New Director of California Cannabis Control: A Reset or More of the Same?
- Zack Figg
- 1 day ago
- 4 min read
What the New Director of California Cannabis Control Could Mean for the Industry
There is a new sheriff in town.
Clint Kellum has been appointed as the new Director of the California Department of Cannabis Control, an agency that has faced sustained criticism for failing to fully stabilize or effectively regulate the largest cannabis market in the world.
You can read the profile on the new director here:
And the official announcement from Governor Newsom here:
It is a big job.
The California Department of Cannabis Control was created to unify fragmented oversight and bring regulatory consistency to the state’s legal cannabis industry. Instead, operators frequently describe a market defined by:
High effective taxation
Persistent illicit competition
Retail access gaps across large portions of the state
Limited banking access
Margin compression that fuels a debt spiral
A leadership change does not solve structural issues. But it can signal intent to solve systemic problems.
The Over-Taxation Problem
California cannabis operators face layered taxation that has long undermined profitability.
While the state recently reversed a proposed excise tax increase, a move we discussed in California Cannabis Excise Tax Reversal: Round 2 Against Texas Hemp.
the overall tax burden remains high relative to other regulated industries.
High taxes do not merely reduce profit. They:
Encourage illicit market persistence
Reduce reinvestment capacity
Constrain payroll and compliance spending
Increase reliance on short-term, high-cost debt
If the new Director intends to foster a healthy, self-sustaining industry, tax coordination with state policymakers remains central.
Illicit Market Enforcement
Enforcement has long been the most politically sensitive issue in California cannabis.
Licensed operators continue to compete with illicit sellers who:
Avoid testing costs
Avoid taxation
Avoid labor and environmental compliance
Regulation without meaningful enforcement creates a structural imbalance.
The DCC cannot eliminate the illicit market alone. But it can coordinate with state and local agencies to ensure that compliant operators are not structurally disadvantaged.
This is not simply about fairness. It is about viability.
Cannabis Deserts and Retail Access
Large portions of California still prohibit retail cannabis sales. Entire counties function as “cannabis deserts,” where legal purchase options are unavailable.
This creates two consequences:
Illicit operators fill the void.
Licensed operators face artificially constrained distribution.
Regulatory reform must consider local participation incentives and frameworks that expand legal retail access without overwhelming communities resistant to rapid change.
Access drives revenue. Revenue sustains compliance. Clint Kellum needs to address the imbalance or the black market simply thrives at the expense of the regulated, tax-paying market participants.
The Banking Problem and the Debt Spiral
Perhaps the most persistent structural weakness in California cannabis is access to banking.
As we discussed in California Cannabis Banking Reform,
limited access to traditional banking forces operators toward:
Hard money lending
High interest private debt
Seller financing
Equity dilution
Without conventional credit markets, businesses often refinance repeatedly at rising cost. This creates a debt spiral that erodes otherwise viable operations.
The DCC does not control federal banking law. But leadership can advocate for reform, coordinate with financial institutions, and signal regulatory stability that reduces perceived risk.
Banking reform may be the single most powerful lever available to stabilize the California cannabis ecosystem. California cannabis tax dollars need to be reinvested to solve this problem - and PAC Garden Assets supports the creation of our own banking institution(s) to foster a healthy financial ecosystem.
The Bright Spots
It is not all negative.
The excise tax adjustment demonstrated that policy can evolve.
Market consolidation is slowly rationalizing supply; even bulk flower prices have seen recent improvement.
Operational sophistication continues to improve, and leadership changes create moments where priorities can shift.
The new Director has an opportunity to reset tone, improve communication, and align enforcement with economic sustainability.
What Success Would Look Like
For the California Department of Cannabis Control, success would not mean eliminating all friction.
It would mean:
Reducing structural tax disadvantage
Increasing meaningful enforcement parity
Supporting retail access expansion
Encouraging banking normalization
Creating regulatory clarity that attracts capital
California remains the largest legal cannabis market in the world. It has climate advantages, scale advantages, brand power, and global recognition.
But it also carries regulatory weight that has proven difficult to balance.
The new Director of California Cannabis Control inherits both.
Clint Kellum is in the spotlight; the industry will be waiting and watching for proof that he is understanding and acting on our concerns.
FAQs
Q: Who is the new Director of the California Department of Cannabis Control?
A: Clint Kelln has been appointed as the new Director of the California Department of Cannabis Control. His appointment was announced by Governor Gavin Newsom in November 2025.
Q: What are the biggest challenges facing the DCC?
A: The primary challenges include high effective taxation, illicit market competition, limited retail access across many counties, and lack of conventional banking services for operators.
Q: Can the DCC fix cannabis banking issues?
A: The DCC cannot change federal banking law directly, but leadership can advocate for reform, coordinate with financial institutions, and create regulatory stability that reduces perceived risk for lenders.
Q: Why does enforcement matter so much?
A: Without consistent enforcement against illicit operators, licensed businesses remain structurally disadvantaged due to compliance costs and taxation. Enforcement parity supports long-term market stability.
Q: Is the California cannabis industry improving?
A: There have been incremental improvements, including excise tax adjustments and consolidation among operators. However, structural challenges remain significant.
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