As more and more states around Canada and the US move to legalize both medicinal and recreational cannabis, the cannabis industry continues to grow. But this influx of growth is not without complications. The lesson we’ve learned from the states to legalise marijuana so far, is that very little has changed. None of the catastrophic predictions, surges in crime and traffic deaths, a rise in use amongst the youth, have come to pass. Likewise, none of the claims of booming economies or reduction in criminal activity have proven true either. While public support for legalization grows, and investors are showing interest, selling and supplying marijuana products is still something of a fuzzy area for business.
As part of a fledgling industry finding its feet, cannabis enterprises are faced with a host of unconventional problems, causing many experts to ask the question, is it possible to regulate the marijuana industry?
A major challenge facing the cannabis industry is the lack of consistent support from the banking sector. Especially in areas with legal marijuana, banks are increasingly coming under pressure to come up with more rigorous compliance and risk management controls. This has caused some banks to either raise costs to cover their own expenses, or drop cannabis companies entirely. Until the potential for profit begins to exceed the costs of meeting government compliance, the banking situation isn’t likely to change.
In some circles, bitcoin and crypto currency has been heralded as the solution to this problem. Using a digital currency for business transactions means marijuana businesses can accept payments from suppliers and businesses, while eliminating the need for a bank until the currency needs to be converted into dollars. With the prevalence of bit-coin based payment processing services, customers can purchase an amount of digital currency using their credit card or bank account, and then simply purchase a marijuana product with their acquired bitcoin. The idea of a specific new digital token, an appcoin or altcoin specifically for the marijuana industry has also been floated by some within the community. The goal here is to integrate blockchain technology into the needs and compliance of cannabis businesses.
Recently the government of British Colombia in Canada asked for submissions about managing the legal marijuana market within the province. IBM responded with a unique proposal, tracking cannabis with blockchain technology. In their filing, IBM made the argument that blockchain was the ideal mechanism the government could use to ‘transparently capture the history of cannabis through the entire supply chain…’
In IBM’s vision, every party within the network; growers, processors, distributors and vendors will produce their own ledger of transactions which regulators can then use to conduct spot checks. Retailers will be able to ensure compliance and customer safety by identifying the farms growing their supply, and records of the safety inspections conducted on their premises. Of course, this requires blockchain software operating within every marijuana based business in BC.
It isn’t just banking and regulatory requirements causing hiccups for the budding industry though. Real estate can prove to be another logistical headache.
The lack of federal legislation regarding legal marijuana in America means different laws exist regarding the issuing of permits to cannabis businesses from state to state, and even from city to city. Creating a nightmare for companies operating in multiple locations.
In Ohio, where the process of legalization is just beginning. Businesses are statutorily required to be 500 feet away from facilities like parks, churches schools, libraries, and day care centres. This presents more of an issue for retail operations like dispensaries than it does for cultivators and processors like seed banks. As a result, there has been a fight raging amongst businesses as they race to secure a spot in the Northeast Ohio market which is expected to make up 30% of the state’s businesses.
Californian businesses face unique challenges too. There are considerations for a full dispensary ban within LA’s Chinatown district, and rules such as a thousand-foot buffer between every retail outlet and the nearest school or child-care centre. There are also calls by some to impose a mandatory 600 feet between dispensaries. Restrictive zoning laws such as these dramatically reduce the areas where dispensaries can operate within cities. Leading to a concern about the rights of patients to easily access medical marijuana, as well as an issue of equity as small-businesses in low-income areas are effectively priced out by those operations who can afford to secure property in the north and south-eastern areas of LA.
It seems the biggest hurdle faced by the legal cannabis industry now is trying to establish feasible regulatory frameworks. The cost, time and complications currently faced by businesses in producing enough product, getting their facilities up to standardand meeting demand means that without some clear direction, the business of weed might never fully get off the ground.