“Kellum’s tenure will succeed only if he recognizes that the agency he now leads cannot rebuild trust without acknowledging, clearly and without qualification, the depth of the failures that preceded him and his commitment to charting a new course.”

By Hirsh Jain, Ananda Strategy

Late on the Wednesday evening before Thanksgiving, California Gov. Gavin Newsom (D) quietly announced the appointment of Clint Kellum as the next director of the state Department of Cannabis Control (DCC).

The timing of the announcement, released at a moment when the Newsom administration could be confident that few Californians would be paying attention, was not lost on close observers of the cannabis market. It revealed the administration’s deep discomfort with the conversation this transition should provoke: a candid examination of DCC’s failures under the leadership of current director (and longtime Newsom ally) Nicole Elliott, and the profound damage those failures have inflicted on California’s legal cannabis market.

It is a conversation that’s long overdue.

Nearly a decade after the passage of Proposition 64, California’s legal cannabis system bears little resemblance to what voters were promised. Instead of a well-regulated market that displaced the illicit one, the state has allowed unlicensed cannabis operators to flourish, unsafe and untested products to proliferate and enforcement to collapse. The legal market is now forced to compete with the very illicit activity legalization was meant to eliminate.

But many of the industry’s deepest wounds were not inevitable consequences of legalization. They were regulatory failures, and specifically failures of DCC under its longtime leadership.

Since its inception, DCC has been at the center of a long and unbroken sequence of scandals and breakdowns.

Most prominent was the pesticide testing scandal, in which the agency allowed products contaminated with banned pesticides to be sold on the legal market. This failure undermined the very premise of “legal and tested” cannabis in California, a premise the state had used to justify stringent compliance costs and high taxation.

As the regulatory agency tasked with ensuring safety failed at the most basic level of product oversight, consumer confidence in the legal cannabis market predictably collapsed.

Equally damaging was DCC’s failure to close loopholes in its “track and trace” system that allowed so-called “burner distributor” licenses to move illicit cannabis into the legal supply chain. These loopholes were well known within the industry, repeatedly discussed in public forums and raised directly with regulators. Yet DCC declined for years to take meaningful enforcement action, allowing illicit actors to benefit from a system that was supposed to regulate them.

This failure not only deprived legal operators of a level playing field, it further blurred the line between legal and illicit commerce. It produced the very outcome legalization was intended to prevent.

DCC’s mismanagement also extended to the administration of local grant programs.

In a formal report, the California state auditor criticized DCC’s “inadequate oversight” of cities receiving millions of dollars in state equity grants, describing the “inappropriate expenditures” made using these taxpayer dollars. Programs intended to remedy decades of disproportionate enforcement instead became examples of weak accountability and public corruption, perhaps unsurprising in a state where large sums of taxpayer funds routinely go missing. The state auditor found that cities received funding without ensuring that grants reached their intended beneficiaries, and that DCC did little to intervene.

Tellingly, DCC faced serious allegations from its own employees as well.

A whistleblower lawsuit accused the agency of retaliating against employees who had raised concerns about DCC’s regulatory failures and uneven, retaliatory enforcement practices. Such allegations reinforced a broader perception that the agency was animated by personal grudges, resistant to criticism, unable to self-correct and particularly intolerant of dissent within its own ranks.

These substantive failures were compounded by DCC’s unyielding insistence, often stated boldly and publicly, that the legal cannabis market in California was “healthy” and “growing.”

In reality, legal cannabis sales in California have fallen by more than 30 percent since 2021—a staggering decline. DCC’s refusal to acknowledge these declines fostered an Orwellian culture of official unreality. Instead of confronting the crisis, the agency’s messaging sought to obscure it, hindering reform and leaving legislators, operators and consumers without an honest assessment of the system’s condition.

Meanwhile, senior statewide leaders have begun to say openly what DCC has long refused to admit.

State Treasurer Fiona Ma (D) recently stated that California’s cannabis legalization framework was a “failure” and suggested that the state may need to start over entirely. Attorney General Rob Bonta (D) acknowledged that California’s cannabis taxes are punitively high and are responsible for pushing consumers back into the dangerous illicit market.

These comments represent clear and unambiguous admissions, from the highest levels of state government, that the system is not working.

The cumulative effect of these failures has been devastating. Hundreds of municipalities in California still prohibit legal cannabis businesses, understandably citing the visible failure of the legal market across much of the rest of the state as justification. Licensed dispensaries continue to compete with unlicensed storefronts that operate in the open, in part because state and local authorities lack a coherent enforcement strategy.

Consumers face high prices, limited access, questionable testing integrity and a regulatory environment that provides little confidence that legal products are meaningfully safer or more reliable than illicit alternatives.

