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Key Takeaways
- California State Treasurer Fiona Ma called California Prop 64 a ‘complete failure,’ citing excessive taxes and regulatory burdens.
- Legal cannabis operators struggle against the unregulated market, with 60% of sales coming from unlicensed competitors.
- Ma seeks a new ballot initiative with lower taxes and fee restrictions to support small businesses over large corporations.
- Federal policy remains a barrier; cannabis is still classified as a Schedule I substance, limiting banking options.
- The forum signals growing support for reform, but the path to a new initiative requires legislative action in Sacramento.
Ten years after California voters passed Proposition 64 and legalized adult-use cannabis, the state’s top financial officer is done sugarcoating it.
California State Treasurer Fiona Ma publicly called Proposition 64 a “complete failure” at a live cannabis banking forum in Sacramento. She argued that excessive taxes, local government fees, compliance burdens, and corporate influence have undermined the legal market and is calling for a replacement ballot initiative that prioritizes small businesses and consumers.
That’s a blunt assessment, and it’s one that a lot of cannabis operators in the state have been waiting for someone in power to say out loud. The legal market, despite a decade of effort, is still struggling to compete with the unregulated market. High taxes and punishing compliance costs are squeezing small businesses out of the market. Ma’s comments weren’t just political posturing. They came with a specific vision for what reform could look like.
What Did Fiona Ma Say at the California Cannabis Banking Forum?
The forum, officially titled “Continuing the Conversation: Advancing Safe and Legal Banking for California’s Cannabis Industry,” was convened by Treasurer Ma at the California State Treasurer’s Office in Sacramento. The event brought together government officials, financial institutions, cannabis business owners, labor representatives, and regulators to examine the persistent banking barriers facing California’s legal cannabis market.
During the discussion, Ma didn’t hold back. She stated directly that Prop 64 is a “complete failure” and that it is not “working as intended,” citing excess taxes and regulatory barriers as the primary culprits. She went further, arguing that the initiative was written by large corporations looking to push out smaller operators.
Ma also noted that replacing the law through a grassroots ballot campaign isn’t realistic right now because of limited funding. Her view is that state legislators would need to pass a bill placing a new initiative on the ballot, and she said she’d be willing to champion that effort if they did.
Why Has California’s Prop 64 Cannabis Law Fallen Short of What Voters Were Promised?
When California voters passed Proposition 64 in 2016, the promise was a regulated, accessible, and fair cannabis marketplace. Critics argue that the system ended up serving large operators far more than the small farms and independent retailers that defined California’s cannabis culture for decades.
The tax structure has been one of the biggest pain points. California’s cannabis excise tax jumped to 19% as of July 1, 2026, up from 15%. On top of that, the California Tax and Fee Administration (CDTFA) imposes a 50% penalty for late tax payments, a figure that surfaced during the forum’s discussion and drew visible concern from attendees. No other comparable industry faces that kind of penalty structure.
Local government fees compound the problem further. Cities and counties have wide latitude to set their own cannabis business fees, and in many jurisdictions, those costs have become significant enough to threaten viability. Ma’s proposed replacement initiative would explicitly address this by preventing local governments from imposing excessive fees on licensed cannabis businesses.
What Would a Replacement California Cannabis Ballot Initiative Look Like?
Ma outlined a clear framework for what she wants to see in a new initiative. The core elements she described include:
- Lower taxes on marijuana distributors
- Streamlined tax compliance options for licensees
- Restrictions on how much local governments can charge cannabis businesses to operate
The focus is on fixing the conditions that have allowed the unregulated market to keep undercutting licensed operators. As Ma explained to State Affairs, legislators need to see cannabis as “a source of ongoing revenues going forward,” not just a one-time policy experiment.
She acknowledged that the current financial landscape in the industry makes it unlikely that grassroots fundraising efforts could get a replacement initiative on the ballot. That means the path forward runs through the state legislature, which adds its own layer of complexity and political negotiation.
How Does the California Unregulated Cannabis Market Connect to These Policy Failures?
The numbers make the problem hard to ignore. According to California Department of Cannabis Control (DCC) Director Clint Kellum, who spoke at the July 29 forum, approximately 60% of cannabis sold in California still comes from the unregulated market. A decade after legalization, legal operators are still losing the majority of sales to unlicensed competitors.
A separate DCC data release added another layer to this picture: 97% of state cannabis enforcement actions in unincorporated areas took place in counties that have locally banned licensed growers from operating. This creates a troubling cycle: the areas with the least legal access attract the most unregulated activity, and enforcement agencies are struggling to keep up.
Ma and other forum panelists agreed that banking access alone won’t fix this. Attendees agreed that banking reform must go hand-in-hand with coordinated enforcement, reduced regulatory friction, improved legal retail access, and stronger collaboration between state and local agencies.
What Role Does Federal Cannabis Policy Play in California’s Legal Market Struggles?
The state-federal conflict is still a foundational issue. Cannabis remains a Schedule I controlled substance under the Controlled Substances Act outside of the Trump administration’s recent move to reschedule it for state-authorized medical use. Until federal status changes more broadly, most banks and credit unions won’t touch cannabis businesses, forcing operators to handle excessive amounts of cash and rely on expensive private financing.
Ma acknowledged the rescheduling move as a step in the right direction, but made clear that it doesn’t resolve the bigger problem. “As long as marijuana remains a Schedule I drug,” she argued, California’s legal marketplace will keep facing structural headwinds.
She and other panelists voiced their support for the SAFER Banking Act, a bipartisan federal bill that Congress has reintroduced. While the House of Representatives has passed the legislation multiple times, the President has yet to sign it into law. Passing it would allow regulated financial institutions to serve cannabis businesses without fear of federal penalties, a change that would have significant ripple effects for California cannabis banking access.
What Happens Next for California Cannabis Policy Reform?
The July 29 forum wasn’t a legislative hearing, but it put these issues on record in a very public way. Treasurer Ma convening state officials, financial institutions, and cannabis industry leaders under one roof, and openly calling Prop 64 a failure, signals that there’s growing appetite at the state level for structural reform.
The practical path forward involves legislators drafting a bill to place a replacement initiative on the California ballot. Whether this idea will gain enough momentum in Sacramento remains to be seen. But with 60% of cannabis still moving through the ungregulated market a decade into legalization, the pressure on lawmakers to act is only going to grow.
Frequently Asked Questions
In 2016, California voters passed Proposition 64, a ballot initiative that legalized adult-use cannabis in the state. California State Treasurer Fiona Ma called it a “complete failure” in July 2026, citing excessive taxes, high compliance costs, local government fees, and corporate influence that she says have hurt small cannabis businesses and consumers while failing to reduce the illicit market.
As of July 1, 2026, California’s cannabis excise tax rate is 19%, up from the original 15% established under Proposition 64. Licensed cannabis businesses also face a 50% penalty for late tax payments under the California Tax and Fee Administration, a figure that drew significant concern at Treasurer Ma’s July 2026 forum.
According to California Department of Cannabis Control Director Clint Kellum, approximately 60% of cannabis sold in California still comes from the unregulated market as of mid-2026, nearly a decade after Proposition 64 legalized adult-use cannabis in the state.
While the Trump administration has taken steps to reschedule cannabis for state-authorized medical use, it remains a Schedule I drug under the Controlled Substances Act. Treasurer Ma welcomes the move but argues that comprehensive federal reform is still needed to achieve meaningful banking access and market stability.
