Editorial threatens a bumpy road for California cannabis as license applications open

Editorial threatens a bumpy road for California cannabis as license applications open

First, the good news: Just ahead of the legalization of recreational marijuana in the state on January 1 (as we've previously reported), California has started accepting license applications for cannabis businesses. The CA Bureau of Cannabis Control and the Department of Public Health are now accepting the necessary paperwork to get approved and open up a business in the Golden State. The BCC has an online system set up, where business owners can apply as well as check out all of the required materials for the process. If you're one of the businesses applying, good luck -- we can't wait to come in and spend a few bucks on opening day!

That's the good news. Now, here's the doom and gloom: Things may not be all that simple. Kimberly Simms is a cannabis business and compliance attorney, and in an editorial for the San Diego Union-Tribune, she foresees trouble ahead for the industry. The picture she paints of opening day for recreational cannabis doesn't exactly sound rosy.

When the proverbial switch is flipped to “regulated market” Jan. 1, the market will look a bit like a fully decorated Christmas tree with only a handful of working lights. The companies with the “lights on” will sell off the last of existing products, and, when that inventory runs out, expect shelves to remain empty as businesses continue to scramble for local and state licenses. While some envisioned a smooth transition from medical-only to medical and adult-use markets, the reality is likely to look a lot more like an iPhone release on limited production — lines around the block and months-long waits for more.

Yeesh. That's no fun. There's more: The tax on cannabis in the state is super high. 15% for operators plus state and local taxes, which also could be as high as 15%, mean customers might have to face a 40-60% markup on cannabis in California just for business to make a profit. And there are limits on the potency too -- no more than 100mg of THC per package, and 10mg per serving. That's all right for casual users, but patients who require a big dose for their health might need much more than that.

All of this means that while there is expected to be a boom once the doors open, there might in fact be a bust: A lot of businesses that start selling soon in 2018 might not even be around at the end of the year.

Hopefully it's not quite as bad as all that. You have to think that if the market really is crushed by high taxes, legislators will have to reconsider those, and ditto for the potency limits (especially if legalization starts to move forward at the federal level). But Simms isn't wrong in saying that it's not going to be all puffs and hits come January 1st. There will probably be a few kinks in the system, and we'll all need to work together to make sure we can create a stable and viable market, in California and everywhere else.

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