Federal legalization will usher in a new regulatory landscape for the cannabis industry…
I can’t tell you how many times I’ve heard someone say that I’m never going to escape death and taxes.
But I’d like to add one more unpleasant item to that list: increased regulations.
I suppose it shouldn’t come as a shock. Every major empire has suffered through a growing list of regulations.
If you go back to Ancient Greece – a society in which more than 70% of people farmed – there were tons of regulations on land ownership and grain production. As a grain farmer, you had to do exactly what the government asked of you. That typically meant restrictions on export.
When we look at Ancient Roman times, banking rules were strict.
Roman banks were not free to use deposits. In fact, many had reserves equal to 100% of their total deposits (when they weren’t lying, that is).
And the Roman Senate would regularly issue senatus consulta, which were regulatory provisions on all sorts of matters.
You see, regulations have always been with us.
In the United States cannabis industry, stiff regulations are the norm.
But they’re going to get a lot crazier once the Feds legalize marijuana…
Cannabis Under the FDA
First, you have to imagine that cannabis would be governed by the Food and Drug Administration (FDA). This makes sense considering alcohol and tobacco are as well.
That means major changes will happen to packaging rules, testing, products made, even the names of the strains.
Charlie Delvalle makes a convincing argument for cannabis legalization as soon as 2021 in part one of his new “The Future of Cannabis” series.
On the production side of things, growers looking to export into other countries will have to spend more money to meet international standards. In Europe, companies have to meet Good Manufacturing Practice (GMP) standards.
GMP certification doesn’t happen overnight. For example, one aspect of GMP is to ensure the stability of your product. In other words, you need to set an expiration date for it.
Right now, flower has no expiration date in Oregon, where my cannabis dispensaries are located. But under GMP standards, the only way I could produce flower with no expiration date is to have years and years of data showing that a product I harvested long ago is still good for consumption.
There’s no doubt the FDA would also come up with its own standards for producing, extracting, packaging, and selling cannabis.
Perhaps the Feds will want growers to use LED lights instead of high-intensity discharge lighting. LED lights cost four times the amount. And while LEDs generate less heat, any room running these lights will need more dehumidifiers, which aren’t cheap to buy or operate.
The Feds could even kill entire product categories.
It all depends on who wins the lobbying wars.
The Safest Play in a Shifting Regulatory Environment
Whatever new rules spring up in America will be lobbied hard by the biggest cannabis players in the market. But cannabis companies won’t be the only ones looking to influence lawmakers.
The tobacco, alcohol, and pharmaceutical industries will all try and exert influence over cannabis. Even Walmart may end up wanting to sell packaged joints, which would drastically change the retail industry.
Nobody really knows what will happen.
All I can guarantee is that federal legalization is going to add a host of new regulations that will change the marijuana industry.
And that could be happening as soon as 2021.
The safest play you can make in a shifting regulatory environment is a real estate investment trust (REIT) like Innovative Industrial Properties Inc. (NYSE: IIPR).
The demand for cannabis-friendly properties is insane. There’s just not enough. And business owners are willing to pay excessive sums of money to lease those properties. That should keep demand for IIPR’s properties extremely high, and keep its dividend growing for years to come.
You can learn more about the lucrative world of REITs like IIPR in this comprehensive guide that my colleagues at the National Institute for Cannabis Investors put together.
That’s all for now.
In part three of this series, I’ll share one more thing that’ll come when the Feds finally give the cannabis industry the green light.
Advisory Board Member, National Institute for Cannabis Investors
7 responses to “This Is What the Legal Cannabis Industry Could Look Like Under the FDA”
August 03 2020