Sunday, June 25, 2017
"The Golden State's ‘High’ Expectations: Will California Realize the Fiscal Benefits of Cannabis Legalization?"
The title of this post is the title of this notable new paper authored by George Theofanis now available via SSRN. Here is the abstract:
The federal government has been taking an increasingly relaxed approach to enforcing marijuana laws, allowing states that have legalized to realize the tax benefits of lawful marijuana. California is now seeking to realize those same benefits. In 2016, California voters legalized recreational marijuana with the passing of Proposition 64 (Prop. 64), also known as the Adult Use of Marijuana Act (AUMA).
With the country’s highest population and largest economy, California’s impact on the marijuana industry is expected to be massive. Some are predicting that California’s marijuana market will generate $1 billion in tax revenue alone. Nonetheless, successfully generating revenue from the recreational market largely depends on several unknowable and unpredictable variables. For example, high prices when legal sales begin could polarize consumers toward the illicit market and stall industry growth. On the other hand, low prices could undercut a state’s revenue goals. In addition, even with the general success of the recreational markets in Colorado and Washington, the unique circumstance’s present in California make revenue projections unpredictable. Complicating matters more, marijuana’s illegal status under federal law also has the potential to slow down market growth and decrease revenue, depending on unpredictable circumstances. Accordingly, a sound cannabis tax scheme must take these and other uncertainties into account.
This Article focuses on how a tax regime that strives for short term gains will be more susceptible to the unstable conditions of the market. It explores how California is able to minimize financial risk in the recreational market while facilitating its growth. This Article argues that California should adopt several mechanisms for adjusting the marijuana tax rate, as recommended in the Rand report, because the current tax scheme is too aspiring and will result in slower market growth over time. For instance, by scheduling future tax rate increases and exploiting untapped tax bases, California can cash in long-term without overburdening the market in its infancy. Indeed, a tax scheme that focuses on a short rate of return rather than long term gain will fail to optimize cannabis tax revenue. The marijuana industry will continue to develop in unpredictable ways, making flexibility to change important to the overall success of any marijuana tax regime. By minimizing risk and facilitating market growth, California can seek to become the golden standard of the cannabis industry.
June 25, 2017 in Business laws and regulatory issues, Initiative reforms in states, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)
Tuesday, June 20, 2017
Fearing Trump turn, big bank no longer willing to serve national advocacy group Marijuana Policy Project
This new Washington Post article reports on a new reality in the banking space for the nation's leading marijuana reform advocacy group. The article is headlined "‘It is too risky’: Marijuana group says PNC Bank to close its accounts amid fears of a DOJ crackdown," and it begins this way:
One of the nation’s leading marijuana legalization groups says PNC Bank has notified it that it will close the organization’s 22-year-old accounts, a sign of growing concerns in the financial industry that the Trump administration will crack down on the marijuana industry in states that have legalized it.
The Marijuana Policy Project (MPP) lobbies to eliminate punishments for marijuana use but is not involved in growing or distributing the drug — an important distinction for federally regulated banks and other institutions that do business with such advocacy groups.
Nick Field, MPP’s chief operating officer, said a PNC Bank representative told him in May that the organization’s bank accounts would be permanently closed July 7 because an audit of the organization’s accounts revealed it received funding from marijuana businesses that handle the plant directly. “They told me it is too risky. The bank can’t assume the risk,” Field said.
Although marijuana businesses are legal in some states, many banks will not provide services to sellers or growers of the drug because it is banned at the federal level. But policy and advocacy organizations such as MPP are spared. A bank’s severing ties with an organization that accepts donations from such businesses signals a new level of concern in the banking industry.
PNC bank declined to discuss its relationship with MPP, but a spokeswoman said that “as a federally regulated financial institution, PNC complies with all applicable federal laws and regulations.”
The bank has held MPP’s accounts since the organization was formed in 1995.
June 20, 2017 in Business laws and regulatory issues, Campaigns, elections and public officials concerning reforms, Federal Marijuana Laws, Policies and Practices, Who decides | Permalink | Comments (1)
Saturday, June 10, 2017
BuzzFeed News has this lengthy new article about employment law limitations on use of medical marijuana. The lengthy full headline of the lengthy article serves as an effective summary: "This Firefighter Took A Doctor’s Advice To Use Medical Marijuana — Now He Could Be Fired: Medical marijuana is off-limits for police officers, firefighters, truck drivers, and millions of other workers in safety-sensitive jobs, even in states where it’s legal. These employees face a tough choice: Live with pain, or lose their job." Here is an excerpts from the start of the article:
Employees ... in jobs categorized as “safety-sensitive” — which include the millions of truck drivers, police, firefighters, paramedics, people who operate heavy machinery, airline employees, and others who are responsible for people's health or well-being — face additional hurdles. Their employers almost always have zero-tolerance drug policies, leaving workers with little choice but to swap medical cannabis for opiates or other pharmaceuticals.
