Gov. Gavin Newsom just signed a game-changing bill that could breathe new life into California’s struggling legal cannabis market. AB 564, authored by Assemblymember Matt Haney from San Francisco, freezes the state’s cannabis tax at 15% until 2028, aiming to help legal cannabis businesses compete with the thriving underground market.

The move comes after a significant tax hike in July pushed the excise tax from 15% to 19%, which further complicated the already challenging landscape for legal cannabis sellers. Currently, legal cannabis only represents about 40% of total cannabis consumption in the state, with high taxes driving consumers toward untaxed, unregulated 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,” Haney explained. This perspective resonates with many in the industry who have been struggling to maintain profitability under increasingly complex regulatory environments.

Origins Council, a nonprofit advocacy group for cannabis cultivation in rural regions, celebrated the bill as a positive step forward. “There’s much more to be done, but AB 564 is a step in the right direction,” they noted in a social media statement.

The tax freeze is designed to provide immediate relief to legal cannabis businesses, potentially creating a more level playing field with illegal market operators. By reducing the financial burden on legal sellers, the state hopes to encourage more consumers to purchase from regulated, safe sources.

This legislative move signals a nuanced approach to cannabis regulation in California, acknowledging the complex economic realities facing legal cannabis businesses while attempting to support a growing industry that promises significant economic potential.

As the cannabis landscape continues to evolve, this tax strategy represents a critical intervention aimed at sustaining and growing California’s legal marijuana market.