California’s failures have also rippled nationwide.

Because California is by far the largest potential cannabis market in the United States, its chronic underperformance has suppressed the growth of the cannabis industry nationwide. If California’s legal cannabis market reached per-capita performance levels comparable to other states like Michigan or Montana, its annual legal sales would be more than three times higher—thirteen billion dollars, rather than the merely four billion dollars recorded today.

The national implications are staggering. If the California market were functioning properly, the United States legal cannabis industry would now exceed forty billion dollars annually, rather than the roughly thirty-two billion dollars it currently generates, and would support one hundred thousand additional jobs in the cannabis industry.

Instead of propelling the national industry forward, California has become a drag on national growth, an anchor weighing down an industry that should be expanding far more rapidly.

These failures have also weakened the political case for cannabis legalization across the country. In red and purple states, policymakers regularly point to California’s regulatory chaos as evidence that legalization produces disorder, fuels illicit activity and overwhelms enforcement systems.

California, once expected to be the national model for cannabis regulation, has become a cautionary example that opponents of reform invoke to slow progress elsewhere.

DCC’s refusal to acknowledge these failures is not merely a bureaucratic flaw. It is a political one.

For more than a decade, then-candidate and now-Governor Newsom has presented himself as a champion of cannabis reform and promised that California would build the most effective and equitable cannabis system in the world.

By any honest assessment, these promises were never fulfilled. Under Newsom’s watch, legalization faltered, the illicit market expanded, local bans entrenched themselves and regulatory incoherence became the norm.

The administration has consistently avoided acknowledging these failures, treating any admission of systemic breakdown as a political liability for Newsom’s future ambitions, rather than a logical prerequisite for urgently needed reform of California’s system.

DCC’s insistence that the California market is “healthy” and “growing” reflects the governor’s unwillingness to admit that his cannabis legacy has been defined by unfulfilled promises and steadily worsening conditions.

But Newsom is now a lame-duck governor, whose focus has clearly left California and drifted toward national politics. This creates an opening for Clint Kellum—that is, if he is willing to exercise independence in his new role—not too much to ask in a position that pays a $230,000 base salary ($300,000 in “total compensation” once the lavish benefits for California state executives are included). Unbeknownst to most taxpayers footing the bill, it turns out that “public service” in California pays quite well.

A new DCC director cannot, on his own, revise tax structures, mandate local participation or rewrite Proposition 64.

But Kellum can do something that has been conspicuously absent from the agency in recent years. He can speak honestly.

Kellum can acknowledge the failures that occurred under his predecessor, describe the structural weaknesses the agency now faces, reject the “political spin” that suggests the California market is healthy and growing and commit to forthright, data-driven leadership going forward. He can echo what Ma and Bonta have already said: that California’s cannabis system has been a failure, that it has harmed market participants and consumers alike and that it requires immediate and comprehensive reform.

Honesty, however, is not a responsibility that falls on regulators alone.

For years, many California cannabis stakeholders—including operators, attorneys, consultants and even trade associations—declined to criticize DCC publicly, out of fear of retaliation or a desire to preserve professional relationships. Some spoke critically of DCC behind closed doors, while offering praise in public settings.

That omission was not a neutral decision. It was an act of complicity. It insulated the agency from accountability, allowed dysfunction to deepen and contributed to the erosion of the legal market. A sustainable regulatory system cannot exist unless those subject to regulation are willing to criticize the regulator, even at the cost of maintaining personal relationships with powerful officials, which many “white collar” professionals are often loath to do.

California’s cannabis industry now faces a choice. It can continue to treat regulators with a dishonest deference in public and frustration in private, a pattern that has helped produce the system that exists today. Or it can insist on transparency, accountability and integrity from an agency whose decisions affect billions of dollars and tens of thousands of livelihoods.

DCC does not need perfection. It needs competence, candor and a willingness to confront the truth—lacking to date. Kellum’s tenure will succeed only if he recognizes that the agency he now leads cannot rebuild trust without acknowledging, clearly and without qualification, the depth of the failures that preceded him and his commitment to charting a new course.

Moreover, whether the coming years become a period of recovery for the California cannabis market or simply a continuance of a “lost decade” of cannabis regulation will depend not only on Kellum’s choices, but also on the willingness of all industry stakeholders to be unafraid to publicly insist that California’s cannabis regulator finally rise to the level of the important task before it.

However it unfolds in California, the entire country will be watching.

Hirsh Jain is the CEO of Ananda Strategy, a cannabis-focused business advisory firm that works with many of California’s leading cannabis brands and retailers on matters ranging from competitive licensing, legislative strategy, regulatory intelligence, market expansion, and other corporate initiatives.