At a time when the opioid epidemic is ravaging US cities and towns, supporters of medical cannabis say policies like the one that got [fire-fighter Brad] Wiltshire in trouble are outdated and dangerous. After all, tranquilizers and prescription pain pills can also affect a person's ability to do a job safely. After his diagnosis, Wiltshire was prescribed a tranquilizer that came loaded with warnings against operating heavy machinery or driving until the user knew it was safe to do so. Over time, he said, the tranquilizers stopped working as effectively, so he turned to medical cannabis. Not only did it help him deal with breakthrough pain, it also helped him sleep.
Thursday, June 8, 2017
Cleveland.com has this notable lengthy new article providing a kind of one-year-later update on Ohio's medical marijuana program under the headline "A year after Ohio's medical marijuana bill signed: Patients waiting, growers applying." Here are excerpts:
The landscape has changed since Gov. John Kasich signed Ohio's medical marijuana law one year ago today. Details of the new, tightly-controlled program began rolling out in November. The state began accepting applications for 24 grow licenses on Monday, and other businesses are preparing to apply for dispensary and processor licenses in a few months.
Several cities and villages that passed moratoriums or temporary bans on marijuana businesses have decided to allow them, usually after being approached by a potential business promising jobs and tax revenue.
But much remains the same. Patients still can't buy legal marijuana here, and doctors can't become certified to recommend it. No licenses have been awarded to marijuana cultivators, processors, testing labs or dispensaries. Some details about the program are still unknown....
The law, which went into effect in September, set the framework for the medical marijuana program: patients with one of 21 medical conditions could buy and use marijuana if recommended to them by a physician. Smoking marijuana and growing it at home were not allowed in the law. But details, including who would grow and sell marijuana, were left to three agencies to work out before September 2017. State officials say dispensaries will open by the statutory Sept. 8, 2018 deadline.
So while it seems to be taking a long time to set up, state officials are on track to meet their deadlines. Rules and regulations for cultivators were finalized in April, and the rest are nearing the end of the process.
The state plans to license up to 24 cultivators (12 for up to 3,000 square feet of growing space and 12 for up to 25,000 square feet), 40 processors that will make marijuana oils, tinctures, patches and edible products allowed by law, 60 dispensaries and an unknown number of testing labs. Cultivator licenses will be awarded based on how they plan to grow marijuana, staff and secure their facilities and comply with state regulations.
The application process is complicated, and state-imposed fees are steep. For example, larger cultivators will pay a $20,000 nonrefundable application fee and a $180,000 license fee if selected, renewable for $200,000 a year. That's not stopping entrepreneurs, many with the help of out-of-state consultants, from applying....
Ohio's law allows cities, villages and townships to limit the number of marijuana businesses or ban them altogether. More than 50 municipalities have passed temporary or permanent bans: some because of public safety concerns, others wanting to see what decisions state officials make. Businesses cannot apply for a license for a site where a moratorium or ban is in place. The cultivator application also requires a local zoning official to sign a form indicating the applicant has applied for local permits.
So communities that haven't lifted their bans by the end of June won't be home to a cultivator unless state officials decide in September 2018 to add licenses. In recent months, more than a dozen communities have lifted those bans or let them expire. The driving factor: Entrepreneurs and investors want to start businesses there. Youngstown gave its approval to five cultivator applicants Wednesday night. Columbus and Johnstown have each signed off on six applicants. Lorain, Painesville, Eastlake and Richmond Heights have given their blessing to cultivator applicants eyeing underutilized city property.
Johnstown was the first Ohio community to open its doors to potential medical marijuana businesses last year and lined up so many potential cultivators it ran out of eligible land to grow on. But it almost lost them all when village council members were mulling a hefty local licensing fee and tax on top of state fees and taxes. Interested businesses balked at the proposal, noting several communities are welcoming marijuana businesses to its empty business parks and vacant lots without tacking on high fees. The village opted to tax 1 percent of net profits -- the same as any other business and lower than neighboring Columbus' 2.5 percent....
Lawmakers recognized it could take two years before legal marijuana was available for patients and built in a safeguard intended to allow patients to use medical marijuana without being prosecuted for possession. Patients with qualifying conditions, who comply with the possession and paraphernalia parts of the law, have an affirmative defense in court if they have a letter or other paperwork certifying compliance and signed by an Ohio physician. But the law didn't say where patients could get marijuana.
Doctors have been reluctant to sign off on paperwork before becoming certified by the state. The certification process is not yet in place, and no continuing education courses -- required to become certified -- have been approved. Only about 7 percent of Ohio physicians said they would be willing to recommend medical marijuana and their hospital or employer would allow them to, according to a state medical board survey of Ohio doctors.
There's only been one known case of an affirmative defense letter being used. The Bedford police chief told the Associated Press charges were dropped against the man because the illegal substances found didn't match the search warrant.
Amanda Candow, a Mentor woman who has multiple sclerosis, has a letter but doesn't know how much she can trust it. Candow said patients like her want to be on the right side of the law, and many, including terminal cancer patients, don't want to buy illegal marijuana. "Everything is so vague and when you're a patient, it feels personal -- why are they doing this to me still?" Candow said. "I didn't choose to have MS or choose to have super tight muscles when I wake up in the morning, and the one thing that gives me relief I can't have."
