News
In designating California’s marijuana industry as essential under the state's COVID-19 stay-at-home order, the administration of Gov. Gavin Newsom has argued that the health benefits of keeping pot shops open outweigh the risks — even as opponents of the policy call it reckless.
Critics say it doesn't make sense to allow people to congregate at cannabis stores, increasing the chance of infection, so they can buy products that are smoked at a time when the virus is attacking respiratory systems.
Despite some studies showing us that THC is actually bad for those fighting off COVID-19, during this great American lock-down cannabis sales are thriving, providing an opportunity for the industry as many states have deemed marijuana essential, just like grocery stores and gas stations.
This has been a boon for retailers and also an uptick for the brands they carry, but also gives the cannabis industry a window to gain larger acceptance with the consumer public.
Millions of Americans are looking for something today to provide some mental relief, and meanwhile, medical marijuana can be used to help ease anxiety and help manage an uncertain world.
“What’s important is that cannabis is considered medicine, and people need access to medicine during this time,” said Chanda Macias, of the Washington, D.C. based National Holistic Healing Center, and a board member of the National Cannabis Roundtable advocacy group.
One company rushed to expand its delivery fleet. Another has seen sales triple. The global coronavirus pandemic has left millions of people locked out of bars, restaurants and theaters, but it’s been an unexpected boost for some U.S. pot shops.
Marijuana users in the nation’s largest legal pot shop, California, and elsewhere are on a buying binge, as they stock up for potential quarantines or simply light up in search of relief during anxious times and government lockdowns. New York, San Francisco and Palm Springs, California, are among the cities labeling dispensaries “essential” businesses that can remain open during virus lockdowns, in some cases with limitations.
Sales increases also are being witnessed in Colorado and Washington, according to cannabis data company Headset.
Dispensaries, meanwhile, have been quick to accommodate virus-wary customers, boosting delivery and pickup options.
California legislators considered a plan Monday intended to encourage more banks to do business with marijuana companies that have been frozen out of thousands of financial institutions.
Most Americans live in states where marijuana is legally available in some form. But most financial institutions don't want anything to do with money from the cannabis industry for fear it could expose them to legal trouble since the federal government still considers marijuana illegal.
The conflict between state and federal law has left businesses in California's emerging legal pot industry in a legal dilemma, shutting many out of everyday services such as opening a bank account or obtaining a credit card. It also has forced many businesses to operate only in cash — sometimes vast amounts — making them ripe targets for crime.
Although the California marijuana industry has hoped for tax relief as it struggles to compete with a thriving illicit market, a tax increase could be on the way.
A tax hike would hit cannabis companies’ bottom line and could drive more consumers into the illicit market in search of cheaper marijuana products.
But an increase isn’t a foregone conclusion. Moreover, a tax cut could occur.
The California Department of Tax and Fee Administration (CDTFA) uses a 60% markup rate, along with the average market price of wholesale marijuana, as a basis for the state’s 15% marijuana excise tax.
That markup rate has to be recalculated every six months, and CDTFA Director Nicolas Maduros told an industry conference this week in Sacramento the excise tax may go up this summer.
“We’re responsible for resetting that markup rate every six months, so it will be reset July 1,” Maduros said, when asked during a panel with other MJ regulators.
“It’s based on market data, and I think particularly once …track-and-traceis more fully utilized, that we’ll have some better pricing data to figure out what that markup rate should be,” Maduros said.
The state track-and-trace system launched in January but is only used by cannabis companies with annual business licenses.
And so far just a fraction of the legal companies have obtained those permits, which means most of the industry isn’t feeding data into the track-and-trace system.
“We’re administrators, so it’s not up to us to sort of use that as a way to lower or increase the tax burden. We’re simply looking at what the facts are. It’s up to the legislature … to determine what the actual tax rate is,” he said.
When asked if the markup rate – and therefore the excise tax – could increase, Maduros said: “It could.”
It’s worth noting, however, that the rate also could either decrease or stay the same.
A CDTFA spokesman said in an email that there’s also no cap on how much the markup rate could increase – or decrease.
What a markup could mean
Maduros said after the panel that any decision on the markup rate and the excise tax will not be made until June at the earliest.
The markup recalculation would not affect the state cultivation tax, which is $9.25 per ounce of flower, $2.75 per ounce of leaves and $1.29 per ounce of fresh plant.
California Cannabis Industry Association Spokesman Josh Drayton said that a tax increase “would only further damage the supply chain as it competes against the illicit market.”
But, Drayton emphasized, it’s possible the excise tax may either stay the same or even decrease, and said it’s too early to tell what will happen with the CDTFA’s recalculation.
“I think we need full implementation of Metrc and track-and-trace before we consider any increase,” Drayton said.
“We have not seen any data that would support an increase in the excise tax for any part of the supply chain.”
Separately, a state bill to temporarily reduce state cannabis taxes is awaiting hearings in the California Legislature.
If successful, Assembly Bill 286 would reduce the excise tax from 15% to 11% and suspend the cultivation tax until 2022.
