One Year After Legalization, The Cali Cannabis Industry Is Sort of a Mess
Strict regulations and pot deserts have caused the world's largest legal pot market to limp out of the gate.
It's been a year since recreational cannabis went legal in the Golden State, but cannabis industry entrepreneurs aren't exactly California dreamin'. California expects to rake in $471 million in taxes from cannabis sales in 2018 -- that's well below the $630 million state officials estimated the city would make at the beginning of the year. They also expected more retail dispensaries to be up and running.
So what went wrong?
“The cannabis industry is being choked by California’s penchant for over-regulation,” explained Dale Gieringer, director of California NORML, a pro-legalization group, in a recent article in the LA Times. Most people in the industry agree.
One of the primary challenges, according to California cannabis business leaders, is that the state has set up a complex and costly regulatory system for legal marijuana sales. In interviews with the Times and other media outlets, they also point to high taxes as another roadblock to rapid growth.
Certainly, the system has not moved as fast as expected. State officials anticipated about 6,000 marijuana dispensaries to be licensed in the first few years after voters approved legal adult-use cannabis sales in November 2016. But in the two years since, only 547 have been issued by the state Bureau of Cannabis Control.
Another issue is that cities have local control over whether or not to sell cannabis, and many have chosen not to participate. While big cities such as Los Angeles, Oakland, San Francisco and San Diego allow marijuana sales, 393 of California’s 482 cities do not, according to numbers from the Times.
Gieringer is not optimistic that this will change any time soon, “It’s impossible to solve all of the problems without a drastic rewrite of the law, which is not in the cards for the foreseeable future," he said.
Another item that is universally unpopular in the cannabis industry is a proposed new rule that requires detailed financial reports from cannabis businesses. It would require companies to disclose the names of every investor, owner, board member and trustees of trusts involved with the company.
Also, the details of any loan agreement would have to be divulged and information on profit-sharing plans provided to employees or landlords.
That’s fine by some. Jeff Breier of Hardcar Security, a company that transports cannabis products, told The Desert Sun that “you want to have a clean money trail. If they don’t like it, they’re hiding. If you have nothing to hide, you don’t care that they check into you.”
However, others think the new policy will slow down the already sluggish legal marijuana industry. One of those is the Marijuana Policy Project, one of the nation’s biggest pro-legalization groups. An attorney for the group told the Desert Sun that the rule could potentially subject even someone with a small piece of a marijuana-related business to a deep background check by the state.
The proposed rule, released in December 2018, is still being considered by state officials.
Some good news
Not all the state's moves have been criticized. Industry professionals and advocates applaud laws that support cannabis business owners from demographic groups who were disproportionately impacted by past drug laws.
State lawmakers also streamlined the process for those convicted of cannabis-related crimes in the past to get their records expunged or sentences reduced.
On the privacy front, laws were passed prohibiting cannabis dispensaries from giving personal information on customers to third parties and prohibiting licensed cannabis companies from selling any product that combines marijuana with alcohol.
Law enforcement in the state also cracked down on the marijuana black market, a development highly praised by the legal marijuana community.
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