California cannabis sales decline 11% in first quarter

Licensed cannabis sales in California fell by 11% in the first quarter of 2025, marking the largest decline in the state’s legal cannabis market history, according to reports from SFGate. Sales reached $1.088 billion during this period, down from the previous year.

Tamma Adamek, a spokesperson for the California Department of Tax and Fee Administration, noted that comparing quarterly sales figures can be misleading, as tax data is frequently updated as cannabis businesses file their reports. Adamek mentioned that the reported gap in sales figures is expected to narrow as more businesses comply with tax regulations.

A recent analysis by the California Department of Cannabis Control revealed that in 2024, legal sales accounted for only 38% of the overall cannabis market in the state. The report highlighted several challenges faced by licensed cannabis businesses, including a 57% decrease in wholesale cannabis prices, adjusted for inflation, when comparing the fourth quarter of 2024 to the fourth quarter of 2020. Additionally, prices for indoor-cultivated cannabis fell by 46%, while outdoor-cultivated cannabis prices dropped by 74%. The report indicated that mixed-light-cultivated cannabis prices also saw a 60% reduction during the same timeframe.

Despite these price reductions across the industry, California plans to raise the state excise tax on cannabis from 15% to 19% starting July 1. This tax increase is expected to further contract the licensed market and could drive more consumers toward unregulated sales. The California Legislative Analyst’s Office warned in a March update that this tax hike might reduce the size of the legal cannabis market and generate only a small portion of the anticipated revenue.

Legislators are currently considering a bill to halt the tax increase; it has passed the state House but still requires approval from the state Senate and a signature from Governor Gavin Newsom. As the legal cannabis industry grapples with declining sales and increasing regulatory hurdles, the future of the market remains uncertain.