“Kellum’s tenure will succeed only if he recognizes that the agency he now leads cannot rebuild trust without acknowledging, clearly and without qualification, the depth of the failures that preceded him and his commitment to charting a new course.”

By Hirsh Jain, Ananda Strategy

Late on the Wednesday evening before Thanksgiving, California Gov. Gavin Newsom (D) quietly announced the appointment of Clint Kellum as the next director of the state Department of Cannabis Control (DCC).

The timing of the announcement, released at a moment when the Newsom administration could be confident that few Californians would be paying attention, was not lost on close observers of the cannabis market. It revealed the administration’s deep discomfort with the conversation this transition should provoke: a candid examination of DCC’s failures under the leadership of current director (and longtime Newsom ally) Nicole Elliott, and the profound damage those failures have inflicted on California’s legal cannabis market.

It is a conversation that’s long overdue.

Nearly a decade after the passage of Proposition 64, California’s legal cannabis system bears little resemblance to what voters were promised. Instead of a well-regulated market that displaced the illicit one, the state has allowed unlicensed cannabis operators to flourish, unsafe and untested products to proliferate and enforcement to collapse. The legal market is now forced to compete with the very illicit activity legalization was meant to eliminate.

But many of the industry’s deepest wounds were not inevitable consequences of legalization. They were regulatory failures, and specifically failures of DCC under its longtime leadership.

Since its inception, DCC has been at the center of a long and unbroken sequence of scandals and breakdowns.

Most prominent was the pesticide testing scandal, in which the agency allowed products contaminated with banned pesticides to be sold on the legal market. This failure undermined the very premise of “legal and tested” cannabis in California, a premise the state had used to justify stringent compliance costs and high taxation.

As the regulatory agency tasked with ensuring safety failed at the most basic level of product oversight, consumer confidence in the legal cannabis market predictably collapsed.

Equally damaging was DCC’s failure to close loopholes in its “track and trace” system that allowed so-called “burner distributor” licenses to move illicit cannabis into the legal supply chain. These loopholes were well known within the industry, repeatedly discussed in public forums and raised directly with regulators. Yet DCC declined for years to take meaningful enforcement action, allowing illicit actors to benefit from a system that was supposed to regulate them.

This failure not only deprived legal operators of a level playing field, it further blurred the line between legal and illicit commerce. It produced the very outcome legalization was intended to prevent.

DCC’s mismanagement also extended to the administration of local grant programs.

In a formal report, the California state auditor criticized DCC’s “inadequate oversight” of cities receiving millions of dollars in state equity grants, describing the “inappropriate expenditures” made using these taxpayer dollars. Programs intended to remedy decades of disproportionate enforcement instead became examples of weak accountability and public corruption, perhaps unsurprising in a state where large sums of taxpayer funds routinely go missing. The state auditor found that cities received funding without ensuring that grants reached their intended beneficiaries, and that DCC did little to intervene.

Tellingly, DCC faced serious allegations from its own employees as well.

A whistleblower lawsuit accused the agency of retaliating against employees who had raised concerns about DCC’s regulatory failures and uneven, retaliatory enforcement practices. Such allegations reinforced a broader perception that the agency was animated by personal grudges, resistant to criticism, unable to self-correct and particularly intolerant of dissent within its own ranks.

These substantive failures were compounded by DCC’s unyielding insistence, often stated boldly and publicly, that the legal cannabis market in California was “healthy” and “growing.”

In reality, legal cannabis sales in California have fallen by more than 30 percent since 2021—a staggering decline. DCC’s refusal to acknowledge these declines fostered an Orwellian culture of official unreality. Instead of confronting the crisis, the agency’s messaging sought to obscure it, hindering reform and leaving legislators, operators and consumers without an honest assessment of the system’s condition.

Meanwhile, senior statewide leaders have begun to say openly what DCC has long refused to admit.

State Treasurer Fiona Ma (D) recently stated that California’s cannabis legalization framework was a “failure” and suggested that the state may need to start over entirely. Attorney General Rob Bonta (D) acknowledged that California’s cannabis taxes are punitively high and are responsible for pushing consumers back into the dangerous illicit market.

These comments represent clear and unambiguous admissions, from the highest levels of state government, that the system is not working.

The cumulative effect of these failures has been devastating. Hundreds of municipalities in California still prohibit legal cannabis businesses, understandably citing the visible failure of the legal market across much of the rest of the state as justification. Licensed dispensaries continue to compete with unlicensed storefronts that operate in the open, in part because state and local authorities lack a coherent enforcement strategy.

Consumers face high prices, limited access, questionable testing integrity and a regulatory environment that provides little confidence that legal products are meaningfully safer or more reliable than illicit alternatives.

