Cannabis Industry Developments in California | Financial Buzz

Cannabis Industry Developments in California

Over a year has passed since California’s recreational marijuana laws took effect. Since California has the nation’s largest state economy, there’s been a lot of interest in whether or not the success of cannabis in California could lead to a nationwide expansion in recreational marijuana laws. California is known as a “regulatory laboratory,” so it could serve as an example of how (or how not to) adequately regulate the industry. Success of the market in California could encourage other states to push for cannabis legalization.

How does then recreational marijuana business fare after a year? Here are all the latest developments, analysis, and predictions in California cannabis.

Impending Licensing Crisis

One of the largest issues facing cannabis companies is that many licenses are set to expire within the next few months. The State issued many temporary licenses to businesses seeking to grow and sell cannabis, with the expectation that companies would have time to optimize their business for the more rigorous process of getting a permanent license.

Cannabis growers are frustrated because many of their temporary licenses will be expiring within the next few months (temporary licenses are only granted for one year), and the State has issued very few permanent licenses. Cannabis growers blame this on heavy regulatory practices by the State. Economic regulation is very heavy in California, and it’s no different with marijuana. What makes it even more difficult for cannabis growers, though, is that the State is still trying to determine which regulations are necessary, and which are not. It appears as if the State Government would rather let local municipalities set cannabis laws.

This, in and of itself, poses another problem for cannabis growers—lots of cities in California are resistant to letting retail cannabis stores open. For example, all cities in Orange County (except for Santa Ana) have banned retail marijuana.

Not only are cannabis companies fighting economic regulation, they’ll also have to do battle with cultural resistance to cannabis that’s still prevalent in some suburban areas.

Push for Greater Freedoms

Cannabis bans haven’t stopped marijuana companies from pushing the State to broaden weed-friendly laws. There’s a big push to get cannabis consumption lounges legalized. San Diego cannabis companies in particular are pushing for the local government to allow for lounges where patrons can freely smoke weed—these are mostly still illegal throughout the state due to complicated technicalities about public consumption laws. And, interestingly, the City of San Diego is seriously considering it.

If San Diego issues permits for consumption lounges, it will likely be modeled after San Francisco, which has had legal medical marijuana lounges since 2010. Of course, anti-marijuana activists in San Diego are sure to voice their opinions, and the city has been somewhat notorious for failing to complete progressive economic developments. Still, one can get red-eyed (pun intended) thinking about the possibilities of two of California’s major cities having legalized consumption lounges.

Black Market Hurting Sales

One of the great hopes about legalizing recreational marijuana is that it would damage the marijuana black market that’s been so powerfully and successfully operated by Mexican drug cartels. That hasn’t happened yet. The black market is alive and well in California, and it’s hurting sales at cannabis retail stores.

It’s more of a cultural problem than anything. Most retail cannabis shops opt for a vibe that’s more akin to a pharmacy than a corner tobacco shop. Many retail cannabis establishments promote themselves as a place for healing (that’s not a criticism, especially when you take into consideration the health benefits of marijuana). But while these “upscale” shops may be appealing in areas with higher-income residents, they’re unpopular in low income areas. The black market has cheaper prices, not to mention that some low income residents are put off by the “New Age vibe” of cannabis retail stores. Another problem is that there are simply not enough cannabis retail stores to feed the market.

With the State over-producing marijuana, and not selling enough of it, some fear that the market could crash. Cannabis companies blame heavy regulations for contributing to high prices and inhibiting the opening of more retail cannabis stores.

Boom is Still Coming

It’s still widely believed by economists and investors that the marijuana business will boom—the only question is when. First, California will have to get a grip on its regulatory practices and create laws that appeal to both cannabis companies and cities that aren’t yet on board the weed train. New technologies, like ones pioneered by Cannabix, should make cities more confident about their law-enforcement capabilities over pot.

Once cannabis companies are able to get retail licenses more easily—and once enough cities come to realize their potential for tax revenue and market job growth—marijuana sales should grow exponentially. Experts believe it could happen within the next few years.