Even though they’re currently deemed “essential“, California cannabis businesses were already struggling financially before the onset of COVID-19. Increasing competition from unregulated, un-taxed, illegal actors combined with high local and state taxes combined with costly and competitive local barriers to entry were all leading to delayed opening timelines, shorted budgets, terrible margins, and increasing failures across the board. This is all on top of federal illegality, of course, which leads to a host of further challenges.
When licensing began in California in early 2018, the momentum and investor scuttlebutt around California’s cannabis industry was incredibly positive. The largest legal cannabis market in the world had opened for business (within the world’s potentially fifth largest existing economy) and branding and market share opportunities created astronomical pre-revenue valuations for lots of cannabis companies.
Because of its frothy start, California cannabis saw lots of investors–institutional and independently wealthy alike–dive in on both licensed and ancillary cannabis businesses. Most of these investors had probably never even considered cannabis investments and knew very little about the marketplace overall, let alone the fact that most cannabis economies are a race to the bottom (and they certainly almost never considered the federal criminal implications of investing