointed to as the model for how this should work. If California had Michigan's per-capita cannabis sales, it would be generating an estimated $13 billion annually — and collecting substantially more tax revenue than it does now. Sometimes the way to make more money is to charge less per transaction and let volume do the work. It's basic economics, and for some reason, Sacramento keeps getting it wrong.
The signing of AB 564 was a small step in the right direction, but it's a band-aid on a broken leg. Until California — and the federal government — fundamentally rethinks how it regulates and taxes cannabis, we'll keep seeing the same pattern: press conferences about record seizures, licensed operators going out of business, and working people caught in the crossfire of a war that shouldn't be happening in a state where cannabis has been legal for almost a decade.