California’s failures have also rippled nationwide.

Because California is by far the largest potential cannabis market in the United States, its chronic underperformance has suppressed the growth of the cannabis industry nationwide. If California’s legal cannabis market reached per-capita performance levels comparable to other states like Michigan or Montana, its annual legal sales would be more than three times higher—thirteen billion dollars, rather than the merely four billion dollars recorded today.

The national implications are staggering. If the California market were functioning properly, the United States legal cannabis industry would now exceed forty billion dollars annually, rather than the roughly thirty-two billion dollars it currently generates, and would support one hundred thousand additional jobs in the cannabis industry.

Instead of propelling the national industry forward, California has become a drag on national growth, an anchor weighing down an industry that should be expanding far more rapidly.

These failures have also weakened the political case for cannabis legalization across the country. In red and purple states, policymakers regularly point to California’s regulatory chaos as evidence that legalization produces disorder, fuels illicit activity and overwhelms enforcement systems.

California, once expected to be the national model for cannabis regulation, has become a cautionary example that opponents of reform invoke to slow progress elsewhere.

DCC’s refusal to acknowledge these failures is not merely a bureaucratic flaw. It is a political one.

For more than a decade, then-candidate and now-Governor Newsom has presented himself as a champion of cannabis reform and promised that California would build the most effective and equitable cannabis system in the world.

By any honest assessment, these promises were never fulfilled. Under Newsom’s watch, legalization faltered, the illicit market expanded, local bans entrenched themselves and regulatory incoherence became the norm.

The administration has consistently avoided acknowledging these failures, treating any admission of systemic breakdown as a political liability for Newsom’s future ambitions, rather than a logical prerequisite for urgently needed reform of California’s system.

DCC’s insistence that the California market is “healthy” and “growing” reflects the governor’s unwillingness to admit that his cannabis legacy has been defined by unfulfilled promises and steadily worsening conditions.

But Newsom is now a lame-duck governor, whose focus has clearly left California and drifted toward national politics. This creates an opening for Clint Kellum—that is, if he is willing to exercise independence in his new role—not too much to ask in a position that pays a $230,000 base salary ($300,000 in “total compensation” once the lavish benefits for California state executives are included). Unbeknownst to most taxpayers footing the bill, it turns out that “public service” in California pays quite well.

A new DCC director cannot, on his own, revise tax structures, mandate local participation or rewrite Proposition 64.

But Kellum can do something that has been conspicuously absent from the agency in recent years. He can speak honestly.

Kellum can acknowledge the failures that occurred under his predecessor, describe the structural weaknesses the agency now faces, reject the “political spin” that suggests the California market is healthy and growing and commit to forthright, data-driven leadership going forward. He can echo what Ma and Bonta have already said: that California’s cannabis system has been a failure, that it has harmed market participants and consumers alike and that it requires immediate and comprehensive reform.

Honesty, however, is not a responsibility that falls on regulators alone.

For years, many California cannabis stakeholders—including operators, attorneys, consultants and even trade associations—declined to criticize DCC publicly, out of fear of retaliation or a desire to preserve professional relationships. Some spoke critically of DCC behind closed doors, while offering praise in public settings.

That omission was not a neutral decision. It was an act of complicity. It insulated the agency from accountability, allowed dysfunction to deepen and contributed to the erosion of the legal market. A sustainable regulatory system cannot exist unless those subject to regulation are willing to criticize the regulator, even at the cost of maintaining personal relationships with powerful officials, which many “white collar” professionals are often loath to do.

California’s cannabis industry now faces a choice. It can continue to treat regulators with a dishonest deference in public and frustration in private, a pattern that has helped produce the system that exists today. Or it can insist on transparency, accountability and integrity from an agency whose decisions affect billions of dollars and tens of thousands of livelihoods.

DCC does not need perfection. It needs competence, candor and a willingness to confront the truth—lacking to date. Kellum’s tenure will succeed only if he recognizes that the agency he now leads cannot rebuild trust without acknowledging, clearly and without qualification, the depth of the failures that preceded him and his commitment to charting a new course.

Moreover, whether the coming years become a period of recovery for the California cannabis market or simply a continuance of a “lost decade” of cannabis regulation will depend not only on Kellum’s choices, but also on the willingness of all industry stakeholders to be unafraid to publicly insist that California’s cannabis regulator finally rise to the level of the important task before it.

However it unfolds in California, the entire country will be watching.

Hirsh Jain is the CEO of Ananda Strategy, a cannabis-focused business advisory firm that works with many of California’s leading cannabis brands and retailers on matters ranging from competitive licensing, legislative strategy, regulatory intelligence, market expansion, and other corporate initiatives.