Wednesday, June 7, 2017
Tom Angell has this interesting and somewhat surprising new article at MassRoots under the headlined "More Banks Open Marijuana Accounts Under Trump." Here are the details:
New federal data shows a sharp increase in the number of banks opening accounts for marijuana businesses since President Trump’s inauguration.
A report from the Financial Crimes Enforcement Network (FinCEN) released this week shows that 368 banks and credit unions had active accounts for cannabis companies as of March. The number of depositary institutions working with the marijuana industry is up roughly 10 percent since Trump moved into the White House.
The 34 new banks that began providing financial services to cannabis businesses between February and March represents the single greatest monthly increase recorded in the new report. The increase runs contrary to widespread fears that anti-marijuana comments from U.S. Attorney General Jeff Sessions and White House Press Secretary Sean Spicer could spook mainstream companies from working with the cannabis industry.
The new FinCEN report also indicates that there were at least roughly 1,600 active individual marijuana business bank accounts in the U.S. as of March.
Despite the growth in the number of banks willing to work with marijuana businesses and Obama administration guidance intended to encourage more to do so, many have remained reluctant in light of continuing federal prohibition laws. That means many cannabis growers and sellers conduct transactions in cash only, which makes them targets for robberies.
Those public safety concerns have spurred efforts in Congress to pass legislation providing additional protections sought by the financial services industry and cannabis businesses. On Wednesday, the U.S. House Rules Committee blocked floor consideration of an amendment that would have prevented the Treasury Department from punishing banks that work with the marijuana industry.
Friday, June 2, 2017
The title of this post is the headline of this lengty new Washington Post article which highlights racialized realities in the marijuana industry. Here are excerpts:
States generally do not track the race and ethnicity of license applicants, but industry analysts and researchers say that dispensaries and the more-profitable growing operations across the country are overwhelmingly dominated by white men.
The lack of minority representation is especially fraught given that research shows African Americans were disproportionately arrested and incarcerated during the war on drugs. Now that marijuana is seen as a legitimate business, advocates argue that minorities should also reap the profits....
The marijuana trade, legal in some form in 29 states plus the District of Columbia, is one of the country’s fastest-growing industries. The $6.6 billion in medical and recreational marijuana sales in 2016 is expected to expand to $16 billion by 2020, according to New Frontier Data, a cannabis data analytics company headquartered in the District.
But African Americans seeking to go into business as growers or retailers face a host of hurdles, researchers say. Many states bar convicted drug felons from the industry, disproportionately hurting minorities because of historically higher conviction rates. Others have set high investment requirements. Some dole out licenses through appointed commissions that industry researchers say reward the politically connected, who by and large are wealthy and white.
“Marijuana legalization without racial justice risks being an extension of white privilege,” said Bill Piper, a lobbyist for Drug Policy Alliance, which advocates for drug policy reforms.
The disparities have become such a source of consternation for some lawmakers and industry leaders that more than half a dozen states and municipalities, including Oakland and the District, are taking steps to boost minorities in the competitive licensing process....
Colorado, one of the earliest states to legalize marijuana, has nearly 1,000 dispensary licenses and nearly 1,500 cultivation licenses. African Americans make up less than a handful of license holders, according to cannabis entrepreneurs in the state. Wanda James, a former Navy lieutenant who says she’s one of the few black growers and dispensary owners in Colorado, blames regulations barring those convicted of drug crimes from owning, and working in, a dispensary or cultivation center.
“In Colorado, if you sell 10 pounds of cannabis today, you probably get written up in Forbes about what a great businessperson you are, but if a young black man sells a dime bag on a street corner in Alabama, he’s probably going to jail for 10 years,” she said. A black person is nearly four times more likely than a white person to be arrested for marijuana possession, even though the two groups use marijuana at similar rates, according to a 2013 American Civil Liberties Union report that examined arrests in every state using a decade’s worth of FBI crime data....
Jesce Horton, an Oregon marijuana entrepreneur who started the Minority Cannabis Business Association in 2015 to diversify the industry, said that as a college student in Florida, he was arrested three times for marijuana possession. His criminal record would have barred him from entering the business in other states. “It’s really a slap in the face to communities who have been targeted,” Horton said. “A lot of people see these as racist regulations. These are fear-based tactics by legislators who are more than willing to go along with the business interests sitting in the room.”
Some states also require applicants to have financial holdings upward of $1 million, a particularly high bar given the documented wealth disparities between blacks and whites. Those without ready access to capital cannot turn to banks, which are unwilling to provide business loans for an industry that is still illegal at the federal level....
Even with potential shifts in federal drug-enforcement policies, several jurisdictions have moved to address racial disparities in the industry. Oakland recently voted to set aside half of all marijuana business permits for people who had been arrested for drug crimes in the city or lived in neighborhoods with high marijuana arrests.
Illinois, like Pennsylvania, awards extra points to minority applicants. Ohio requires 15 percent of licenses to be issued to minorities. Florida has reserved one of its future marijuana-cultivation licenses for a member of the state’s Black Farmers and Agriculturalists Association. Maryland marijuana regulators, meanwhile, are fending off a lawsuit that threatens to halt its program after no black-owned businesses won cultivation licenses.
