6.5.25 - “Cannabis Conundrum: What a 11% Dip in Legal Sales Tells Us About the Market—and What It Doesn’t”

By Alan Gaul, Vice President of Marketing & Brand, TASI Bank

Link to original article:

Licensed California Cannabis Sales Down 11% in Q1 — SFGate

If you’re watching California’s cannabis market closely (as we are), then the Q1 headline—“Licensed cannabis sales down 11%”—might’ve had you either sweating, shrugging, or sighing audibly into your favorite terpene-infused tea.

As reported by SFGate, this marks the sharpest quarterly drop since adult-use cannabis sales were legalized in the Golden State. But for those of us who’ve been in this industry for over a decade—serving the licensed, the compliant, and the resilient—we know this isn’t the end of the story. It’s just a difficult chapter in a book we’ve been helping to write.

Let’s unpack what this moment really means.

1. Sales Down, but the Market Isn’t Dead—It’s Diverging

Legal sales reached just $1.088 billion in Q1 2025. We say “just” in quotes because, while that’s down from last year, it’s still a billion-dollar quarter. The bigger issue isn’t the drop—it’s why it dropped.

According to the California Department of Cannabis Control, legal cannabis only made up 38% of the state’s total market in 2024. Translation? Nearly two-thirds of consumers are still shopping in the unlicensed market. That’s not a demand problem—that’s a policy and price pressure problem.

2. Cultivators Are in Freefall—And the Ground Keeps Moving

Outdoor flower prices have fallen 74% since Q4 2020. Mixed-light and indoor cultivators are down 60% and 46% respectively. This isn’t a correction. It’s a pricing collapse.

At TASI Bank, we’ve been watching this closely—and advising our clients even more closely. We’re seeing cultivators diversify, consolidate, or exit. What we’re not seeing is giving up. The ones who survive this moment will be the ones with strong cost discipline, smart banking relationships, and a plan to weather regulatory whiplash. Spoiler: We can help with all three.

3. The Tax Man Cometh… Again

Just when you thought prices couldn’t be squeezed any tighter, the state excise tax is slated to rise from 15% to 19% on July 1. That’s right—more taxes, fewer buyers, and more incentive to return to the illicit market. The Legislative Analyst’s Office itself admits the increase might shrink the legal market while barely moving the needle on actual revenue.

That’s the cannabis equivalent of squeezing water from a dried-out bud.

4. We’ve Seen This Before—And We’ll Be Here After

At TASI Bank, we’ve been banking cannabis since 2015. Back when tier-one licenses were rare and compliance software didn’t have acronyms. We’ve seen boom cycles, bust cycles, and all the green in between.

Here’s what we know: The California cannabis industry isn’t going anywhere. But it is evolving—and the businesses that survive will need more than just good product. They’ll need good partners.

Partners who can help them read between the lines of a CDTFA report.  Partners who know the difference between a 280E write-down and a write-off.

Partners who know that the best businesses aren’t always the biggest—they’re the ones with staying power.

So, What Now?

This is the moment to double down on operations, understand your margins, and—frankly—bank smarter. At TASI Bank, we serve the cannabis industry because we believe in it. Not just when it’s making headlines, but especially when it’s making hard choices.

Let’s talk strategy. Let’s talk reality. Let’s talk about how we can help you move forward—even if Q1 moved backward.

Because at TASI Bank, we don’t just watch the cannabis industry.

We bank it.

Alan Gaul is the Vice President of Marketing & Brand at TASI Bank, where he helps translate jargon into real-world solutions for real businesses. If you’ve got questions about cannabis banking, reach out—he probably already has a spreadsheet about it.

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