Campaigners in California say the state should ease its crippling financial crisis - by legalising marijuana and collecting tax on its sale.
Campaigners say business in California will prosper if cannabis is made legal
California was the first state to allow people to smoke marijuana for medical purposes but under US federal law the drug remains illegal.
It means campaigners pushing to have a state-wide vote on legalisation next year are on a collision course with the US government.
The city of Oakland, near San Francisco, this year became the first to collect tax on the sale of so-called 'medical marijuana'.
California Governor Arnold Schwarzenegger was forced to put drastic cuts in place to deal with a multi-billion dollar budget deficit in a state which has a bigger economy than almost every nation on earth.
Richard Lee, who runs a "cannabis college" in the Oakland district which has become known as Oaksterdam, says the industry is worth an estimated $15bn (£9.4bn) in California so sales tax alone would bring in $1.5bn (£0.9bn).
He told Sky News: "Just like alcohol makes a lot of money we learned with alcohol prohibition in the 1920s that when you make it illegal it doesn't stop people doing it, it just means more crime and violence and a loss of respect for the law and law enforcement."
Medical users in Oakland have to carry a card issued by their doctor which entitles them to buy marijuana at one of the city's four licenced 'coffee shop' dispensaries.
But police dispute the medical benefits of marijuana and insist the drug remains a 'gateway' to harder substances.
Special Agent Bob Cooke, the man in charge of California's Bureau of Narcotic Enforcement, told Sky News any amount of tax collected would not pay for the damage caused.
He said: "We're not making enough money now to care for all the people in hospital with illnesses caused by smoking cigarettes for 30 years and quitting 20 years ago, so who is going to pay for all of this."
Pro-legalisation campaigners believe the move is inevitable in California and that big business cannot wait.
Eric Sligh, who runs Grow magazine, said: "Everyone says the big tobacco companies are hovering over and they are ready to pounce the second marijuana is legalised.
"They think it is going to happen, they have binoculars and are just sitting and waiting for legalisation and they're going to cash in."
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