Crackdowns on illegal cannabis operations are ramping up. This development is an underrated part of cannabis’ story arch that is needed to help the legal market continue to grow to its potential.
At the National Institute for Cannabis Investors, we’ve talked a lot about the transition from illicit cannabis to legal cannabis and how that can make millions for savvy investors.
But the mechanics of doing so are more difficult and complicated than they sound. So, while in most markets consumers had to buy their cannabis on the sly and risk getting arrested, in places like California and Canada with a robust “grey market” consumers had the option of choosing illegal but tolerated stores where they could purchase product without fear of arrest and with some assurance of the product’s quality.
However, one of the main aims of legalizing cannabis in both Canada and California was to stamp out that illicit market. It’s starting to happen – and it’s good news for investors.
California is starting to crack down on illicit dispensaries and growers. The state had mostly left them alone in 2018 as they encouraged the “grey market” to get licensed or risk becoming a black market. Now that some time has passed California has decided that enough is enough and it is closing those operations which refused to get licensed.
One operation recently seized 400,000 cannabis plants. That’s 400,000 plants which would not have resulted in tax revenue or benefitted operators that play by the rules. And now it’s 400,000 plants’ worth of products which will be purchased in one of the legal dispensaries instead.
Dozens of other closures are beginning to happen in California, with dispensaries and growing operations both in jeopardy.
A similar dynamic is happening in Canada. Just this Thursday, the Supreme Court of British Columbia ordered all unlicensed dispensaries to close or face penalties. And unlike in California, that order comes amid a legal cannabis shortage brought on by the massive demand which occurred on October 17, the first day of legal sales there.
The National Institute for Cannabis Investors is seeing similar crackdowns in smaller jurisdictions with a large illicit cannabis infrastructure, like Washington and Oregon.
All of this will benefit investors in publicly traded licensed cannabis dealers. Imagine if Altria Group, which recently bought 45% of Canadian cannabis giant Cronos Group, had to compete with thousands of illegal untaxed cigarette makers. You can see both the problem legal operators face and the benefits that come from solving that problem.
This change in attitudes or strategies by the authorities in legal-cannabis states is an underrated part of cannabis’ story arch that is needed to help the legal market continue to grow to its potential.
Thanks for being an important part of the National Institute for Cannabis Investors,
Executive Director, National Institute for Cannabis Investors
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December 15 2018