California’s Total Number of Cannabis Licenses Shrinks

The cannabis industry has received media criticism (especially in Canada) with respect to the speed at which it has been able to grow and develop. However, in both the U.S. and Canada, the principal obstacle in the evolution of the legal cannabis industry continues to be government.

As the U.S.’s single largest cannabis market, California has been especially prominent in its failure to successfully navigate the translation to legal cannabis. The latest example of its regulatory stumbles? The total number of cannabis licenses in the state has contracted in 2019.

As reported in MJBizDaily, cannabis licenses have contracted across the board in 2019. The largest drop has taken place among cultivation licenses (48%). However, there have also been significant declines in manufacturing (29%) and distribution licenses (17%).

The silver lining in this licensing issue is that the number of licenses for retail storefronts has declined the least in 2019 – only 7%. This reflects the fact that storefront licensing is arguably the least complex segment of cannabis licensing.

Apart from more stringent restrictions on how these cannabis retail stores can conduct business, licensing of retail storefronts is generally straightforward. Not so for cultivators, manufacturers, and distributors.

Licensing of a cannabis cultivation operation more closely resembles the process for licensing a uranium mine versus licensing a conventional farm. This reflects ongoing biases and prejudice among elected officials that extends from national governments all the way down through state and local government.

Along with nearly a century of cannabis Prohibition has come mountains of anti-cannabis misinformation. Because of this, politicians continue to exhibit both strong suspicions and deep ignorance concerning cannabis and all facets of cannabis commerce.

The cannabis industry is grossly over-regulated and over-taxed. In combination, these factors continue to put the legal industry at a strong disadvantage versus the cannabis black market.

Here it needs to be stressed that the cannabis black market is not “an industry problem”. It is a government problem.

The misguided cannabis Prohibition that has existed in North America and around the world created the cannabis black market. This is identical to how U.S. alcohol Prohibition created an enormous illegal alcohol “industry”: handed to Organized Crime.

The difference is that alcohol is a toxic and addictive drug, produced through fermentation. Cannabis is a non-toxic, non-addictive natural substance. The human body naturally produces its own cannabinoids.

While the cannabis black market is a government problem, government continues to be the major obstacle to eliminating this black market rather than being a facilitator in this process. U.S. states (and Canadian provinces) have been reluctant participants in the process of unwinding this enormous black market.

Instead of devoting abundant resources to the licensing process – and reasonable requirements – licensing requirements have (in most cases) been onerous. And inadequate resources have been directed toward expediting the licensing process.

California is a perfect illustration of this.

Its cannabis black market continues to thrive. Rather than increasing its efforts at promoting the legal market through more reasonable cannabis regulations and taxes, California is instead squandering enormous tax dollars attacking its black market with a post-Prohibition ‘War on Drugs’.

Such law enforcement has always been as efficient and successful as whack-a-mole. For every illegal cannabis operation that law enforcement authorities shut down, one more (or two more) mushroom into existence to take its place. Futile.

How can the legal cannabis industry in California grow (to replace the black market) while the number of licenses is shrinking? With great difficulty.

As MJBizDaily pointed out, part of this licensing problem was foreseeable. The state created a one-year temporary licensing framework, precisely to try to eliminate the sort of regulatory bottleneck we are now seeing in California.

The temporary licensing framework was relatively relaxed. Temporary licenses could be obtained with reasonable speed and efficiency.

The permanent (or provisional) licenses that are now required set much higher bars for qualification. Some cannabis businesses with temporary licenses were never going to be able to qualify for such licenses. Others are still trying to navigate this bureaucracy.

For cannabis consumers, heavy-handed law enforcement toward gray market and black market cannabis operations along with reduced cannabis licenses spells reduced access to cannabis.

Government may not see this a problem for the recreational cannabis market. It is definitely a problem for the medicinal cannabis market – and the people dependent upon this medicine.

The issue of reduced access to medicinal cannabis in Canada has just been highlighted through a lawsuit aimed at federal restrictions on THC content in cannabis edibles. Other lawsuits seem likely, in Canada and the U.S.

High cannabis taxes impose hardship on medicinal consumers. This comes at a time where (especially in the U.S.) more and more people are financially imploding from healthcare expenses.
Many medicinal users of cannabis who would prefer to shop for their medicine from a licensed/regulated source continue to buy from the black market. They are (economically) forced to do so because high taxes and strict regulations are adding too much to the final purchase price of legal cannabis products.

The state of Colorado (and the province of Alberta) has shown that it is possible to make the transition to a legal cannabis industry in a sensible and efficient manner. However, ongoing anti-cannabis phobias among politicians mean that the words “sensible” and “efficient” rarely apply when it comes to cannabis legalization.

Instead of copying the success of Colorado/Alberta, most states and provinces continue to repeat what has already failed: trying to replace the cannabis black market with an over-taxed and over-regulated legal industry.
 

The cannabis insanity continues in California.