Some prior related posts:
- Highlighting notable state efforts to enhance minority participation in marijuana industry
- Looking at marijuana reform in black and white
- "The Growing Movement for Marijuana Amnesty"
- "'The Mellow Pot-Smoker': White Individualism in Marijuana Legalization Campaigns"
June 2, 2017 in Business laws and regulatory issues, Medical Marijuana Commentary and Debate, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate, Who decides | Permalink | Comments (0)
Thursday, June 1, 2017
Bloomberg has this notable new article headlined "Trump Casts Cloud Over Cannabis, But Money Keeps Pouring In," and here are excerpts:
The Trump administration’s adversarial stance toward marijuana has brought jitters to the burgeoning cannabis industry, but money continues to pour in.
Pot-related companies raised more than $734 million between Jan. 1 and April 21, an almost sevenfold increase from $108 million in the same period last year, according to a report from New Frontier Data and Viridian Capital Advisors. That brings the total amount raised to $1.9 billion since the start of 2016.
The investment surge reflects optimism that President Donald Trump and Attorney General Jeff Sessions won’t crack down on the industry, even as those concerns weigh on stock prices this year. Since hitting a peak in February, the Bloomberg Intelligence Global Cannabis Index has dropped 36 percent.
For cannabis financiers, the industry’s growth potential outshines the political risk. Eight states voted to legalize cannabis in some form on Nov. 9, including the nation’s largest. Legal cannabis demand in California is set to grow by 50 percent in 2018, when recreational use is scheduled to come online, according to the report. The report’s authors forecast that national demand for legalized marijuana will almost quadruple by 2025.
“With each new state that legalizes, that need for capital is going to be there,” said John Kagia, New Frontier’s executive vice president of industry analytics and author of the report. “It will continue to represent a substantial investment opportunity for the foreseeable future.” As a result of competition for funding, seed capital is being raised in greater initial amounts and its cost is getting more expensive, New Frontier Chief Executive Officer Giadha Aguirre de Carcer said.
The boom has taken place amid an unclear policy outlook under Trump. Press Secretary Sean Spicer said in February that he expects the Department of Justice to increase enforcement of federal laws prohibiting recreational pot use, even in states where it’s allowed. While Spicer defended medical marijuana, Sessions indicated he dislikes anything to do with the plant....
The uncertainty has made some investors more nervous about getting into the industry. “There’s a lot of fear,” said Rob Hunt, a founding partner of Tuatara Capital, which invests in cannabis companies and has more than $100 million under management. The silver lining, however, is that “it’s not very likely we’re ever getting someone further to the right on this issue than Sessions is.”...
Neither the political threats nor ongoing banking and tax difficulties will ultimately derail the industry, Viridian and New Frontier predict. Legal sales of cannabis products are expected to reach $24.1 billion in 2025, up from $6.6 billion in 2016. Investment will keep gaining too, particularly because interstate commerce is prohibited. That means every state that legalizes weed must create its own infrastructure....
“What we’ve also seen in the past 18 months or so is an increased number of more sophisticated companies entering the industry,” De Carcer said. And they’ve come with “more mature and experienced management teams,” she said.
Wednesday, May 31, 2017
This new AP article, headlined "Growing pot industry offers breaks to entice minorities," reviews some efforts in some jurisdictions to help some minorities participating in the emerging marijuana industry. Here are excerpts:
Oakland and other cities and states with legal pot are trying to make up for the toll marijuana enforcement took on minorities by giving them a better shot at joining the growing marijuana industry.... The efforts' supporters say legalization is enriching white people but not brown and black people who have been arrested for cannabis crimes at far greater rates than whites....
Massachusetts' ballot initiative was the first to insert specific language encouraging participation in the industry by those "disproportionately harmed by marijuana prohibition and enforcement." The law does not specify how that would be accomplished.
In Ohio, a 2016 medical pot law included setting aside 15 percent of marijuana-related licenses for minority businesses. In Pennsylvania, applicants for cultivation and dispensing permits must spell out how they will achieve racial equity. Florida lawmakers agreed last year to reserve one of three future cultivation licenses for a member of the Florida Black Farmers and Agriculturists Association.
There have been setbacks as well. The Maryland General Assembly adjourned last month without acting on a bill to guarantee a place for minority-owned businesses that were not awarded any of the state's initial 15 medical marijuana cultivation licenses.
There's no solid data on how many minorities own U.S. cannabis businesses or how many seek a foothold in the industry. But diversity advocates say the industry is overwhelmingly white. The lack of diversity, they say, can be traced to multiple factors: rules that disqualify people with prior convictions from operating legal cannabis businesses; lack of access to banking services and capital to finance startup costs; and state licensing systems that tend to favor established or politically connected applicants. "It's a problem that has been recognized but has proven to be relatively intractable," said Sam Kamin, a professor at the University of Denver Sturm College of Law who studies marijuana regulation....
The Minority Cannabis Business Association has drafted model legislation for states considering new or revised marijuana laws, including language to expunge pot-related convictions and to encourage racial and gender diversity among cannabis businesses. "The people who got locked up should not get locked out of this industry," said Tito Jackson, a Boston city councilman and mayoral candidate. He suggests Massachusetts give licensing preference to groups that include at least one person with a marijuana conviction....
