Legalizing cannabis is no easy feat. However, the last few years have proven that legal and social obstacles can be removed with enough public support. Still, legalizing cannabis can make for a major headache, as policymakers in Colorado, Alaska, Washington, and Oregon have all discovered.
It has been quite interesting to watch the different ways that individual states decide to regulate this plant for both medical and recreational purposes. But there are still major hiccups that have yet to be solved. This November, California voters will see Proposition 64 on the ballot, offering solutions to recreational cannabis. This article will explore the hard work and big decisions that California policymakers put into this proposition.
California Will Set the Legalization Standards for Cannabis
California produces and consumes the most cannabis of any state, by far. In fact, the cannabis economy in California is already estimated in the multi-billions, and that is primarily due to illicit activity. The combined populations of all the states with recreational cannabis laws is less than half the population of California. This means that when voters take to the polls in November, their ballots could influence cannabis across the United States.
California’s influence on American cannabis laws is nothing new, but of all the states with cannabis laws, California seems to be the most concerned about getting it “right.” This is not to say that other states should not be admired for their progressive policies. It simply means that California politicians have to consider the needs of many more consumers than Colorado, Washington, and others.
So what have politicians like Governor Jerry Brown and Lieutenant Governor Gavin Newsom done to prepare for the responsible legalization of cannabis for adult use?
The Focus of Policymakers
The primary goal for legalizing cannabis is to facilitate a safe industry that reduces any need for a cannabis black market. There are a few key methods for promoting a legal cannabis industry. The first is to guarantee that taxes on legal cannabis do not exceed the price points offered by illicit cannabis dealers. The second task is to reduce the barrier for entry into the legal cannabis industry so that business people in the current gray market have the opportunity to participate legally.
A massive cannabis infrastructure already exists in California, and the only chance for the legal cannabis industry to emerge without hiccups is to open the doors to anyone willing to follow the rules.
Another primary goal that was highlighted in Lieutenant Governor Gavin Newsom’s Blue Ribbon Commission last year is the fundamental risk that legal cannabis poses to the underage community. Cannabis is quite easy to obtain for high school students simply because the same regulatory checks are not in place. Someone dealing marijuana on a street corner does not have a business license in jeopardy like a liquor store selling to underage buyers.
The solution to the youth exposure conundrum is a major investment in cannabis education and support programs. Unlike the D.A.R.E. initiative of decades past, these new education programs should hold cannabis in a neutral light that does not entice students to partake in underage cannabis use. While there is a lot of evidence to suggest cannabis is not physically addictive, young people can abuse cannabis with disastrous social effects. It is critical that these education programs receive adequate funding if legal cannabis can exist for a population the size of California’s.
This leads us to the most discussed topic among policymakers considering cannabis legalization. Tax revenue can be a fantastic incentive for states looking to bolster their coffers. Unfortunately, many of the cannabis-related funds are earmarked for increased police presence to “combat” the new rush of people trying cannabis. The paradox here is that heavy taxation on cannabis sales incentives states to sell more cannabis, and also does nothing to encourage authorities from shifting their cannabis policies.
The solution that California has chosen is to push tax revenue from legal cannabis back to the education and support programs previously discussed. Crime is most effectively reduced when programs are in place to help people avoid those circumstances. Many of the states to legalize cannabis early on were convinced by their police lobbies to allocate tax revenue to combat an insurgence of cannabis crime that doesn’t even exist when the plant is legalized.
The last measure of discussion is how to track legal cannabis as it transitions through the supply chain. The current market has no official oversight, which has allowed for black market actors to easily insert themselves into California’s medical cannabis industry. The only way to protect legal cannabis is to initiate a program that tracks the activity of licensed businesses, and that is probably the biggest task of them all.
If it was a matter of paying a large bill for an existing product, California regulators would be thrilled. Unfortunately, cannabis is far more complex that typical consumer products, and there is no efficient system that has proven itself at scale. There are a few programs currently in use by states with recreational marijuana laws. METRC in Colorado and BioTrackTHC in Washington are required for licensed businesses, but very few companies (if any) have good things to say about these systems.
In fact, theses systems are so cumbersome that they recommend business hire a full-time employee just to manage these traceability requirements. The cannabis industry has far less disposable income floating around that what is suggested by major media reports. Hiring employees is a major responsibility, and amounts to a major chunk of change. Additionally, cannabis businesses are still not able to write off normal business expenses, so they are basically paying cost for each employee.
If legal cannabis is going to succeed in California, regulators must be conscious of the fact that the majority of businesses are unable to spend money in areas considered standard by other consumables industries.
Going back to the barrier for entry, California will only find success with legal cannabis if measures are taken to protect businesses from mounting expenses. If companies have to hire a full-time employee just to manage their traceability, then the traceability system is simply subpar. Furthermore, if regulators hold existing cannabis companies to unobtainable standards, then the majority of businesses will not be able to convert over to the legal industry. This will only lead to the propulsion of the black market, and consumers will not hesitate to find the cheapest prices.
This is not to say that responsible regulations should not be enacted as soon as possible. There are some undeniably bad actors in the cannabis industry, and these select few are the focal point for media stories on violence and lawlessness in the Wild West. Certain states like New York had the notion that only good businesses would be able to get certified if high licensing fees were in place.
The result was forty major entities assembling tens of thousands of dollars in non-refundable application fees (a risk no small business could afford), and only five being awarded a license to operate. In less that six months, one of these businesses had already been caught redirecting legal cannabis products to unapproved business entities. Clearly high fees did nothing to eliminate bad actors and everything to incentives under-the-table diversion.
The End Goal for California Cannabis
Legal cannabis could change everything. Once the stigma left behind by the War on Drugs fades, more people will find comfort in cannabis for both recreational, medical, and spiritual relief. There are, of course, many industries that feel threatened by legal cannabis including pharmaceutical giants and an increasingly-profitable prison system. In recent years, arrests for cannabis in California have plummeted along with prescriptions for opioid-based painkillers.
Regulators in California have done a decent job ensuring an open cannabis industry. Reducing the black market by granting an ample number of licenses will keep cannabis off the street, reduce the chance of youth exposure, and allow for tax revenue from sales to be responsibly funneled back into a self-sustaining cannabis program.
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