Cannabis is here to stay. With thirty-eight states now allowing medical cannabis and eighteen having given the green light to recreational use, there is no putting the cannabis genie back in the bottle. The question now is how to prop up the legal market and simultaneously eliminate the stranglehold black market operators now have on the industry.
Black market proliferation is not a simple issue. There are many facets contributing to the success illicit operators enjoy. Those same things make it hard for legal business owners to compete. Therein lies the rub. How do lawmakers and regulators make life easier on legal operators without sacrificing their own interests?
Here are four things hindering the legal cannabis market, along with ways to address them:
1. High Taxes
Cannabis taxes are a problem across the country, but California is the poster child for this particular issue. As things currently stand, growers pay a cultivation tax based on the amount of plant they produce. The larger the crop, the more they pay. Unfortunately, wholesale prices have been falling in California for years. Yet the cultivation tax hasn’t been reduced. Thus, growers have been earning less per pound.
California governor Gavin Newsom wants to reduce the cultivation tax but then make up for it with a new excise tax on retail purchases. He wants to rob Peter to pay Paul. It will not work. Ultimately, retail customers buy from whomever offers the best price. As long as taxes stay at current levels, black market prices will be cheaper. The obvious solution is to drastically cut or eliminate cannabis taxes altogether.
2. Licensing Regulations
Right behind taxation is licensing. Many states, California included, make licensing requirements so burdensome that operators cannot afford to do things by the book. They have neither the time nor the resources to jump through hoops just to get a license. But it’s not just California.
Deseret Wellness, a medical cannabis pharmacy in Park City, UT, says that the Beehive State has only licensed fifteen pharmacies thus far. They have only licensed eight growing operations. Regulators have no plans to issue any more licenses. That means suppliers will continue struggling to keep up with demand. High prices will remain as a result. What is the solution? Stop making it so hard to get a license.
3. Regulatory Inconsistencies
Next up are regulatory inconsistencies. They start with the conflict between federal and state laws. You know the drill. Cannabis is still illegal at the federal level. That makes it more difficult for the industry to do everything from obtaining banking services to transporting product. In California, there are also legal inconsistencies between the state and local jurisdictions.
Regulatory inconsistencies make for a confusing business environment. They also make it harder for operators to comply. Standardize regulations and you make a difficult industry a lot easier to work in.
4. Lack of Enforcement
Finally, Washington and the states have all but given up enforcing cannabis laws. They have more or less given black market operators the green light to do what they do. As long as this is the case, the black market will always find a way to undercut the legal market. They will always have the edge because they do not care about the law. The obvious solution is to get back to enforcing laws already on the books.
The legal cannabis market is being hindered by taxes, regulations, and a lack of law enforcement. It will continue to thrive as long as we maintain the status quo. No amount of wishing things were different will change reality.