This one company can do more to move California’s marijuana profits into the legal light than any politician in the state…
It’s no secret that California legislators have mucked up many aspects of cannabis legalization in the Golden State.
For starters, as I told you about back in December, they left it up to California’s 482 cities and 58 counties to determine what types of cannabis business activities they would allow in their jurisdictions.
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.
Effectively, laws can change at city limits. So, despite legalization at the state level, there is still an all-out prohibition on operating a cannabis business of any kind in two-thirds of the state.
Rather than deal with the resulting crazy quilt of regulations from jurisdiction to jurisdiction, many customers will go to their old, black-market dealers and many businesses will have little luck with licenses.
The government also went overboard on taxes. In some parts of California, state, local, and excise taxes could exceed 40% – a major disincentive to buying legally.
Bad laws like these keep revenues out of the pockets of legitimate cannabis businesses. They also hold back gains investors can make on their cannabis stocks.
But because of the actions of a single, privately-held enterprise, the siphoning of revenues into illegal channels could slow down to a trickle.
Offsetting the Failures of the War on Drugs
One of the big promises of cannabis legalization is that it creates the opportunity for more people to benefit from the birth of an industry.
The “War on Drugs” has been a complete failure. The starkest being its disproportionate impact on many individuals and communities.
To help fulfill that promise, Weedmaps – an online directory that connects its users with marijuana dispensaries – has allowed illegal operators to advertise. Its position has been that government restrictions and scarce capital have made it “nearly impossible to participate in the legal market.”
But last week, the company announced that later this year it would no longer allow unlicensed dispensaries on its platform.
Without an easy way to access customers, black-market operators will not draw nearly the same amount of business, with some estimating that half will shut down.
Instead, the company will support unlicensed businesses in their efforts to become licensed. For instance, Weedmaps will train owners on compliance regulations, how to get licensed, and provide professional support. And once a business gets a license, it can advertise on the site for free for up to one year.
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With the end of this support for black market sales, legal cannabis businesses operating in California can expect a surge in revenues.
Boosting the Legal Market
And central to Origin House’s California-focused strategy is owning distribution assets.
In California, all sales of cannabis products must go through licensed distributors. These distributors are private companies and serve several roles. For example, only distributors can transport marijuana products. They are responsible for all quality assurance packaging and labeling of their products, and they collect all cannabis taxes for the state.
Distributor licensees touch all cannabis products sold in the state. This makes them toll takers in the California cannabis market.
By acquiring key distribution licensees to support a large brand portfolio, Origin House will be well positioned to address the fragmented and chaotic California cannabis market with a comprehensive and professionally run structure.
And the sharp policy shift from Weedmaps will force even more revenue through Origin House’s cannabis tollbooth.
You’ll find plenty of other ways to profit from the migration of cannabis sales to legal channels in our NICILytics Database. With the right access, you are free to uncover those California-focused opportunities for yourself.
Executive Director, National Institute for Cannabis Investors
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10 responses to “Private Enterprise Boosts California’s Legal Marijuana Profits”
August 29 2019