An Oakland-based nonprofit known as The Hood Incubator provides training and mentoring to minority cannabis entrepreneurs. "Maybe they lack the money to get into the industry or they might have, you know, gotten arrested in the past for oh, what do you know? Selling weed. And now they can't actually get into the legal industry," said Ebele Ifedigbo, one of the group's three co-founders.
This related AP article provides a details state-by-state run down of efforts to aid minority participation in the marijuana industry.
Tuesday, May 30, 2017
Pennsylvania legal publication notes "Medical Cannabis Is the Next Boom" and asks "but When Will It Bust?"
As a law professor, I am always distinctly interesting in stories about how marijuana reform is impacting the legal profession. Consequently, this new article from a Pennsylvania legal newspaper, headlined ""Medical Cannabis Is the Next Boom, but When Will It Bust?", really caught my attention. Here are excerpts:
With Pennsylvania well on its way toward implementing a medical marijuana program, dozens of lawyers in the state are preparing for an explosion of legal work related to cannabis. The blossoming industry is reminiscent of the surge in legal work that grew out of the Marcellus Shale play, which sparked up engagements for all kinds of firms almost a decade ago.
“Everyone wanted to be in it, there were people who carved out individual expertise … but the special area is here to stay,” said Steve Franko, a solo practitioner from Northeast Pennsylvania and member of the Pennsylvania Bar Association’s medical marijuana and hemp law committee. “It’s going to be, just like the [natural] gas was, a combination of people who have skills that maybe cross upon multiple areas.”...
Lawyers now getting into the medical marijuana space acknowledge that there may come a time when federal authorities decriminalize marijuana, decreasing the number of legal questions and the demand for cannabis-related legal consultations. But that’s a long way off, they said, as Pennsylvania is just starting to address the complicated effects of medical marijuana on numerous areas of law.
Andrew Sacks, head of both the Pennsylvania and Philadelphia bar association’s medical marijuana and hemp committees, said he has also heard lawyers compare medical cannabis to Pennsylvania’s gambling expansion, which created a rush of legal work several years ago, then saw a decline in work when casinos got their licenses.
But licensing is just the surface of medical marijuana law, said Sacks, a name partner at Philadelphia’s Sacks Weston Diamond. Lawyers in many other practices areas have an opportunity to get in on the action. “Everybody is searching the world, searching the country and cities to see what people have done in their specific area so they can become specific experts,” Sacks said. “People are gearing up to become the names in the category.”...
Things will really explode in the legal world “the second the first drip of medical marijuana gets sold,” Sacks said. When that happens, it won’t just create heath care and business issues, he said, but questions in a multitude of legal practices.
Kathryn Palladino, a criminal lawyer and subcommittee chair on the Philadelphia Bar’s medical marijuana committee, said she expects medical marijuana to become part of her day-to-day work, and it’s not just about clients breaking federal law to use it. DUI cases will raise questions about whether patients can drive after using marijuana, she said, and patients who are incarcerated may seek access to cannabis in prison. Patients on probation or parole who seek access to medical marijuana may risk violating parole. “It will only grow as the patients have access to the marijuana and we see some issues come up that the legislature hadn’t planned for,” Palladino said. And that’s just criminal law.
The new field of medical marijuana law will also touch on employment law, family law, education, intellectual property, licensing, life sciences, real estate, tax, workers’ compensation and zoning law, lawyers said. That’s one way that medical marijuana is different from the Marcellus Shale boom, Sacks said. Drilling and natural gas led to legal questions in five or so other areas of law, he said, but for legal cannabis, the collateral issues are more numerous.
Thursday, May 18, 2017
This afternoon brings two interesting new pieces about the state and fate of the marijuana industry from the business media. Here are the headlines, links and a few key passages from the articles:
From MarketWatch here, "Marijuana experts question how industry will mature as rapid growth continues but full legalization lags":
Right now the industry is experiencing growing pains.... Certain markets have become so crowded and competitive it’s gotten tougher for businesses to turn a profit. The Marijuana Business Daily, which conducts an annual survey of marijuana retailers, wholesale cultivators and infused product manufacturers, said about 55% of those queried said they had reached break-even or turned a profit within the first year of starting their business. That’s down from 70% who, when polled last year, said they achieved that first-year milestone.
Recreational sales of marijuana ballooned 80% to $1.8 billion in 2016, according to data from Marijuana Business Daily, and in 2017 recreational sales are expected to surpass medical sales for the first time. The industry currently employs anywhere from 165,000 to 230,00 people, according to data from Marijuana Business Daily.
Investments in the industry are increasing in size, frequency and scope. Major institutional investors are still steering clear of the market because it’s federally illegal, but individual investors are showing interest. Last year, private equity firm Tuatara Capital raised an industry record $93 million to invest in marijuana businesses.
From CNBC here, "How the Trump administration is affecting the multibillion-dollar marijuana industry":
Projections vary among industry analysts, but the numbers are substantial. Marijuana Business Daily predicts retail sales will hit $6.1 billion for 2017 and the industry could have a maximum economic impact of some $68.4 billion by 2021; GreenWave Advisors predicts $7.7 billion for 2017 and $30 billion by 2021 if recreational and medicinal cannabis is legalized nationwide.
