Ron Strider
Well-Known Member
Last month, I counseled over half a dozen clients to wind down their business operations by the end of 2017. No, I’m not a bankruptcy attorney; I’m a cannabis business and compliance attorney. And while I’m certainly not a cannabis oracle, one thing has become abundantly clear in my practice this year: Regulated cannabis is coming to California and to San Diego, and it’s going to be a roller coaster.
Over the past two decades, a robust, multibillion-dollar medical cannabis market has developed in California. This market has operated largely without regulatory oversight — until now. In September 2015, the California Legislature passed the state’s first statutory framework for the now thriving 20-year-old medical cannabis industry in California. A little more than a year later, voters approved Proposition 64, ushering in a new age of legal, adult-use cannabis in California. Now, as we move into 2018, state and local jurisdictions are attempting to impose order on this thriving industry.
While regulation is the only way forward, it will come at quite a cost to both consumers and businesses. Over the next year, I expect to see sky-high prices, product shortages, supply chain issues and general chaos. Following is a taste of what state residents and potential consumers can expect from California’s regulated cannabis market.
The days of $40 for an eighth of an ounce of marijuana are over. As we’ve seen in other states, the most immediate effect of legalization and regulation is price spikes due to various tax increases. And here in California, the proposed tax structure is untenable. Operators must pay a 15 percent state excise tax on top of California sales tax and local taxes. Local taxes alone may be as high as 15 percent on gross receipts. What does this mean for consumers? According to some estimates, it may mean a 40 percent to 60 percent markup on the retail price of cannabis.
After an initial sales boom, we will experience product shortages and empty shelves. In the past, barriers to entry in the cannabis industry were relatively low; would-be cannabis moguls were required to do little more than form a collective in order to sell cannabis — and they did with surprising efficiency. But beginning Jan. 1, 2018, only state license-holders may engage in commercial cannabis transactions, which means the entire supply chain from cultivator to distributor to dispensary is required to be licensed.
When the proverbial switch is flipped to “regulated market” Jan. 1, the market will look a bit like a fully decorated Christmas tree with only a handful of working lights. The companies with the “lights on” will sell off the last of existing products, and, when that inventory runs out, expect shelves to remain empty as businesses continue to scramble for local and state licenses. While some envisioned a smooth transition from medical-only to medical and adult-use markets, the reality is likely to look a lot more like an iPhone release on limited production — lines around the block and months-long waits for more.
Whatever your personal feelings about cannabis, thousands if not millions of Californians currently use cannabis as medicine. These patients can expect to lose reliable access to their medicine, at least initially. Many of California’s most vulnerable patients will be priced out of the market entirely. Add to this the race to buy what little inventory remains, and a shortage of medicine is practically guaranteed.
Patients can also expect changes to medical cannabis itself that may require them to buy and consume substantially more product for the same degree of relief. California has capped the potency of infused edibles in both the medical and adult-use markets to no more than 100 milligrams of THC per package, and 10 milligrams per serving. While a cannabis edible containing 5 or 10 milligrams of THC may be perfect for the casual adult consumer looking to avoid a Maureen Dowd-level experience, many medical patients require 500 milligrams of THC or more to find relief.
In addition to the cost of high taxes and supply-chain bottlenecks, small businesses that are the backbone of the California cannabis industry as we know it today are facing nearly insurmountable financial and logistical barriers to compliance. Far too many small- and medium-sized operators throughout the state will not be able to compete and may eventually be forced to close their doors.
A well-regulated cannabis industry is a good thing. An overly regulated cannabis market, with insufficient lead time that invites chaos and causes hardships to patients and businesses alike, is not.
And so to the small farmers and small-business people who are feeding their families with cannabis income: my heartfelt apologies. Unless and until the state and localities address the issues raised here, there may be no realistic pathway to legal operation.
