California lawmakers can likely adjust the state’s 2016 adult-use marijuana legalization law without having to go back to voters to approve every change, a state judge tentatively ruled Thursday.
The decision came from San Francisco Superior Court Judge Harold Kahn in a lawsuit brought by youth advocacy organizations seeking to undo a cannabis retail tax cut passed by the Legislature and signed into law last fall by Gov. Gavin Newsom, according to Courthouse News.
California voters legalized adult-use cannabis in 2016. Still the country’s largest individual market, California nonetheless has seen legal sales steadily drop as operators complain of high taxes, onerous regulations and a bustling illicit market that persists despite enforcement efforts.
The state’s licensed retailers reported under $4 billion in sales last year, down from $4.2 billion in 2024. The overall number of units moved also declined, according to state data.
Can California lawmakers legally cut cannabis taxes?
Retailers predicted such a dip when the state excise tax increased from 15% to 19% on July 1, 2025 – an automatic increase put in place in 2022 when lawmakers eliminated the state cultivation tax. The tax is now locked in at 15% until at least 2028 under legislation Newsom signed last fall.
That’s still too high for most cannabis industry observers and operators – but the tax cut also means less money for programs promised cannabis tax revenue. That includes outfits like Youth Transforming Justice and the East Bay Asian Youth Center, which sued the state Department of Cannabis Control and other state officials in San Francisco Superior Court in February, records show.
The groups also sued to block a separate law, Senate Bill 141, which devotes money from the state Cannabis Tax Fund to illicit-market enforcement efforts.
Both moves are illegal, the groups alleged. In their lawsuit, they argued that the state Constitution “prohibits the Legislature from amending voter-approved ballot measures without voter approval, unless the ballot measure permits that amendment.”
They argued that decreased taxes “undermine the voters’ intent to use cannabis excise tax revenue for social and environmental programs.”
“As a matter of California constitutional law, those amendments are therefore void.”
Subscribe to the MJBiz Factbook
Exclusive industry data and analysis to help you make informed business decisions and avoid costly missteps. All the facts, none of the hype.
What you will get:
- Monthly and quarterly updates, with new data & insights
- Financial forecasts + capital investment trends
- State-by-state guide to regulations, taxes & market opportunities
- Annual survey of cannabis businesses
- Consumer insights
- And more!
What other changes to California cannabis law can officials make?
In response to an objection from the state, Kahn agreed that such amendments to Prop. 64 are likely constitutional.
However, as Courthouse News reported, plaintiff’s attorney Margaret Prinzing maintained that amendments to Prop. 64 are illegal and requested more time to make an argument that the tax cut is unconstitutional.
Kahn agreed. A briefing date has not yet been set, records show.
But there are signs that a tax hike may also harm outfits that rely on tax revenue.
Even with the three-month excise tax increase, cannabis retailers generated less tax revenue last year than they did in 2024. The state’s cannabis tax haul dropped to $1.05 billion in 2025, compared to $1.07 billion the previous year.
