The Business of Regulating Cannabis
There’s always one question on everyone’s mind when it comes to legal cannabis, “How do you regulate it?” The question might seem simple, but the answer is complex, frustrating and constantly evolving. The truth is that legalizing cannabis is contingent upon regulation.
“The tradeoff for the end of prohibition is to move cannabis into the light and out of the black market,” shared Tim Cullen, the CEO of Colorado Harvest Company. “That only happens when local, state and federal governments get a slice of the action through tax revenue, and the only way to collect that revenue is to regulate.”
“I am so happy about the MMRSA,” expressed Tawnie Logan, the Executive Director of the Sonoma County Growers Alliance. “It’s a huge win for Californians and a sign of the change in times. The government isn’t going to legalize without regulation.”
Successful Cannabis Regulation
For states like Colorado and Washington, there’s already regulation in place, moving the industry toward legitimacy. The systems are by no means perfect, but they’re functional. “Adults in Colorado can walk into a retail store, purchase an ounce of marijuana, pay for it and go home,” Cullen explained. “That’s exactly what the people of Colorado voted for and it’s what we have.”
The regulations in Colorado, enforced by the Marijuana Enforcement Division, respond to market issues by improving packaging, labeling and pesticide use to provide the public with safe access to cannabis. The issue is that not every state functions like Colorado. In fact, in states like California, cannabis regulation is in need of an overhaul.
Regulating Cannabis in California
“California is in a bit of a crisis right now because we haven’t had regulations for the last 20 years,” Logan recounted. “Now, in 18 months, to be considered a viable cannabis business in California, operators will have to meet MMRSA standards.”
For two decades, the California system has been a free-for-all where operating in the gray market was the norm. Now, the $2.2 billion industry is getting an overhaul. The problem is that although the Medical Marijuana Regulation and Safety Act (MMRSA) has been passed, there’s no clear outline for operators on how to meet state and local codes by January 2018, and many businesses are struggling.
Adding additional pressure is the fact that all eyes are on California. “California represents the tipping point where the federal government has to stop straddling the fence and make a move as it relates to their out-of-date cannabis policy,” Cullen said.
So, how is the California industry responding? Not well. “It would be easier for an out-of-state entrepreneur or new startup to open a cannabis business in California than for a preexisting operator,” Logan continued. “Mostly, I’m seeing confusion and concern. Dispensaries and growers are waiting and watching to see how the regulations are going to fall on everything from zoning to how to pay taxes.”
“It would be easier for an out-of-state entrepreneur or new startup to open a cannabis business in California than for a preexisting operator. Mostly, I’m seeing confusion and concern. Dispensaries and growers are waiting and watching to see how the regulations are going to fall on everything from zoning to how to pay taxes.” -Tawnie Logan, Executive Director of the Sonoma County Growers Alliance
The Key to Regulating Cannabis
The reality is that it’s not enough for the government to provide regulations. They must also give businesses the ability to comply.
For Cullen and the Colorado Harvest Company, they employ a full-time Compliance Officer who works closely with the regulatory bodies to stay up to code. “The rule book keeps getting thicker,” he expressed. “It’s a lot to keep up with, but failure to comply could devastate the organization.”
For California, the regulation struggle is more complex. “The first thing that has to happen is safe passage for the preexisting industry to come into compliance with the new regulations—some sort of transition period,” Logan explained. “Businesses also need to be incentivized to comply. Small farmers should be charged less on their application fee and pay fewer taxes.”
The Future of Cannabis Regulation
What does cannabis regulation look like in the future? It’s hard to say.
“We are waiting on the rest of the country to catch up to cannabis legalization,” Cullen said. “Colorado has made some bold steps in the right direction. We have a system that collects taxes and regulates the adult use of cannabis, we just wish more states would join us in our march to end prohibition.”
As for what you can do to help move the cannabis industry forward, Logan recommends talking with local advocacy groups. “Too often, operators turn to lawyers and consultants for regulation help, but they need to start with their local advocacy group because that’s where they’re going to get the most free advice.”
Tim Cullen is the CEO and co-owner of three Colorado Harvest Company retail cannabis shops. He’s also a partner in Organa Labs (an organic cannabis oil product company) and O.penVAPE (a best-selling vaporizer brand). Tim has appeared on The Today Show and in top-tier news outlets including The New York Times, Wall Street Journal, The Guardian and the Associated Press.
Tawnie Logan is the Executive Director of the Sonoma County Growers Alliance, a community group organized to educate, collaborate and advocate for patient, cultivator and community rights and responsibilities. For 15 years she’s worked as a cannabis advocate and is committed to expanding the education and implementation of the best management and cultivation practices.[/vc_column_text]