California released new emergency cannabis regulations on November 17 to prepare for legal recreational sales planned for January 1, 2018.
The rules are being categorized as temporary regulations that will help establish a framework to allow cities and counties and businesses prepare for the transition to a legal market while the state works out other details like seed-to-sale tracking, rules for how producers can ship product to testing labs, how an owner of a business is defined, and other small and not-so-small details.
While the Canadian and US markets are very different, the similarities to Californias approach, timeline and existing culture has many parallels with Canada.
Canada announced a long-expected notice of intent on Nov 21 that gave a broad overview of the regulations the government is looking at for regulating cannabis producers and products (as well as a two month public consultation period), just a few days after California's emergency regulations. California has a timeline of having regulations in place by Jan 1, 2018, about 7 months ahead of the Canadian governments goal of July 2018, and both jurisdictions have deeply embedded cannabis industries and cultures. Both jurisdictions are not expected to have a fully-functional system in place by their established target dates, but are furiously working towards the goal.
California and British Columbia arguably produce a significant portion of the cannabis consumed not only in their respective countries, but around the world, and have decades of embedded culture, sometimes generations deep. Some have even drawn a connection between the influence of the BC Bud indoor growing culture and American draft dodgers from california bringing up technology and approaches just emerging in places like California in the 1970s.
In response to Californias announcement, some have expressed concerns about some aspects of the regulations that they find too limiting, like concerns with high taxes, limits on the potency of edibles, and overall skepticism with what is seen as over regulation of an industry used to little oversight.
To better understand these new regulations and what they mean for smaller growers in the Golden State, I reached out to Amanda Reiman, a drug policy reformer based in Mendocino County, California. Reiman is a social worker, a cannabis expert and the Secretary of the International Cannabis Farmers Association, with a focus on promoting public policy that ensures an equal share of licenses are issued to traditional sun grown Cannabis farmers. She is also the VP of Community Relations at Flow Kana, a California-based, small batch cannabis brand.
While Reiman discusses the state of the cannabis industry and the process of regulation in California, the similarities with Canada are noteworthy. We discuss the challenge of transitioning from an under-regulated market to a regulated market, the identity crises this brings for some who have only ever known the illicit market, and how to respond to change proactively rather than fighting it.
You can read our full interview below:
Whats your take on these emergency regulations that California recently announced?
Im really glad that they came up with regulations because we really want to move this forward in California, and the reconciliation of the adult use program and the medical use program was quite a hurdle and Im really glad to see that theyre moving forward.
When we look at other states, especially Maine where the governor vetoed their implementation legislation, I think were in pretty good shape here in California, comparatively. Its a very difficult market to bring regulations into, partially because its so big and partially because its already been an industry for over 20 years, so were really not starting from scratch here.
I think that typical of California, theres way too much regulations. I think this is an intersection between the cannabis industry and this desire to have tight controls over it, and the fact that California over-regulates every business in this state. So, unsurprisingly, the taxes are so high that the barriers to becoming a business are too onerous, the reporting requirements are too intense. But thats to be expected.
I think, as weve seen in other places, as time goes on there are some elements of these programs that people realize are too onerous, and they start to relax those things. I think something thats important for folks to remember is that this is the beginning of a very long marathon. This is not a sprint. This is not going to be over in a year. This is a starting place.
Because cannabis is so stigmatized and because California loves their regulations, the starting place is going to be in an area that make a lot of people in the industry nervous, because the regulations seem so onerous. But I think its important that we respond to these regulations and not react to them, because we want to be strategic and we want to set in place something that is going to benefit the smaller player while still recognizing the constraints of the current system we exist in when it comes to capitalism.
Related: Five years in: The effects of legalization in Colorado and Washington state
Whats the difference between response and reaction, in your mind?
I think theres a lot of fear on the part of people in the industry and on the part of consumers and the general public, about what legalization looks like, and I think that some of these bigger fears, which are just these kind of broad ideas about who wins and loses in the grand scheme of things, these fears are stoked by reaction to regulation.
I think that instead of getting really anxious and afraid and being in attack mode, its more useful if were able to relax, read the entire set of regulations, think very mindfully about what will benefit the smaller players moving forward, and making those recommendations and being proactive about trying to create an equal playing field rather than being reactive to things that we assume are going to attack people in certain ways.
