“This is going to open up a tidal wave of big operators… sucking all the capital out of the capital markets and essentially rendering social equity participants unable to even raise funds,” said Aaron Goines, co-owner of Emerald Turtle, a capital-owned cannabis delivery company in Massachusetts. “In general for social fairness, I think it would be a disaster at this point for federal legalization to occur.”
Senate Majority Leader Chuck Schumer backed the decriminalization of cannabis, producing a bill this summer that would regulate an industry nationwide and force siled state markets to interact with each other . Tearing down those walls would open up new business opportunities and unlock more traditional banking tools for an industry that has long been forced to primarily use cash. However, this could immediately expose every existing state market to a frenzy of domestic competitors and disrupt hard-fought local policies, a combination of fears that have begun to blur the industry’s approach to federal legalization.
Struggling Oregon cannabis growers could suddenly ship their products anywhere in the country, including places like Alaska and Massachusetts, where they would likely be lower than the prices local growers typically get. . The tightly controlled and expensive medical marijuana programs in Florida and Pennsylvania could be forced to compete with cheaper products out of state. And large national companies could flock to Washington state and Maine and buy out or kick out small businesses.
Many states are trying to put safeguards around their marijuana markets: Maine and Washington are intentionally limiting the industry to help protect small businesses. Others have created licensing requirements that intentionally help communities affected by the war on drugs, including Massachusetts, which has exclusively granted licenses to deliver cannabis to equity seekers in the state for three years. .
“If you look at the states, it’s really clear that it’s always the smallest businesses and the most marginalized groups that suffer the most when you introduce this kind of chaos,” said former Massachusetts Cannabis Commissioner Shaleen. Title, who now runs the Parabola Center. , a cannabis policy think tank.
State quilt quilt
Cannabis is the only industry in US history that has been legalized in 37 states (for recreational or medical purposes) without having federal permission to operate.
And since interstate commerce is overseen by the federal government, each market has grown to support all aspects of growth, production, distribution, and sale, as goods cannot cross state borders. . Cannabis is grown in states where it doesn’t grow naturally well or cheaply, rather than importing it from places where it thrives, like California and Oregon.
It would be like every state had to grow and process their own oranges because they couldn’t ship juice from Florida.
The big question for small businesses in these siled markets is what happens when these hard borders suddenly disappear.
“If the [Schumer] the bill is passed, with this current language that really doesn’t give states the authority they need to keep their markets intact, so I think we’re seeing a race to the bottom, ”Jeremy Unruh said, vice-president of regulatory and public affairs. at PharmaCann, a multi-state operator with facilities in New York, Illinois, Ohio and Massachusetts.
Unruh believes large-scale growers will flock to states with cheap energy, more flexible labor and environmental standards, lower taxes and fees, and good outdoor growing conditions. Then they’ll export their cheap, mass-produced cannabis to the rest of the country.
“You will see a dramatic shift in economic opportunities that have enjoyed states like Colorado and Washington (…)
And for dispensary owners, producers and delivery companies, the removal of state borders will also immediately change where capital comes from and to whom it goes. Some states have residency requirements for financing, licensing, or both, meaning state capital is either prohibited altogether or must be invested in local businesses. Others have licenses limited only to equity seekers, with the intention of opening up opportunities in the marijuana industry to those facing disproportionate criminal enforcement around drugs.
Washington state, for example, has residency requirements and permit caps in hopes of maintaining a mom-and-pop style market. Ian Karl Eisenberg, founder of the Uncle Ike’s Pot Shop dispensary chain in Seattle, said Washington businesses would not be able to compete for market share if borders fall and residency requirements are removed.
“Some people want to keep [the state’s industry] small organic, mom and pop businesses. Which is good, but it’s not the reality, ”said Eisenberg. “When we open, there won’t be any big guys here. It’s going to be big guys from other places – like, God forbid, Portland – come in and buy us out. “
But laws like these could be seen as limiting or binding on interstate commerce under the dormant trade clause – an implicit constitutional ban on states passing laws that discriminate against imported goods.
“Once the dormant trade clause is active, social equity programs will become vulnerable,” said Robert Mikos, professor at Vanderbilt Law School. Mikos says the courts could overturn parts of current state regulations – like residency requirements or labeling regulations – on the pretext that they impede interstate commerce.
“This is something that has gone under the radar, because it is not in the text of [Schumer’s cannabis bill] or any other federal proposal, ”Mikos explained during a panel hosted by law firm Perkins Coie earlier this month.
Concern over federal legalization is not pervasive. Chris Fevry is the co-founder of Your Green Package, a majority minority delivery service based in Massachusetts. He says he’s more concerned with the producers he knows in the industry than his own business.
“I think competition is definitely a good thing,” he said. “The downside is that the smaller players will be overwhelmed.”
In Oregon, where licensing is plentiful and there are hundreds of operators of all sizes, producers are eager to see interstate commerce begin. The state changed its cannabis regulations two years ago to allow interstate commerce the second the federal government allows it.
And in other states like Florida, industry advocates point out, the licensing structure favors large companies over small companies. Smaller operators, equity licensees and consumers in these markets would likely benefit from a more open market.
“It would be a shame [that] in order to protect nascent experiences of social equity in certain states, [it would] at the expense of potential entrepreneurs and consumer access in other states, ”said Justin Strekal, political director of the National Organization for Marijuana Law Reform.
Some lawmakers, regulators and business owners want the federal government to enshrine stronger protections for state market regulations in any bill decriminalizing marijuana. In comments submitted earlier this month on Schumer’s cannabis bill, Colorado Governor Jared Polis, a Democrat, called on the federal government to allow state markets to continue with the structures they created in the vacuum caused by the lack of federal oversight.
Some industry officials and advocates, such as Title and Unruh, are calling for the immediate deprogramming and deletion of recordings, coupled with a phased approach to interstate commerce.
“We’re not talking about stopping interstate commerce. We’re just talking about reversing the default, so these existing state regulations remain valid until Congress says otherwise, ”Unruh explained.
As part of such a plan, states such as Oregon and New York could potentially strike a deal whereby Oregon exports cannabis to New York. Or a state like Iowa could open the doors to any state that will allow its producers to export. But borders will not be immediately dismantled, giving small businesses time to adapt and survive.
Oregon’s desire for open markets, however, could be a barrier to any restrictions on interstate trade in federal legislation – in the form of powerful Senate finance chairman Ron Wyden (D-Ore.), one of the architects of the Senate decriminalization proposal.
In the meantime, some states are proactively changing their regulations to make their cannabis industry more competitive nationally. Colorado, the oldest market for adults, initially put in place regulations that made it more difficult to grow cannabis outdoors than indoors. But last summer, Colorado lawmakers passed a new bill relaxing some outdoor growing regulations – and indicated the impetus was to make the Colorado market more competitive when federal legalization takes hold.
“There are winners and losers in capitalism. And it’s not our position to pick winners and losers, ”Strekal said. “And by restricting interstate commerce, you are picking the currently established players as the winners.”