It's no secret that California's recreational cannabis market has limped out of the gates. Eighteen months into this grand legalization experiment in the world's fifth largest economy, sales and tax revenue have lagged behind projections and much of the state has prohibited retail sales. Meanwhile, consumers complain of high prices and those within the industry say they are squeezed from all sides, struggling to make ends meet.

But brighter days are ahead. So says a new report from Arcview Market Research and BDS Analytics, two industry research firms, which projects that in 2024 legal sales will outpace their illicit counterparts for the first time.

In 2018, California earned the dubious distinction of becoming the first state to see legal spending on cannabis fall year-over-year. After recording $3 billion in medical cannabis sales in 2017, the Golden State's new recreational market came online in 2018, bringing a new regulatory paradigm with it, and legal sales dipped to $2.5 billion. But California has seemingly begun to right the ship and, according to the report, is on pace to book $3.1 billion in legal sales in 2019. That's pretty good but pales in comparison to the $8.7 billion Californians are expected to spend on illicit cannabis this year. For those keeping track at home, that means for every dollar spent on legal weed in California this year, three more will go to someone operating out of compliance with state laws.

That's expected to shift in five years, according to the report, which estimates that 53 percent of California's projected $13.6 billion in cannabis sales in 2024 will be aboveboard.

In short, the report is pretty bullish on California's cannabis market, even while pointing out that local bans on retail sales throughout much of the state and the implementation of stringent testing requirements have caused many cannabis businesses to fold.

"California companies that survived the dual 'extinction events' of 2018 have emerged stronger and well-positioned to grow their market share going forward," Tom Adams, BDS Analytics' principal analyst, said in a press release.

Troy Dayton, Arcview Market Research's CEO, added that California has the world's largest legal cannabis market — a distinction he expects will continue to hold until federal legalization comes.

"At that point, California will assume its usual place in the world economy as a major exporter of agricultural commodities and their derivative products, a technology mecca and consumer product trendsetter," he said in the release.

The report also indicates those billions of dollars in legal sales are increasingly going to a handful of companies. The report notes that the state's top 20 "brands" accounted for roughly 45 percent of sales in May, up from roughly 35 percent in January of 2018.

The report blames "the tax and regulatory load being carried by the legal market" for the continued viability of its illicit counterpart, noting that Colorado and other states that have legalized recreational weed have "more supportive regulatory regimes" that the report credits with shrinking their illicit markets to less than a 30 percent market hold. Another culprit, according to the report, is the Golden State's lack of legal retailers. While there's one dispensary for every 4,240 people over the age of 21 in Colorado, there's just one for every 35,147 residents in California.

Another interesting tidbit from the report: While it identifies the average California cannabis consumer as 44 years old, it found that younger folks typically consume a lot more. Thirty-nine percent of Gen Z-ers and millenials, as well as 41 percent of Gen Xers, reported having consumed cannabis within the last six months. That number dropped to just 20 percent for Baby Boomers and older generations.

Thadeus Greenson is the Journal's news editor. Reach him at 442-1400, extension 321, or [email protected]. Follow him on Twitter @thadeusgreenson.