Authored By: Silvia San Nicolas, Esq.
If we have learned anything in the last six months about California’s legalized cannabis market, we’ve learned that it’s nothing less than a gauntlet of treachery – This transitioning marketplace has drawn a perfect storm for operators and new market entrants alike.
The dual state and local licensing structure that created 540 distinct county and city versions of California cannabis law with bans and partial bans in the majority of the localities was just the beginning.
Layer in lack of banking options, high start-up and licensure costs, a compliance intensive process, an abundance of unsavory predators and extraordinary taxing all required with perfect records and full transparency. The struggle is real, and we haven’t even had breakfast yet.
There are increasing stories of raids and arrests for local pay for play corruption and all that implies, competition with the black market (that doesn’t pay taxes or play by the rules) operating openly only a block away from licensed operations and a regulatory backdrop that has manifested to strongly favor the only the very well capitalized.
We haven’t even scratched the surface and the hits keep coming.
The Bureau of Cannabis Control’s Cannabis Advisory Committee held a seven-hour public meeting in Oakland Thursday the 17th to Approve, Modify or Reject Subcommittee Licensing Application Recommendations on a variety of licensure issues. In what had been a strained succession of confused committee member discussions and vocal public frustration by industry stakeholders over agenda items like extending the A & M designation (Adult Use and Medical) transition period to 2020 (currently set to expire July 1, 2018), what a micro-business really is, (no one could really say) and if security requirements should be relaxed, especially for operations in rural counties, a committee member summed up the state of committee affairs quite well when he said:
“We’ve developed an understanding of what we don’t understand”
Public stakeholder commentators sarcastically (and seriously) made light of the fact that while the committee “figures it all out,” the fate of the small farmer and small operator is in limbo. State licensing fees and startup costs required by mandates in the new regulations are too extraordinary for most operators to afford and big business is the only segment of this market that is capitalized well enough to participate, noting some licenses cost up to $150,000 in professional and license fees to secure.
Getting much attention was the micro-business license, a license that allows small cultivators to vertically integrate under one contiguous premise in a combination of manufacturer, distributor, and retailer type operations. It is a license model arguably created to enable small vertically integrated operators to operate and compete without having to secure multiple licenses. But in practical application it is inaccessible to most operators due to local zoning limitations that don’t authorize a micro-business type license model as they do not allow all types of required commercial activity contemplated by the micro-business license.
Divorces and suicides were reported by a Trinity County stakeholder – the commentator noting that they are watching 4000 small farms go under right now and its destroying families and lives. The message was profound. One stakeholder who had been shut down since January 1, 2018 because of her inability to get local licensure started her 90 seconds of allotted public comment time by saying “I never thought that legalized cannabis would put me out of business when the DEA couldn’t.” Seems if we understand anything it’s that compliance is not an option for far too many and we are out of time.
To view a webcast replay of the meeting, (once the BCC has uploaded the video)