Capital has also flooded into the space — nearly $1 billion from 2012 through 2016, according to GreenWave Advisors, citing data from Pitchbook. What's more, Marijuana Business Daily finds that investors report plans to increase the size of their investments this year. The average investor or firm involved in the industry has put around $450,000 in cannabis companies to date, with each investment coming in around $100,000. But this year, they plan to invest around $500,000 on average in marijuana businesses.
"The Trump Administration has not yet changed our strategy, because there's been a lot of rhetoric but not a lot of action," says Patrick Rea, CEO and co-founder of Boulder, Colorado-based Canopy Accelerator, an investment fund for early stage cannabis companies. It has invested over $6.5 million since early 2015 in more than 64 companies. "A lot of investors are becoming more aware that they have an impact on what the administration might decide or not decide to do based on how they present themselves as a business-friendly environment, creating jobs and having positive effects on society," Rea says.
Thursday, May 11, 2017
In a post last month, I asked "Is the Trump Administration driving a 2017 spike in Colorado marijuana sales?" based on data showing increased marijuana sales in Colorado the first two months of this year. Now, via this new Cannabist piece, headlined "Colorado marijuana sales top $131M, set record in March 2017," we have additional data on ever-increasing sales, though there is no way to tell from basic sales data if the market is experiencing general growth or if folks in Colorado may be stocking up on marijuana in light of uncertainty concerning federal marijuana policies under a new administration. Speculations about reasons aside, here are the basic sales details along with some perspectives via The Cannabist:
The Colorado cannabis industry’s unbridled growth hasn’t waned — in fact, it’s still setting records. The state’s licensed marijuana shops captured nearly $132 million of recreational and medical cannabis sales in March, according to The Cannabist’s extrapolations of state sales tax data made public Tuesday.
The monthly sales haul of $131.7 million sets a new record for Colorado’s relatively young legal marijuana industry, besting the previous high of $127.8 million set last September, The Cannabist’s calculations show. It’s the tenth consecutive month that sales have topped $100 million.
Sales tax revenue generated for the state during March was $22.9 million, according to the Colorado Department of Revenue. March’s sales totals were 48 percent higher than those tallied in March 2016, according to The Cannabist’s calculations. The month closes out a quarter in which sales were up nearly 36 percent from the first three months of last year.
In 2016, the year-over-year quarterly growth rate ranged between 29 percent and 39.6 percent. The Cannabist also found that March 2017’s year-over-year percentage growth outpaced much of what was seen on a monthly basis last year. Monthly growth rates from calendar year 2015 to 2016 averaged nearly 34 percent.
It was this continued rate of growth that caught the attention of some analysts and economists contacted by The Cannabist. Andrew Livingston, director of economics and research for cannabis law firm Vicente Sederberg, separately calculated out the year-over-year monthly growth rate for Colorado cannabis sales and saw a trend emerge.
“The year-over-year rates of growth have continued at a steady pace, which to me indicates that we have not yet reached the point at which we are starting to cap out the market,” he said. At that point, he added, the growth rates would start to decline.
If the current growth rates keeps up, April 2017 should be another record month, and the summer of 2017 should set new highs, Livingston predicted. And by the end of the year, that could add up to an industry boasting $1.6 billion in sales, he said.
“We’re surprised that sales continue to grow so quickly,” said Miles Light, an economist with the Marijuana Policy Group, a Denver-based financial, policy, research and consulting firm focused on the marijuana industry. “We are not surprised that almost all of the sales growth is in the retail marijuana space.” Adult-use sales, which hit a new monthly high of $93.3 million, accounted for the lion’s share of the March totals. Medical cannabis transactions totaled $38.4 million.
Light and other economists have previously projected that Colorado’s marijuana market would eventually hit a ceiling as the draw from the black market becomes more complete, regular economic cycles take hold and other states implement adult-use sales. It’s hard to predict when that plateau may occur, but the license and application fees in the March 2017 report were telling, Light said.
Ten months into Colorado’s fiscal year (the latest report for March sales show tax revenue remitted in April), the license and application fees for medical marijuana businesses and retail marijuana businesses were down 25.4 percent and 8.5 percent, respectively, according to the Colorado Department of Revenue report. “This shows that fewer new firms are entering and, I believe, shows that … sales should be tapering off or declining,” he said.
Whatever the particular reasons for the strong and steady sales growth in Colorado, there numbers seem certain to keep investors and other business players "bullish" on the marijuana industry at least for the time being. And such business bullishness will likely continue to fuel various efforts in various jurisdictions to continue moving forward with or expand the reach of marijuana reform.
Prior related post:
May 11, 2017 in Business laws and regulatory issues, Medical Marijuana Data and Research, Medical Marijuana State Laws and Reforms, Recreational Marijuana Data and Research, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)
Monday, May 8, 2017
The title of this post is the headline of this notable new Forbes article. Here are excerpts:
Retail sales for legal marijuana are growing so big and so fast that the industry is having to super size their operations. Growing and producing marijuana products is now happening on an industrial scale.
