California Cannabis Brand Sues Regulators Over High Taxes, Illicit Market

California licensed operator Catalyst Cannabis Co. last week filed a lawsuit against the state Department of Cannabis Control (DCC) over the agency’s failure to address so-called burner distributions which the company says are the result of the state’s high cannabis taxes.

In a press release, Catalyst CEO Elliot Lewis said that state cannabis regulators “know that burner distributions exist but will not admit it publicly because they want to pretend like this problem they helped create doesn’t exist.”

“I want to be clear—our goal is to outline a problem that the state has created by failing to work with the cannabis industry on fair taxes. The cannabis industry has the biggest potential for job growth and good paying jobs with tons of upward mobility since the tech boom. The burner distributions are a symptom of the state’s complete incompetence as well as their unwillingness to admit what they know, they have screwed up the entire legal cannabis market.” — Lewis in a statement

The state’s cannabis excise tax is set at 15% and municipalities can set their own rates.

Lewis further describes the state’s cannabis tax as “smothering” the industry and that the state is treating cannabis industry operators as “second class” members of the state’s business community. He added that the tax policy is “aimed to discriminate against the entire industry.”

“It’s laughable that the state officials want to talk about good-paying jobs, racial justice, social equity, and safe access while putting in place policies that will never allow any of this to happen,” Lewis said in the statement. “Congratulations California you have figured out how to continue the War on Drugs. Up your game!”

The goal of the lawsuit, which claims the DCC is not enforcing state law, is to reveal what the agency knows about the burner distributions and bring regulators to the table on industry tax reform.

This is not Catalyst’s first time taking legal action against government officials: in a February podcast interview, Lewis told Ganjapreneur that Catalyst has successfully litigated against cities in the past. “Look, there’s a lot of corruption that goes on in this industry,” he said. “It’s just a fact. We don’t engage in corruption.”