News Moderator: Ron Strider 420 MAGAZINE ®
Full Article: Why California cannabis rules promise a bumpy ride - The San Diego Union-Tribune
Author: KIMBERLY R. SIMMS
Contact: Contact the Union-Tribune - The San Diego Union-Tribune
Photo Credit: AP
Website: The San Diego Union-Tribune - San Diego, California & National News
Over the past two decades, a robust, multibillion-dollar medical cannabis market has developed in California. This market has operated largely without regulatory oversight — until now. In September 2015, the California Legislature passed the state’s first statutory framework for the now thriving 20-year-old medical cannabis industry in California. A little more than a year later, voters approved Proposition 64, ushering in a new age of legal, adult-use cannabis in California. Now, as we move into 2018, state and local jurisdictions are attempting to impose order on this thriving industry.
While regulation is the only way forward, it will come at quite a cost to both consumers and businesses. Over the next year, I expect to see sky-high prices, product shortages, supply chain issues and general chaos. Following is a taste of what state residents and potential consumers can expect from California’s regulated cannabis market.
The days of $40 for an eighth of an ounce of marijuana are over. As we’ve seen in other states, the most immediate effect of legalization and regulation is price spikes due to various tax increases. And here in California, the proposed tax structure is untenable. Operators must pay a 15 percent state excise tax on top of California sales tax and local taxes. Local taxes alone may be as high as 15 percent on gross receipts. What does this mean for consumers? According to some estimates, it may mean a 40 percent to 60 percent markup on the retail price of cannabis.
After an initial sales boom, we will experience product shortages and empty shelves. In the past, barriers to entry in the cannabis industry were relatively low; would-be cannabis moguls were required to do little more than form a collective in order to sell cannabis — and they did with surprising efficiency. But beginning Jan. 1, 2018, only state license-holders may engage in commercial cannabis transactions, which means the entire supply chain from cultivator to distributor to dispensary is required to be licensed.
When the proverbial switch is flipped to “regulated market” Jan. 1, the market will look a bit like a fully decorated Christmas tree with only a handful of working lights. The companies with the “lights on” will sell off the last of existing products, and, when that inventory runs out, expect shelves to remain empty as businesses continue to scramble for local and state licenses. While some envisioned a smooth transition from medical-only to medical and adult-use markets, the reality is likely to look a lot more like an iPhone release on limited production — lines around the block and months-long waits for more.
Whatever your personal feelings about cannabis, thousands if not millions of Californians currently use cannabis as medicine. These patients can expect to lose reliable access to their medicine, at least initially. Many of California’s most vulnerable patients will be priced out of the market entirely. Add to this the race to buy what little inventory remains, and a shortage of medicine is practically guaranteed.
Patients can also expect changes to medical cannabis itself that may require them to buy and consume substantially more product for the same degree of relief. California has capped the potency of infused edibles in both the medical and adult-use markets to no more than 100 milligrams of THC per package, and 10 milligrams per serving. While a cannabis edible containing 5 or 10 milligrams of THC may be perfect for the casual adult consumer looking to avoid a Maureen Dowd-level experience, many medical patients require 500 milligrams of THC or more to find relief.
In addition to the cost of high taxes and supply-chain bottlenecks, small businesses that are the backbone of the California cannabis industry as we know it today are facing nearly insurmountable financial and logistical barriers to compliance. Far too many small- and medium-sized operators throughout the state will not be able to compete and may eventually be forced to close their doors.
A well-regulated cannabis industry is a good thing. An overly regulated cannabis market, with insufficient lead time that invites chaos and causes hardships to patients and businesses alike, is not.
And so to the small farmers and small-business people who are feeding their families with cannabis income: my heartfelt apologies. Unless and until the state and localities address the issues raised here, there may be no realistic pathway to legal operation.
News Moderator: Ron Strider 420 MAGAZINE ®
Full Article: Why California cannabis rules promise a bumpy ride - The San Diego Union-Tribune
Author: KIMBERLY R. SIMMS
Contact: Contact the Union-Tribune - The San Diego Union-Tribune
Photo Credit: AP
Website: The San Diego Union-Tribune - San Diego, California & National News
