California Legalization 3.0



The stage is set for California’s third attempt at cannabis legalization. After failed attempts in 1972 and 2010, legalization proponents are gearing up for another stab at recreational cannabis. Following successful efforts in Colorado, Washington, Oregon, and Alaska (and Washington D.C.), California has a unique opportunity to learn from the successes and failures of ours and other states. If proponents use the knowledge gained through implementation of legal weed in Colorado, Washington, and Oregon – California residents can finally harvest the fruit of legal cannabis in 2016.

The snowball is picking up size and speed…

ReformCA filed their ballot initiative to legalize cannabis. New statewide medical regulatory framework was signed into law. A federal ruling established that the U.S. Justice Department cannot use funding to prosecute state legal cannabis entities. The U.N. is set to call on all governments to end punitive drug policy and Canada’s new presidency has vowed to legalize weed.

With the whole world changing its stance on cannabis, it’s easy to just jump on the bandwagon and cheer legal weed home…

Just legalize it! Right? Well… Not so fast…

Within the purview of ‘legal weed’ many aspects must be considered. In the Emerald Triangle where cannabis industry has been rooted for 20+ years, our interests cannot be conflated with the rest of the state. As with all things seeming too good to be true, we must read the fine print. And the fine print for cannabis legalization comes down to one main point: who can cultivate and sell cannabis? We can look at this question from many angles… but to look at this question from the correct angle, we must figure out our goals.

Here at HU, we see California as the Cannabis state. This means California, specifically Northern Cali, will lead the industry in cultivation, sales, research, development, tourism, technology, etc. In turn, our state will reduce the harms associated with prohibition, fill our coffers with tax revenue, employ our unemployed, and show the world how cannabis can be implemented and regulated into a socially and environmentally legit industry.

So how do we do this? How do we create and regulate a legal cannabis industry that safely produces large amounts of revenue and jobs for California’s residents? It’s a tricky feat – as these are uncharted waters – but if we focus on our goals and learn from others, we can steer in the right direction.

Lets compare legalization in Colorado, Washington, and Oregon. It was estimated that Oregon grossed $11 million in their first week of legal sales. Compare that with Colorado and Washington – $5 million and $2 million in their respective 1st weeks. This is a large fiscal variation between these states…

So why did Oregon gross so much more than Colorado and Washington?

Mainly, Oregon had 280 cannabis dispensaries agree to sell legal weed on day one, while Colorado had 24; and Washington only had four. Basically, Oregon utilized existing medical cannabis infrastructure allowing medical dispensaries currently operating to sell legal cannabis, while Colorado and Washington didn’t. This means Oregon allowed medical growers to sell weed to dispensaries wholesale, tax free. This also means established individuals within the medical cannabis industry where the ones who made $11 million in Oregon’s 1st week of sales (mostly tax free).

So why did Oregon allow medical cannabis dispensaries to sell recreational cannabis tax free?

This is an question HU has not been able to answer… In fact, as of January 4, 2016, medical cannabis facilities in Oregon will not be able to sell recreational cannabis. So who knows the reason Oregon is allowing medical dispensaries to sell recreational cannabis for three months. Nevertheless, analyzing this question allows us to look at the benefits of Oregon’s (intentional or unintentional) strategy.

Besides the obvious benefits of economic stimulation and employment, Oregon is gaining compliance with current grey market cannabis growers and sellers – making it easier for current growers to transition into recreational cannabis: paying taxes, following environmental standards, and adhering to product quality requirements. Most of the harms associated with cannabis production are a result of prohibition. Environmental harms, child safety, organized crime, etc, can all be tied to lack of regulation and oversight – industry compliance with modern business ethics and norms. This is why Oregon’s implementation of legalization is so amazing… It flies in the face of Colorado and Washington’s attempts at recreational cannabis – where medical cannabis infrastructure was not utilized and black market cannabis remains strong.

Essentially – whether intentional or not – Oregon is incentivizing grey market growers to transition into legal markets – taking the first steps in building relationship with an industry operating in the shadows.

Locally, this is a hot topic, as no harm will be solved in our hills, forests, and watersheds unless those currently growing cannabis decide to transition into legal and compliant markets. Barriers to entry including steep license fees, overly stringent caps on retail outlets and farms, excessive regulation, the ability to grow cannabis for personal use, etc, all affect the likelihood of the black market. Nonetheless, throw some incentives in the mix for early compliance, build some trust with the cannabis community, and some of these barriers can be mitigated.

It may be a tough pill to swallow – the idea that policy needs to create incentivizes for growers to become compliant – but as Steven Levitt argues in Freakonomics, incentives are the root of human behavior. Therefore, if California is going to become the Cannabis state – generating the most revenue possible while reducing the harms of unregulated cannabis production – legalization policy may need to incentivize legal compliance.

If we step outside the box and look at cannabis growers as small business employers who make up – in conservative estimations – 25% of our local economy, then we can easily choose to incentivize these ostracized business men and women to become compliant with government oversight. If safety, environment, and revenue are our goals, grey market medical cannabis must transition into legal markets.


One response to “California Legalization 3.0

  1. Pingback: 4 Signs Your Cannabis Business Is Ready To Go Legit | The Humboldt Underground

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