Pubdate: Thu, 15 Oct 2015
Source: SF Weekly (CA)
Column: Chem Tales
Copyright: 2015 Village Voice Media
Author: Chris Roberts

What a Regulated Cannabis Marketplace Will Mean to You.


California government is finally on board with the state's enormous 
cannabis industry. Last week, Gov. Jerry Brown signed into law the 
Medical Marijuana Regulation and Safety Act (MMRSA), a package of 
laws that - at long last - attempt to get a handle on how the state's 
biggest cash crop is grown, processed, and sold.

Every step of the supply chain will, by 2018, be overseen by a new 
Sacramento office called the Bureau of Medical Marijuana Regulation. 
Run by a "weed czar" appointed by the governor, the BMMR will issue 
state licenses to commercial cannabis businesses, which will also 
need to be licensed and approved by local authorities at the city or 
county level.

The rules were a long time coming, arriving almost 20 years after 
voters legalized medical marijuana with Prop. 215 in 1996, and 12 
years after the Legislature last acted on the issue with 2003's SB 
420. It will be some time yet before real change is felt, as existing 
businesses have until 2018 to secure state licenses - but what can 
industry insiders and consumers expect?

First, some basic reminders: medical cannabis patient rights under 
Prop. 215 are untouched. You are still allowed to grow and consume 
limited amounts without a commercial license. And this has nothing to 
do with what may or may not happen with future attempts to legalize 
recreational marijuana.

Local bans stand

If you live on the Peninsula, you know this already: it can be hard 
to find a legal cannabis store. Many cities and counties around the 
state strictly limit or ban outright dispensaries or cultivation in 
some way. All of those bans stand, until campaigns underway in places 
like Yuba County succeed in overturning them. Allowing local bans was 
crucial in earning support from Brown and other influential state 
powerbrokers, but critics say this only encourages black market activity.

Moreover, if an existing marijuana operation is in a county that 
decides not to issue a local license, it will have to shut down. 
"There is going to be a lot of disruption in the supply chain," said 
attorney Matt Kumin, who specializes in marijuana.

For consumers, this means total uncertainty. However, prices have 
remained on a relatively stable downward trend for years. We suspect 
this will continue as the industry becomes more legitimate.

profit is legalized

Under current regulations, cannabis dispensaries must be nonprofit 
collectives or cooperatives. Under the MMSRA, a cannabis business can 
be a nonprofit - or an LLC or a corporation, which can turn profits.

Profit will have to wait until state licenses are issued, but profit 
will no longer be a reason for law enforcement raids (at least from 
state cops).

advantage to big boys

There are 17 different types of marijuana licenses available - 
covering every aspect of the industry, from cultivation to 
manufacturing to sales - and no one entity can have licenses in too 
many categories. This will discourage vertical integration, but 
businesses in place as of July are exempt. This means a handful of 
businesses around the state will be able to keep supply chain monopolies.

How much is too much? Nobody knows

Outgoing state law sets possession limits, but these were declared 
unconstitutional in a 2010 state Supreme Court decision. Yet, those 
standards are still used by law enforcement (except in counties, like 
San Francisco, where you are allowed more plants).

The new laws don't set limits per se, but they do say how large a 
garden can be. For individual patients, it's 100 square feet. For 
commercial marijuana production, total canopy can be no larger than 
an acre. How many plants can fit in an acre? "A lot," one grower told 
me. This could lead to some confusion, but most observers believe 
that a commercial license will protect most large-scale growers from 
criminal prosecution, as the bills provide for civil - not criminal - 
penalties in the form of fines if a garden is found to be too big.

The end of the Emerald Triangle?

Cannabis is synonymous with Mendocino and Humboldt counties, where 
tens of thousands of small homesteaders grow marijuana because the 
climate is suitable and because it's hard to find a pot patch tucked 
into a remote mountain valley. In a regulated commercial landscape, 
however, being hard to access provides little competitive advantage. 
Large-scale marijuana production facilities will likely shift to the 
Central Valley, where land is cheap and plentiful, and where large 
highways lead directly to population centers in Southern California.

Northern California outdoor won't go away - the market has proven 
demand for organic, boutique strains whose genetics only a few 
farmers possess - but production will shift south.


Cannabis will still be a mostly cash-only business in California for 
the near future. Both banks and credit unions have been scared off by 
federal authorities from accepting deposits from cannabis businesses. 
(After all, drug-related assets are subject to forfeiture.)

Cannabis is not entirely bank-less: some dispensaries do take credit 
cards, and some daring - and anonymous - credit unions accept 
marijuana deposits, but in both situations, somebody is telling a lie 
to someone along the way.

Both Board of Equalization member Fiona Ma and state Assemblyman Jim 
Wood (D-Healdsburg) - one of the authors of the regulations - have 
pledged to work on state legislation that would allow the marijuana 
industry to use banks, but for now, the cash-mostly situation will continue.


$44 million: sales tax collected on medical cannabis in California in 2014.

25 percent: number of dispensaries that actually paid their taxes, 
according to the Board of Equalization.

$1.2 billion to $1.8 billion: total sales of cannabis at dispensaries 
in California. (This range is wide because sales taxes can range from 
8 percent (in Humboldt) to 10 percent (in Los Angeles).
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MAP posted-by: Jay Bergstrom