Protecting the marijuana industry from state legalization

The legalization of cannabis at the federal level is well under way. There are state cannabis laws getting closer to enactment that would end the seven decades war on cannabis. The MORE Act, as it is called, would remove cannabis from the Controlled Substance Act and effectively legalize the industry at the federal level.

You’d think the entire cannabis industry would welcome such a change, but not everyone shares the excitement. In fact, some business owners are very concerned about their future – smaller businesses in particular are concerned about their place in the future of the cannabis industry.

A recent article by Politico highlighted the concerns of these business owners as expressed in this quote;

“It will unleash a tidal wave of large operators sucking up all of the capital in the capital markets and essentially resulting in social justice participants not even getting funded,” said Aaron Goines, co-owner of Emerald Turtle, a social corporation public cannabis company Delivery company in Massachusetts. “In general for social justice, I think it would be a disaster at this point in time if state legalization happens.”

This feeling is shared by many farmers and smaller business owners who have been burdened with high taxes, the inability to bank, and many other hurdles that these giant corporations would not have to worry about under a federal legalization program.

On the other hand – federal legalization has to come at a certain point in time, however, and for other cannabis companies, the lack of federal jurisdiction means many of their products are on shelves and not being sold.

California overproduces and much of its stored cannabis is sold in illegal markets. There are millions of dollars in tax foregone every day that a state ban hampers the option of interstate trade.

With Mexico and Canada already having some form of legal cannabis on the books nationally, the United States is the missing piece to initiate the transnational cannabis trade.

This puts the cannabis companies in an awkward position. Legalize at the federal level and you may find yourself engulfed by large conglomerates or continue to pay the heavy burden of doing business in a pseudo-legal environment.

The Benefits of State Legalization

The cannabis industry is in a strange place. The majority of US states have legalized cannabis one way or another, and every year it seems like another state is pushing for legalization. However, with the federal ban still on the books, there are several obstacles facing the industry.

• Lack of traditional banking – Due to anti-money laundering banking laws, banks cannot do business with legitimate cannabis companies due to the illegality of cannabis at the federal level. Since cannabis is a “Schedule I drug,” accepting any form of payment or holding money for a cannabis company is technically “money laundering.” Of course, HSBC can do this with legitimate cartels and be fined – but if a bank dares to do business with a legitimate company, it would be “breaking the law”.

• Lack of tax benefits – Since cannabis isn’t considered a legal federal good, unlike traditional businesses, you really can’t get the same tax breaks that a regular business would get. This means cannabis companies are paying an excessive amount of money to the federal government without receiving any of the benefits. This is because they continue to have to pay federal taxes on employees but cannot make cuts for the same reason. The cost reduction will have an impact on the total cost of cannabis and will benefit the end user.

• international trade – As already mentioned, one day legal states like California could sell to other states. This would solve the problem of “overproduction” – which often occurs in western countries – immediately.

• International commerce – Mexico, the US and Canada would become the world’s first cannabis trading alliance. This would have an immediate impact on the cost of cannabis products, propelling the industry into the high billion, if not trillion, dollar industry per year as speculated by Popular Mechanics in 1937.

• Employee protection – With state legalization, the natural next step would be to unionize cannabis workers. This means that you can receive government benefits for working in the cannabis industry.

• Migration – Currently, migrants are prohibited from using cannabis due to the illegality of cannabis. If a migrant admits to using cannabis – even if it is legal in their country – the US has a legal obligation to deny them entry. Removing cannabis from the CSA would solve this problem.

There are probably hundreds of other problems that I haven’t mentioned yet. Nonetheless, these are some of the biggest benefits for the industry as a whole and solve other national policy problems.

The disadvantages of federal legalization

As mentioned at the beginning of this article, one of the biggest concerns is that large corporations could suddenly gobble up local markets. This would have a negative impact on the “social justice” aspect of legalization.

Here are a few other potential downsides to legalization.

• Corporatism – the initial fear of corporate takeover of the cannabis industry has already begun in one way or another. Unless we offer some regulatory inclusions like the ability to have a farmers market, national laws allowing individuals to grow weed, and cheap entry-level cannabis business licenses – at some point there will ONLY be corporate cannabis in the legal market .

• Higher taxes – Adding a federal tax to state taxes slightly increases the cost, but when there is an excess of cannabis it can lower the price per gram.

• Stricter regulations – Do not be surprised if additional regulations for cannabis are enacted, this is how the federal government makes its money.

• Bad political choices – Once the conversation is federal there will be huge lobbies struggling to bend the law to their advantage. Policy makers are not very well informed about cannabis right now, so whoever throws them the biggest bone is most likely going to get their attention. This could shape the industry into something that no one intended.

• Prohibition 2.0 – This is already happening. There will be significant crackdown on “illegal growth” as it would compete with the legal market. Hence the idea of ​​creating a farmers market would keep the integrity of the local cultivation intact.

The sticky end result

Federal legalization is coming one way or another, but it’s going to be an interesting development to watch. However, it is critically important to think about the average Jane and Joe and create a space for independent and local businesses to compete with giant corporations. After all, cannabis is the counterculture drug, and when it is swallowed by large corporations – it seems that all but American corporations have lost the war on drugs.

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