Can the California Cannabis Industry be Saved? An Update

On Wednesday, June 26, Hirsh Jain of Ananda Strategy and I did an hourlong presentation where we examined a laundry list of problems facing the California cannabis industry. We had a lot of questions about whether a replay would be available and are happy to report that you can watch it here.

During the webinar, Hirsh and I talked about a host of problems facing the industry, including:

• What structural legal issues make substantive changes to California law challenging
• How federal rescheduling may affect California
• Over-regulation at the state and local level
• California’s poor sales performance as compared to other mature adult-use states
• The effects of burdensome taxation at the federal, state, and local level
• California’s lack of retail licenses
• The festering illegal market and minimal enforcement,
• Competition from poorly regulated intoxicating hemp products
• Why we don’t think interstate commerce will happen soon or fix all of California’s problems

This was a lot to unpack in an hour and, unfortunately, we didn’t get too much time to address potential solutions we think could fix things. So I wanted to do that here, after speaking with Hirsh.

Below are a few ideas we each have, which we think might be a good start towards improving the California cannabis industry. We both appreciate that a lot of these changes may not be feasible without another voter initiative, but are listing some anyway.

• Reduce, not increase, excise taxes
• Reduce license fees
• Cap gross receipts taxes by counties and cities
• Eliminate excessive penalties for late excise tax payments to CDTFA, and retroactively waive any penalties charged by CDTFA in the past
• Streamline DCC regulations and eliminate requirements that are cumbersome for the industry (e.g., prohibition on sales after 10 PM, unnecessary change of ownership prohibitions, and so on)
• Create “automatic referendums” so voters (not politicians) have say on whether cannabis businesses are allowed in their jurisdiction
• Reduce regulatory burden on delivery businesses (e.g. increased case pack value, prohibit delivery bans, prohibit “multiple taxation” of delivery businesses)
• Reduce burdensome CUP processes (that lead to long delays)
• Cities can’t impose more restrictive zoning than the state
• Allow “farmers markets” on limited basis to create more retail distribution points
• Allow “drive throughs”
• Allow “curbside pickup”

California has a choice to make. It can either make participation in the legal market easier by dropping unnecessary and burdensome laws and rules, or make participation in the illegal market harder (i.e., enforcement). Right now the state is not doing either of those things very well.

We’ll keep you updated on changes that may impact the industry. So stay tuned.