California’s Cannabis Crackdown: Record Seizures and Budget Reforms Aim to Level the Playing Field

These efforts build upon the previous year’s record, when $534 million worth of illegal cannabis was seized in 2024. This aggressive enforcement underscores the state’s commitment to dismantling the illicit cannabis market and protecting consumers.

On release of the revised 2025-2026 state budget, Governor Gavin Newsom has proposed significant changes to the funding structure for California’s cannabis enforcement activities. The proposal would shift the Department of Cannabis Control’s (DCC) enforcement funding from the Cannabis Control Fund to the Cannabis Tax Fund, a move intended to bolster enforcement against illicit cannabis operations while alleviating financial pressures on legal cannabis businesses.

Under the proposed budget, the DCC would be authorized to shut down illegal cannabis operations and collect background information on properties involved, thereby increasing accountability for property owners and incentivizing them to prevent unlicensed activity. The budget also calls for increased DCC resources dedicated to consumer protection and investigations into illicit activity.

A notable component of the proposal is the expansion of eligibility for Board of State and Community Corrections (BSCC) grants. Jurisdictions that prohibit cultivation but allow cannabis retail stores would now be eligible, and the grants would further prioritize enforcement against illicit cannabis activity.

The proposal is informed by several persistent challenges in the California cannabis market. The illicit market remains robust, with only approximately 40% of consumers purchasing from legal sources. Meanwhile, the Cannabis Control Fund, DCC’s primary funding source, is facing a structural deficit with annual shortfalls nearing $50 million. Without intervention, sustaining enforcement efforts would require raising licensing fees for legal businesses by as much as 40%, further undermining their competitiveness against the illicit market.

By redirecting enforcement funding to the Cannabis Tax Fund — an industry-generated revenue source — the proposal aims to maintain critical enforcement activities without increasing costs for compliant businesses. If adopted, the DCC would join other state agencies in receiving enforcement funding from the Cannabis Tax Fund, aligning fiscal policy with the broader goal of supporting a well-regulated legal cannabis market.

The proposed changes to the BSCC grant program are expected to provide expanded support for local law enforcement in their efforts to combat the illicit cannabis market. The budget revisions reflect a recalibration of California’s fiscal framework for cannabis regulation, seeking to balance enforcement needs with the economic realities faced by legal operators.