When California, the most populous state in America, legalized recreational marijuana last year, many had high hopes for the industry, writes Joseph Misulonas. But unfortunately, it appears initial projections for the success of the industry were a little off.
The California Department of Tax and Fee Administration announced that in 2018 the state collected $345.2 million from marijuana taxes. While that is a huge number, it's actually only slightly more than half of the state's initial projections of $643 million in tax revenue that they predicted they would receive in 2018.
Many have argued why the state didn't make more money off of legal sales. The biggest reason seems to be the tax rate. California has some of the highest cannabis taxes in the nation, and customers can sometimes pay tax rates up to 45 percent on their marijuana purchases. These high prices are forcing many cannabis users to continue purchasing black market marijuana. This would also explain why California cannabis sales actually decreased between 2017 and 2018, despite it being legal recreationally last year.
Despite the fact that almost everyone acknowledges the tax rate is an issue, California legislators continue dragging their feet on the issue and not passing bills to lower the rate, despite several proposals to do so.
For years, “$20 billion by 2020” was an oft-heard refrain from market analysts who saw a bright and prosperous future for the legal cannabis industry. Now, with that horizon fast-approaching, analysts are setting their sights on what the next decade has in store. And one analyst, RBC Capital Markets’ Nik Modi, is seeing green.
RBC Capital Markets, an investment bank that’s part of Royal Bank of Canada, issued a memo to clients outlining the rapid growth of the U.S. marijuana sector. The memo, authored by Nik Modi, shows how cannabis sales in the U.S. are gaining ground on beer and wine sales.
Projecting a compound annual growth rate (CAGR) of 17 percent, Modi estimates that the legal cannabis category could reach $47 billion in sales annually in the United States within the next decade, according to Business Insider.
Yet the cannabis market in the U.S. faces uncertainties that Canada does not. Regulatory environments are constantly and rapidly shifting as states implement legalization and adopt different approaches to dealing with federal prohibition. Investing in the industry still carries risk.
But RBC Capital Markets analyst Nik Modi brushed off concerns about the unpredictability of legal cannabis in the U.S.. Instead, he drew clients’ attention to a shift in consumer trends that is already having a major impact on domestic retail markets.
Data from BDS Analytics, included in Modi’s memo, shows that the margin on cannabis flower has steadily declined since the beginning of recreational sales in Colorado in 2012. That’s indicative of a larger national move away from flower and toward cannabis edibles and concentrates.
In Colorado, flower made up 70 percent of legal sales when shops opened in 2014. By the end of Q4 2017, flower accounted for just 46 percent of total sales. Picking up the slack were edibles and concentrates. Both are surging in popularity everywhere, and Modi thinks those forms of cannabis can propel total sales beyond $47 billion a year by 2027.
Another eye-catching aspect of Modi’s analysis is another BDS Analytics chart showing the estimated U.S cannabis market size. The chart compares cannabis sales to spirits, wine, cigarettes, and beer. From spirits at $58 billion to beer $117 billion, all four categories best cannabis at $50 billion. But interestingly, the chart includes total legal and illegal cannabis sales to arrive at the $50 billion figure. It’s unclear what proportion of that amount is made up by illegal sales.
Other cannabis market analysts say that illegal sales still account for the majority of total marijuana purchases in the U.S. But as legalization continues to channel consumers into the legal market, illegal sales are slowly declining.
While access to legal cannabis expands nationwide, the size of the illegal market remains difficult to measure. So does predicting how much of it will move aboveboard in the coming years.
The letter RBC Capital Markets sent to clients also lauded Constellation Brands’ recent $4 billion investment in one of Canada’s largest medical cannabis producer Canopy Growth Corp. Constellation Brands is the firm behind the popular beverage companies Modelo, Corona and Svedka. The company has been moving incrementally into the Canadian cannabis market, upping its stake each time. Nik Modi says he’d like to see more companies make similar moves in the cannabis space.
5,871 miles of open Pacific Ocean waters separate the Commonwealth of the Northern Mariana Islands (CNMI) from the coast of California. But the 15-island chain that makes up the United States’ westernmost territory is poised to do something no U.S. state has ever done.
On Wednesday, 18 of CNMI’s 20 legislators voted to approve a bill to legalize cannabis for adult use. The bill would also legalize medical cannabis and industrial hemp. And if CNMI Governor Ralph Torres enacts the bill, the territory will make legalization history—twice.
This isn’t the first time CNMI lawmakers attempted to legalize cannabis. As recently as May, the CNMI Senate approved a piece of legislation nearly identical to the House-approved bill. Procedural issues, however, stymied the bill’s progress.
After another false start in the Senate, the House opted to file its own bill. It took less than a week for the full chamber to vote to approve the proposal.
That act alone makes CNMI unique among the 9 U.S. states that have legalized adult-use marijuana. Vermont comes closest, having legalized marijuana through a legislative process rather than a ballot initiative. But unlike CNMI’s proposed legislation, Vermont’s law doesn’t establish a retail market. The Mariana Islands’ legislation would.
