Obedio Update: Ordinances, Regulations, Enforcement, Inspections and Guidance

California Enacts SB 141 to Bolster Enforcement Against Illicit Cannabis Operations

California’s Legislature passed SB 141, enacting its first new cannabis law of the current legislative session. Chapter 18 of 2025, which became effective June 27, 2025, prioritizes grant funding for municipal law enforcement efforts to eradicate illicit cannabis operations. The illicit cannabis market accounts for more than 60% of cannabis sales. To address this, the Administration sought a statutory change to allow the Department of Cannabis Control’s (DCC) enforcement activities against the illicit market, as well as the costs associated with operating the state’s track-and-trace system, to be funded from the Cannabis Tax Fund. This proposed shift aimed to avoid increasing fees on existing licensees by allowing the Cannabis Tax Fund to support these enforcement efforts instead.

Introduced by the Committee on Budget and Fiscal Review, SB 141 was presented as part of the 2025-26 budget package to implement necessary statutory changes for the 2025 Budget Act.

The bill’s core provisions directly address funding for illicit cannabis enforcement:

• It transfers existing expenditure authority for the DCC’s illicit enforcement activities from the Cannabis Control Fund to the Cannabis Tax Fund. This means the Cannabis Tax Fund will now be used for civil and criminal enforcement against unauthorized commercial cannabis activity.
• It also authorizes the Board of State and Community Corrections (BSCC) to award Proposition 64 Public Health and Safety grants to local governments that prohibit cannabis cultivation, provided they now authorize retail cannabis sales (or delivery for jurisdictions with populations of 10,000 or less). Crucially, the bill requires the BSCC to prioritize grants directed specifically to local illicit cannabis enforcement efforts. These grants can be awarded competitively or based on a formula to provide consistent and ongoing funding.

The rationale behind these changes was to support additional inspections and investigations by allowing the DCC to add staff over three years. It also aimed to expand the DCC’s collaboration with local law enforcement and encourage retail participation to stabilize the legal cannabis market and promote consumer safety.

While a number of cannabis industry and union organizations supported these efforts to strengthen the DCC’s ability to combat illicit market activity, some youth program and environmental advocates opposed the bill, arguing that Proposition 64 does not authorize the DCC to use Cannabis Tax Fund revenue for illicit cannabis enforcement activities.

The fiscal impact for 2025-26 reflected this funding shift directly related to enforcement:

• A reduction of $56.3 million and 167.5 positions in authorized expenditures from the Cannabis Control Fund.
• An increase of $63.4 million and 176.5 positions in authorized expenditures from the Cannabis Tax Fund.

SB 141 was declared to take effect immediately as a bill providing for appropriations related to the Budget Bill. The Legislature found that this act furthers the purposes and intent of the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA). Looking to the future, the bill also specifies that effective July 1, 2028, the Legislature may amend Section 34019 of the Revenue and Taxation Code by majority vote to further AUMA’s purposes, including allocating funds to programs other than those specified in subdivisions (d) and (f), but prior to this date, the specified allocations cannot be changed.