• California began the sale of recreational marijuana on January 1.
  • The market is expected to hit $3.7 billion by the end 2018, and that number will increase to over $5 billion in 2019.
  • Legal marijuana will be a tax windfall for the state.

Recreational cannabis sales began in California on January 1 — and the market is expected to haul in billions in revenue next year as dispensaries roll out across the state.

A report from the cannabis industry research firm BDS Analytics estimates sales of cannabis to hit $3.7 billion by the end of 2018 alone, and predict that number will increase to $5.1 billion in 2019 as more dispensaries come online.

For comparison, beer sales in California hit $5 billion in 2017, according to industry research group IBIS World.

California — the world's sixth largest economy with a population of close to 40 million — will be a huge chunk of the total market for cannabis in North America.

On top of that, the price of pot is expected to increase up to 15% as California applies a new excise tax on recreational sales. According to Green State, the price of an eighth-ounce of marijuana — now around $54 including tax — is approximately $65, though local municipalities may levy different fees.

While it's hard to say how this will affect the market, there is a concern here among some industry analysts that high prices may divert some customers to the black market, where they an avoid the extra fees.

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