Retail sales in the U.S. from 20 jurisdictions were $6.5 billion, but according to Greenwave Advisors that number is projected to grow to $30 billion by 2021. In order to meet the demand for customers, the growers and makers of infused products are having to scale up their operations. More automation, more square footage and the ability to manage this fast growth is separating the mom & pops from corporate cannabis.
Berto Torres, Chief Operations Officer at GFarmaLabs in California has been with the company since it started with four grow lights and had a canopy of 3,000 square feet. They now have 700,000 square feet under management. Torres said the company's growth boomed after they made the jump to branded products and specifically after they won a Cannabis Cup award for chocolate truffles in 2014. “It created so much demand, we had to scale up,” he said, “We needed to organize ourselves and run and function like a normal corporate company.”... Of course success in the cannabis industry immediately comes with accusations of “going corporate.” “We were accused of selling out by having a consistent product,” said Torres. “I think we're one of the few companies that's been able to create a successful blending of both worlds.”
One of the companies that is helping the cannabis industry scale up in volume is Convectium. While some industrial equipment companies refuse to work with the cannabis industry, Convectium has jumped at the opportunity. “If this was a stagnant industry, slow growth would be okay. Cannabis is growing so fast, you get passed by if you don't automate,” said Danny Davis, a Managing Partner at Convectium. He added that a laid back chill attitude in this business won't work. “Aggressive is a solid attitude to have in cannabis.”
For example, when it comes to filling a cannabis oil cartridges for vaping some small companies fill them by hand using a syringe. Davis said it takes a company an hour to fill 100 cartridges in that manner. His machine can fill 100 vape cartridges in 30 seconds. “The demand for machines is 5 times what it was from one year ago,” he said. “We truly believe that the only way to scale is to add technology and standardization.” Like the people that criticize G Farma for going corporate, Davis said there are many operations that are resistant to change. “They don't trust technology,” he said. “Many of the companies out there are primitive, even the big ones, but they will learn they had better scale quickly.”
Kiva Confections is one of the biggest infused edible companies in California that has successfully grown. Co-founders Kristi Knoblich and Scott Palmer started with a couple of workers and now Kiva employs 85 people, with products in 1,000 dispensaries. The business began in their kitchen, but the fast growth has them moving to a 30,000 square foot facility. “We're looking at large scale equipment to prepare for the recreational market.” said Palmer. Kiva is also in Nevada and Arizona and has plans to expand to Colorado, Illinois and Hawaii....
The days of local growers selling out of backpacks to dispensaries wasn't that long ago, but it is definitely over. Growers must produce large volumes of consistent flower. Producers must be able to sell branded product that is the same from state to state and meet the demand of hundreds of dispensaries. Scaling up will be the new challenge for the biggest players in the marijuana industry.
Thursday, May 4, 2017
This new local article out of Colorado, headlined "Why Colorado nonprofits are taking a risk accepting donations from pot businesses," highlights yet another was that federal marijuana probation makes it a bit more difficult from a marijuana company to try to do good while doing well. Here are excerpts:
When is a donation not necessarily something you want to take straight to the bank? Kaya Cannabis, in Denver, is donating a portion to medical marijuana sales to three nonprofit organizations. "Nothing is simple in cannabis, I've learned," said Amanda Gonzalez, CEO of Kaya Cannabis. "Many non-profits are part of national organizations or their of board of directors is just a little bit more conservative and nervous about what's still a relatively new industry."
Kaya medical marijuana customers are given a copy of their receipt to put in a basket in front of one of three charities [including] Rocky Mountain MS Center... "The MS Charity that we are giving to, it was a yearlong process with their board of directors to make sure that they were able to accept these kinds of donations," said Gonzalez....
In Colorado, marijuana is legal. In the eyes of the federal government, it's still illegal, essentially making donations from a pot shop, drug money. "Some nonprofits want the waters tested a little bit more," said Gonzalez.
"There is still some legal risk that a nonprofit would need to evaluate, but from the experts we've talked to, it seems small at this point," said Renny Fagan, CEO of Colorado Nonprofit Association.
The Colorado Nonprofit Association sent out an annual survey last year that asked about marijuana industry donations. One in 10 nonprofits had actively sought out contributions, but two-thirds would consider accepting a donation if offered.
"If the nonprofit receives federal funds through a contract or grant, that contract or grant will probably prohibit a violation of federal law as a condition of receiving those funds, so for those nonprofits, they should not accept donations from a marijuana retailer," said Fagan. "Most nonprofits do not directly receive federal funds, and so for them, the issue of whether to accept sponsorship or donations from the marijuana industry, really comes down to, how does that fit with their donor base overall and is it consistent with their mission."
