Federal health regulators have pulled more than 4,100 cannabis licences since legalization, citing risks to public health and safety — including concerns about marijuana being diverted into the black market — as the legal pot industry grapples with bankruptcies and mounting unpaid taxes.An Oct. 9 Mandate Briefing Binder from Health Canada said the department has stepped up enforcement under the Cannabis Regulations to strengthen oversight of the industry.“Under Cannabis Regulations, Health Canada may refuse or revoke a registration on public health or public safety grounds including the risk of cannabis being diverted to an illegal market or activity,” the memo stated.As of March 31, 2025, Health Canada had refused or revoked more than 4,100 registrations, including approximately 3,400 for reasons tied specifically to public health and public safety. The department did not disclose how many active distributors lost licences over allegations of diverting product into the black market.The crackdown comes amid financial turmoil across the sector. In the first five years following legalization, 93 cannabis retailers, wholesalers and distributors — including national chains — sought protection in bankruptcy court..In a 2023 report titled Planting The Seeds For Competition, the Competition Bureau estimated that 66% of licensed marijuana dealers were delinquent on taxes. Unpaid cannabis excise duties reached $269.8 million by 2024.“The total amount of unpaid cannabis excise duties has continuously been rising since legalization,” the Bureau wrote, noting that 66% of licensees required to remit excise duties had outstanding debts with the Canada Revenue Agency.Even as enforcement tightened, Health Canada acknowledged in a March 12 Regulatory Impact Analysis Statement that the legal cannabis sector faces significant economic headwinds.“The cannabis industry is facing economic difficulties which threaten a key objective of the Cannabis Act which is to provide for the legal production of cannabis to displace the illegal cannabis market,” the department wrote. It added that a “healthy, well-regulated, diverse and competitive legal industry” is central to the federal framework..Licence holders have argued that some regulatory requirements are overly burdensome and unnecessary to achieve public health and safety objectives. According to the analysis statement, industry representatives said certain rules could be reduced or eliminated without compromising safeguards, benefiting both businesses and government by lowering regulatory costs.Revenue projections have also fallen far short of early expectations. In 2019, the Global Affairs Canada forecast cannabis revenues of up to $959 million in a report to the International Narcotics Control Board.Actual federal revenues peaked at $256.7 million in 2020 — the year Ottawa approved edible cannabis products — and declined to $244 million in 2024, according to a May 30 memo from the Department of Finance Canada.The figures underscore the gap between early projections tied to the 2018 legalization of marijuana and the fiscal reality facing an industry now marked by licence suspensions, unpaid taxes and ongoing competition from the illegal market.