What do you think causes this reaction?
The first thing that a lot of folks are nervous about in general is high taxes. You have taxes at basically every level of production, plus you have localities that are passing their own cannabis taxes. So theres a concern that with such high taxes, are we really going to be moving into a regulated market or are we going to be proliferating a black market or illicit market?
I think this is a legitimate concern. I do think the taxes are too high.but I do think we will see this relax. Like alcohol, we constantly study the impact of tax rates on consumption, and who among the consuming public is impacted by certain price elasticity measures, and so really it will be no different for cannabis.
Other concerns are things like licensing fees and the cost it takes to do business. And again, those are totally legitimate concerns. Its very difficult to be a small business, its even more difficult to be a small agricultural business. So we see fees for water usage, fees for electricity, fees for land use, fees environmental inspections, and I think that thats very concerning as well. What does it take to move someone whos been operating for 20 years into a different type of marketplace, while still maintaining the integrity of their company and their product? I think thats a growing pain that a lot of people are experiencing.
And then finally I would say, as is a concern for every industry pretty much in the states: is the bigger player or the smaller player going to be the one at the end of the day thats going to win out? And thats also an extremely legitimate concern. When we look at capitalism, many times its the person with the most capital that ends up being the winner. And weve seen this happen in other industries. Weve seen struggles in the alcohol industry, with small craft breweries verses large beer producers, and so I think concerns about vertical integration, concerns about just how much cannabis we need to produce in this state and whos going to end up doing that production are all real concerns.
And again, this is all preemptive of an actual, legitimate market, and I think that folks perhaps remember that as we define quantity and quality more on things we see in traditional commodity marketsthe actual quality of the product, the uniqueness of the product, the story behind the product, rather than these artificial qualifiers that we have in the prohibition marketthat folks will understand that we do have an opportunity to help small producers elevate their brand.
But again, that comes from mindfulness and strategic response, rather than knee jerk reaction, which really tends to not necessarily move things forward, but instead, keep people stuck and kind of spinning their wheels because of their anxiety around their reaction.
Related: The environmental impact of indoor cannabis farming
California has a deeply embedded illicit cannabis industry, and in many ways is very similar to British Columbia in this regard. A lot of the current illicit industry is currently wed to a somewhat free market, libertarian ideal, and they obviously enjoy a lot of aspects of a very unregulated market. What are some of the challenges for moving from an unregulated market to a regulated market in terms of these perhaps conflicting worldviews or approaches?
Its interesting that you bring that up, because I was just thinking about this the other day. A lot of the folks that want these huge restrictions on canopy size and garden size are the same people who say cannabis should have very little regulation. And these are free market people, the people who say there should be no regulation, the markets should be able to figure it out, people should be able to do what they want to do, oh, but we want all these caps on how much a person can grow.
So I think that that really shows the issues with reacting versus responding and a lack of mindfulness in terms of folks figuring out what they really want. So folks may say forget these regulations, I just want to sell my stuff the way Ive always sold it.
But the reality is, the consumer market is going to change. It may not change overnight, but eventually youre going to get to a point where cannabis consumers, for the most part, would much rather go into a store and purchase something thats been tested, where they know how potent it is, where its grown, that theres no pesticides on it.
You just have to look at alcohol. There was a time when alcohol was prohibited, where all sales were street sales. And it took a while, but how many people do you see on the side of the road selling wine? You dont see that. Even if it was cheaper, even if they were selling it for half the price of the wine in the store, the consumer is not going to buy that wine with no label and no knowledge, because the culture has shifted.
So I think theres that, and I think theres also this artificial market that is produced by the fact that we cant ship between states. So we have this situation where all cannabis produced in the state has to stay there, and thats not true for any other agriculture. We dont have greenhouses where were growing mangos in ohio. And that doesnt happen because we can shop mangos where they grow best. And in Ohio and other states they grow grains that are suitable to those environments.
So this whole California, black market thing is really going to dissipate once interstate commerce becomes a reality, which Is not that far off. I would give it maybe ten years ...
