California pot industry facing 'extinction event'

May 18, 2023Media Mention

Cannabis Co-Chair, Michelle Mabugat, recently shared her insights with SFGate discussing how California's cannabis industry is facing a potential collapse due to high taxes, burdensome regulations, and competition from the illicit market, posing a significant threat to licensed businesses.


Michelle Mabugat, a cannabis attorney at the Greenberg Glusker firm in Los Angeles, told SFGATE she expects debt problems to shut down many shops in the state.

“There’s a debt bubble that’s been building over the last few years that’s getting close to bursting,” Mabugat said. “I do anticipate a lot of retailers going out of business this year, just like we saw a lot of cultivators go out of business last year.”

Mabugat said retailers had been “hoping and praying” that they would come up with more cash before they had to pay the excise taxes. But with the May 1 deadline past, hundreds of pot shops were unable to come up with the money and could be headed toward failure. 

These debt-ridden retailers are now at risk of going out of business thanks to the state’s recent tax payment change. The state’s decision to shift tax payments from distributors to retailers both removed a form of financing — retailers were using excise tax collections as a way to finance their businesses — and created a big penalty for cash-strapped retailers.

As Mabugat said: “That kind of financing model, if you can even call it that, is a really easy way to go upside down fast.”