There’s a second way CNMI would make legalization history if the bill becomes law. Every U.S. state that has legalized adult-use marijuana did so only after establishing a medical cannabis program. But in CNMI, there is no medical marijuana. The territory would be the first U.S. jurisdiction to go from total prohibition to full legalization.
Despite the tremendous distance between the Commonwealth of the Northern Mariana Islands and the continental United States, the territory has been closely watching legal cannabis unfold there. Indeed, the overwhelming support for the proposal in the House is due to lawmakers’ recognizing the significant benefits of legal weed.
The full text of the legislation, SB 20-62, cites how states with regulated markets for marijuana “have observed real and significant benefits to public health, safety and quality of life for all residents,” and goes on to list medical benefits like treatments for pain, epilepsy and PTSD, social benefits like a reduction in overdose deaths and lowered crime and economic benefits like tax revenue and job growth.
But the bill still has a couple more hurdles to clear before it becomes law. The CNMI Cannabis Act of 2018 is currently on its way back to the Senate for approval. After that, it will head to the desk of Gov. Ralph Torres, a Republican who has expressed concerns about legalization.
In response to House passage of the bill, Torres stressed the importance of taking “a look at both sides of the coin.” Torres wondered about the crime statistics in states with legal weed and other public safety issues.
Whether those reservations would ultimately lead Gov. Torres to veto the legislative effort and oppose the will of CNMI residents, however, remains to be seen. Public hearings about the act had higher attendance than any hearings senators could remember. Initially, legislators had designed the bill as a voter referendum before adopting it in the Senate.
July 5, 2018
Marijuana festival organizers were banking on this to be their biggest year yet, now that recreational cannabis is legal in California and the state is legitimizing such events by licensing them for the first time.
Promoters say they planned to stop operating under the loose protections of the state’s medical marijuana laws, where they’d force attendees to get doctor’s recommendations for cannabis before entering the gates. Instead, they hoped to have licenses that would allow anyone 21 and older to buy and smoke cannabis, just like they can buy and drink beer at other festivals.
But with local authorities now able to block such festivals even from the limited venues where they’re permitted by new state rules, there weren’t any state-sanctioned events in Southern California during the first half of the year. And none are on the horizon for the rest of 2018.
The picture is a bit brighter in Northern California. The state licensed marijuana festivals this spring in Sacramento and in Santa Rosa, where the massive Emerald Cup is also expected to go off in December without a hitch.
Marijuana is now legal in Oklahoma for medical purposes.
Voters approved State Question 788 in Tuesday’s primary, which makes it legal to grow, sell and use marijuana for medicinal purposes. The law provides no outlines on qualifying conditions, giving physicians broad latitude to determine why they recommend medical marijuana to patients. Under the law, adults with a medical marijuana license would be authorized to possess up to 8 ounces of marijuana, six flowering plants and various weight of edibles and marijuana concentrates derived from the plant.
“The passage of State Question 788 highlights the strength and diversity of public support for laws allowing the medical use of marijuana,” said Karen O’Keefe, director of state policies for the Marijuana Policy Project, a drug policy reform group. “Most Oklahomans agree that patients should be able to access medical marijuana safely and legally if their doctors recommend it. It is noteworthy that this measure passed in such a red state during a primary election, when voter turnout tends to be older and more conservative than during a general election.”
Oklahoma becomes the 30th state to legalize cannabis for medical use. Legal recreational marijuana has been approved in nine states and Washington, D.C., which continues to ban sales, unlike the state programs. Despite the states’ efforts to scale back on criminalizing the plant over the past few years, marijuana remains illegal under the federal Controlled Substances Act.
Former President Barack Obama’s Justice Department allowed states to forge their own way on marijuana policy with guidanceurging federal prosecutors to refrain from targeting state-legal marijuana operations. But in January, Attorney General Jeff Sessions rescinded the Obama-era guidance, a move that has possibly paved the way for a federal crackdown on legal marijuana. But states that have legalized medical marijuana retain some protections from federal interference under a budget rider known as the Rohrabacher-Farr amendment, which must be renewed every time Congress passes a government-funding bill.
In order to more fully protect marijuana states from the policies of federal prohibition, Sens. Cory Gardner (R-Colo.) and Elizabeth Warren (D-Mass.) introduced a bill earlier this month that would allow businesses and individuals working in the burgeoning legal marijuana industry in states around the nation to operate without fear of Department of Justice prosecution. The bill would also protect banks that work with state-legal marijuana businesses. President Donald Trump has said he will “probably” support the bill.
Marijuana is the most commonly used illicit substance in the United States, and the trend of states bucking prohibition in favor of legal regulation of the plant reflects a broad cultural shift toward greater acceptance of marijuana. National support for the legalization of the drug has risen dramatically in recent years, reaching historic highsin multiple polls. And states like Colorado, the first to establish a regulated adult-use marijuana marketplace, have seen successes that have debunked some lawmakers’ and law enforcers’ predictions that such policies would reap disaster.