Monday, May 1, 2017
The Colorado Springs Gazette, which has tended to take a skeptical/critical perspective on marijuana reform in Colorado, has this big new series of big new articles under the banner "State of Marijuana." Here are the headlines and links:
May 1, 2017 in Business laws and regulatory issues, Criminal justice developments and reforms, History of Marijuana Laws in the United States, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)
Friday, April 21, 2017
Blogging in this space will be light over the next few days because I am about to travel to Pittsburgh to attend and participate in the 2017 World Medical Cannabis Conference & Expo. As this schedule details, I am speaking tomorrow afternoon (Saturday) on a panel titled "Higher Education & Its Role in the Industry." Here is how the panel is previewed:
The cannabis industry is set to create more jobs than established industries like manufacturing by 2020. However, there is still no clear path to getting involved in the industry or clear educational path. Students need more courses and curriculum that teaches the fundamentals of the industry. These include all areas of the industry including business, agriculture, research, etc. This panel will talk about what courses are currently available for students and what still needs to be offered as well as how higher education can translate their findings into commercial services and products the industry can use to advance itself.
April 21, 2017 in Business laws and regulatory issues, Employment and labor law issues, Medical Marijuana Commentary and Debate, Medical Marijuana Data and Research, Medical Marijuana State Laws and Reforms | Permalink | Comments (0)
Friday, April 14, 2017
As noted in this prior post, this past week a student in my Marijuana Law, Policy & Reform seminar presented on the law, policies and practices surrounding banking activities for the marijuana industry. But this issue is so big and important, another student also spent the semester looking at this topic, and here are additional resources he sent my way in preparation for his coming coverage of the issue in class:
My paper is on the intersection of the marijuana laws and the banking industry but also details attempted risk management and solutions via technology. Technologies such as cryptocurrencies and third party payment apps such as Paypal and Venmo have all toed the line of anti-money laundering statutes. Likewise, I address third party apps that perform due diligence for the banking industry by way of seed to sale tracking systems and point of sale systems thereby reducing risk for the banks.
The following are articles relevant to my paper. I did not want to send FinCEN guidance or the 2014 Cole Memo as they have already been posted here.
An article detailing the secrecy of big banks working with the marijuana industry and suggesting that the banking woes may not be as deep rooted as once thought.
A link to podcasts from past Crypto Cannabis Conferences discussing cryptocurrencies in the marijuana industry.
An article which details one of the many tech startups attempting to reduce risk for banks by performing due diligence in compliance with FinCEN guidance and the Cole memos.
An article describing an alternative payment system for the marijuana industry
Monday, April 10, 2017
A student in my Marijuana Law, Policy & Reform seminar is looking closely at the law, policies and practices surrounding banking activities for the marijuana industry, and he has provided for class reading the following links in preparation for his presentation this coming week:
Federal regulation on "Suspicious Activity Report"
Press article from 2014, "U.S. Issues Marijuana Guidelines for Banks"
FinCEN guidance on "BSA Expectations Regarding Marijuana-Related Businesses"
Blog posting from January 2017 on "Marijuana Banking Band-Aid? Senators Push For More Cannabis Banking Guidance"
Press article from April 2017 on "Marijuana-state govs ask feds to maintain status quo"
Sunday, April 9, 2017
A student in my Marijuana Law, Policy & Reform seminar is looking closely at the laws and policies surrounding marijuana advertising, and he has provided for class reading the following cases (and one video) in preparation for his presentation this coming week:
1. Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748 (1976).
2. Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n, 447 U.S. 557 (1980).
3. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 161 (2000).
Monday, April 3, 2017
Among the many exciting topics for student presentations in my Marijuana Law, Policy & Reform seminar this coming wee is a look at "recent trends and varying approaches in allowing/restricting home growing marijuana for medicinal or recreational purposes and the plant count and possession limitations these laws impose." As preparation for this topic, my student has provided these links for background reading:
Law review article: Ryan Stoa, “Marijuana Appellations: The Case for Cannabicultural Designations of Origins.”
A research paper expounding upon the possible iterations of a post-legalization marijuana market in the United States. Predictions concerning the form of a future market and the potential regulatory hurdles in the way. The possibility of the marijuana market evolving similarly to the wine industry and avoiding the widespread concern with “Big Marijuana."
Press article: "Costs of Growing Cannabis at Home vs. Buying Bud at a Dispensary"
A helpful guide comparing the costs to a consumer of either cultivating their own marijuana or simply purchasing marijuana from a dispensary.
A recent article from Denver concerning home grown marijuana entering into the black market.
A helpful visual summary of which states have adopted medical/recreational marijuana policies.
Press article: "Home Cannabis Cultivation Laws by State"
A quick reference to the laws of each state that has legalized marijuana for recreational or medical purposes with regard to home cultivation.
April 3, 2017 in Assembled readings on specific topics, Business laws and regulatory issues, Medical Marijuana State Laws and Reforms, Recreational Marijuana State Laws and Reforms | Permalink | Comments (0)
One of my Marijuana Law, Policy & Reform seminar students is taking a deep dive into products and processes involving cannabis without THC, giving particular attention to the "murky issues relating to CBD oil and the extraction of oils from all cannaboids." For this topic, my student has provided for posting here "some interesting articles about CBD oil, hemp and the implications for the USDA and FDA [that reveal] some conflicting reports about legality, organic certification and other important matters" as background for his presentation:
April 3, 2017 in Assembled readings on specific topics, Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Medical Marijuana Commentary and Debate | Permalink | Comments (0)