AB 564: A Critical Step to Stabilize California’s Cannabis Market 

California’s legal cannabis market has long struggled under the weight of high taxes, limited retail access, and persistent illicit market competition. Assembly Bill (AB) 564, introduced by Assemblymember Matt Haney, aims to change that by freezing a scheduled increase in the state’s excise tax, from 15% to 19%, that is currently set to take effect on July 1.

This is a timely and necessary intervention. California’s legal operators are already battling a system where the majority of cannabis sales still occur outside the regulated market. The combination of steep taxes and vast local opt-outs has created a fragmented legal system that simply can’t compete with unlicensed sellers who offer faster, cheaper, and more convenient options. Last year only 38% of cannabis consumed in California came from licensed channels, meaning 62% remained illicit. (Source)

Raising the excise tax would only deepen this divide. For consumers, price and convenience are key, and pushing prices higher risks driving even more traffic to unregulated channels. For legal operators, especially small and equity-owned businesses, holding the line at 15% could help ease pressure in an already difficult environment. AB 564 passed the Assembly with unanimous support and is now under review in the Senate Revenue and Taxation Committee. If enacted, it could be a first step toward restoring balance between tax revenue goals and market sustainability, not just in California, but as an example for other states facing similar challenges. Take action here (NORML) to get this legislation across the line!