This one legal change not only opens millions of dollars in immediate opportunity for a group of legal cannabis, it also shows the countries most populated state is finally getting its program heading in the right direction.
Earlier this week, I raved about the impressive Nevada recreational cannabis program. They’re the gold standard among regulated retail programs that are newer to the books.
In the process, we criticized California as the sort of antithesis to Nevada. And few in the industry, if any, would take me to task for it.
That’s because California, so far, is a story of badly missed opportunity. The state has a larger population than the whole of Canada, so when recreational cannabis was legalized and stores were allowed to start selling to any adult with an ID on January 1 this year, the expectations were high.
Aside from the cumbersome red tape in the phase-in plan itself – which I’ll get to in a moment – there was a huge backlog of businesses that were waiting for approvals well beyond the first day of the year.
Perhaps more importantly, California enacted some of the highest tax rates in the country, while also allowing counties and municipalities to pile on. And they did. It’s a big part of why the black market continues to operate there with little disruption – this is infuriating to legitimate marijuana businesses.
All of that said, California still has the potential to be one of, if not the most lucrative markets in the United States. The customer base is there. The quality companies and products are there. It’s by no means too late.
And, finally, it has become apparent that the state realizes it needs to make some big changes to cash in on the fastest emerging industry we’ve seen in a lifetime.
Here’s what I saw this week that convinced me that California is ready to start doing things that will make residents, businesses, and especially investors much happier…
Burdensome Regulations Give Birth to Huge Opportunity
When California voters approved Proposition 64 over two years ago, it became legal for individuals to carry up to an ounce of marijuana and grow it at home, anywhere in the state. However, the law also gave individual jurisdictions considerable latitude in determining for themselves just how other aspects of the law would be implemented. The result is a crazy quilt of regulations across California’s 482 cities and 58 counties.
What this means is that while a municipality may allow cannabis businesses within its incorporated limits, the county could prohibit businesses in the unincorporated regions. In short, laws can change at city limits.
So even though California has a larger population, and a much larger cannabis market potential, than Canada, running a cannabis business is still illegal in much of the state.
Let me give you an example of just how much of the state is off-limits to cannabis.
Operating a cannabis business of any kind is prohibited in more than two out of three cities and counties. That works out to an all-out prohibition of any type of cannabis operation in 338 cities and 40 counties.
And when it comes to running a business that can actually sell cannabis products to a customer the restrictions are even more severe. Less than one-fifth of California municipalities allow a medical-only dispensary, and less than one in seven allow recreational dispensaries.
But based on regulations just submitted by California’s Bureau of Cannabis Control, the realized market just got a work-around that will make the market significantly bigger…
(Legal) Marijuana Delivery Is California’s Next Dominant Trend
Marijuana delivery is about to become huge business in California. The new bureau regulations will get around previously standing prohibitions set by counties and municipalities. Business will be able to ship cannabis to its customers even if dispensaries are banned in that area.
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This will be a game-changer for California’s medical market. Think about it, if you’re in severe pain or too ill to drive to a far-off city that allows dispensaries, you realistically might not be able to get your medical marijuana prescription filled in a timely fashion.
If you’re a recreational consumer, you won’t bother with the hassle – again, California is not low on black market, at least for now.
Residents in more than two-thirds of all cities won’t have to make this choice anymore. The new regulations, which are approaching the final approval stage, would clear the way for cannabis deliveries throughout the state, regardless of any city or county laws. They literally won’t be able to stop cannabis.
This is a massive step in the right direction for a program hampered by ill-advised and onerous restrictions. And once that new revenue comes in, it will inspire more companies to go public throughout 2019.
Even with the old regulations in place, a handful of companies are thriving. I’m getting ready to tell my Cannabis IPO Insider readers all about my favorite companies in the state. It’s already raking in tens of millions just from its existing delivery business – and its conservative estimate is that revenue will almost triple within about one year even without this helpful law change.
That company is going to find itself awfully busy immediately after California greenlights this change.
This is an important change of direction for California. Bolstering cannabis delivery system, especially for the thousands of medical patients in California, goes a long way to realizing California’s full potential.
And that’s really just a first step.
Everybody loves a comeback story. California’s move tells me the state is setting up for its big rebound in the coming year. And that’s worthy of celebration for investors in publicly traded companies with operations in the state.
Thanks for being an important part of the National Institute for Cannabis Investors,
Executive Director, National Institute for Cannabis Investors
7 responses to “Revenue About to Rush In as the Market Bigger Than All of Canada Is Righting the Ship”
December 13 2018