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California’s legal cannabis industry is entering the fourth quarter of survival mode—and the referee just blew the whistle on another foul. As of July 1, 2025, cannabis retailers in the state will face a staggering 26% increase in excise tax, raising the rate from 15% to 19%. This decision, announced during a recent California Department of Tax and Fee Administration (CDTFA) advisory meeting, has sent shockwaves through an industry already grappling with regulatory fatigue, dwindling investment, and relentless competition from the illicit market. What was supposed to be a strategic adjustment tied to past legislation is now seen by many insiders as the final blow in a game the legal market is losing.

Gov. Gavin Newsom’s administration had previously removed the burdensome cultivation tax in a move to stimulate industry growth, but that came with a caveat: if cannabis revenues dropped, the state would raise the excise tax to recoup the difference. That moment has arrived. The upcoming increase now puts legal operators in a deeper financial bind, with business leaders warning that prices will soar further out of reach for everyday consumers—pushing them right back to the untaxed, unregulated illicit market. “More businesses will close sooner… less investment… demand for licenses will decline exponentially,” warned Jerred Kiloh of the United Cannabis Business Association. A state-funded study backs this concern, revealing most consumers still rely on illegal sources.

The implications extend beyond business and into broader public health, sports recovery, and wellness. With athletes and health professionals increasingly turning to cannabis for recovery, inflammation control, and mental wellness, higher legal costs could derail efforts to research, standardize, and safely distribute therapeutic-grade products. The correlation is clear: if the regulated market shrinks, so does access to clean, tested cannabis options. Amy O’Gorman Jenkins of the California Cannabis Operators Association echoed industry concerns, calling on lawmakers to freeze the tax at 15% before the regulated market collapses altogether. A potential legislative Hail Mary—San Francisco Assemblymember Matt Haney’s bill to block the tax increase—is working its way through the Capitol but faces a race against the clock.

California’s cannabis market isn’t just playing defense—it’s hanging on the ropes. With the looming tax hike, the state risks sidelining its legal market, pushing innovation, jobs, and health-focused products off the court entirely. As lawmakers consider a policy timeout, the cannabis community must rally to protect access, opportunity, and safe supply—especially for athletes and advocates who depend on it for performance and recovery.