California marijuana industry divided on Gov. Newsom recall

Image of a voting box in front of California state flag

As California Gov. Gavin Newsom battles for his political life with a recall election looming next week, the state’s marijuana industry remains divided on whether to fully back the incumbent.

Newsom’s uncertain future has some wondering about the ramifications for California cannabis businesses if the governor were to lose and become the first chief executive since Gray Davis in 2003 to be recalled from office.

Though Newsom has been a proponent of legal marijuana for the better part of a decade, he is seen as something of a disappointment by many in the California marijuana industry.

That feeling has led to a sense of apathy in the industry toward the Democratic governor’s recall election, set to be decided Sept. 14.

The leading candidate to replace Newsom is Republican talk show host Larry Elder, according to most polls – though several recent surveys show the governor winning relatively easily.

Still, the prospects of what might happen if Newsom is replaced have been a focus for many in the cannabis business.

“If a Republican governor came in, or someone who doesn’t have the same stance on cannabis, they could unwind so many things we’ve all been working on,” said Jerred Kiloh, the president of the Los Angeles-based United Cannabis Business Association (UCBA).

He was referring to the various marijuana regulatory reforms the UCBA and other trade groups have lobbied for at the state Legislature.

“It could set us back years. Yeah, that’s pretty scary,” Kiloh said.

An industry divided

Newsom made a name for himself as one of the most prominent state-level politicians to throw his weight behind full marijuana legalization. And in 2016, he gave his full-throated support to Proposition 64 and even spoke at the election-night victory party after voters approved the measure.

Despite such triumphs, cannabis industry support for Newsom has waned since he assumed the governor’s office in January 2019.

While many – such as the UCBA’s Kiloh – have continued to assert publicly that the industry should continue supporting Newsom, others have become disenchanted with the governor.

One of those is marijuana consultant Jackie McGowan.

She decided to throw her hat in the ring in July and has since become known as the cannabis candidate, even garnering a shout-out from comedian Bill Maher on his HBO show last month.

In a subsequent poll released Aug. 26, McGowan ranked third in the race of 46 candidates hoping to replace Newsom.

But with 5% of voter support, she was still far behind Elder, the leader with 27%. The poll showed that Newsom was ahead overall, with 57% of voters saying they opposed the recall.

Elder’s campaign did not respond to an MJBizDaily request for comment, and the candidate hasn’t staked out much in the way of policy positions – and definitely not on anything as niche as cannabis regulations.

Most of the publicity Elder has gotten regarding cannabis have been allegations by his ex-fiancee that Elder, high on marijuana, threatened her with a firearm.

McGowan has asserted that Elder would be no friend to marijuana companies.

“Larry Elder is a flip-flopper … so, good luck getting anything done. Good luck getting tax reform. Good luck getting more retail locations,” she said, referring to two of the industry’s top political goals and predicting a “catastrophic effect” for cannabis companies should Elder win.

McGowan said that while a lot of the industry is behind her candidacy, many businesses are cautious about publicly supporting her because of fear of political reprisals.

“The cannabis industry is also very nervous about coming out publicly to support me,” she said, “because they fear that if I’m not elected, then either Newsom stays in office or a Trump Republican is elected, that there’s going to be some sort of retaliation.”

L.A.-based consultant Avis Bulbulyan agreed with McGowan that much of the industry has been hesitant to take sides in the election because companies are trying to hedge their bets.

“The industry … (is) a little more hesitant to come out in opposition, in case Newsom does get reelected. So that’s why you’re not hearing much about Newsom and the implications,” Bulbulyan said.

In contrast to McGowan, Bulbulyan believes an Elder governorship would be “super positive” for cannabis businesses because, while Newsom has been slow to act on marijuana-related policy, Elder would likely bring a low-tax, free-market approach to the industry.

“(Newsom has) dragged his feet on cannabis stuff. He’s a supporter, but not really,” Bulbulyan said. “He hasn’t done anything to really aggressively move the industry forward.”

But Elder, Bulbulyan said, is “going to be for lower taxes, for open opportunity.”

Bulbulyan also suggested that Elder, an African American, would “accelerate” awareness and conversations surrounding social equity programs and use the bully pulpit of the governor’s office to promote the industry to cities and counties in California that haven’t yet accepted marijuana businesses.

Ramifications of a new governor?

If Newsom were to lose the recall, multiple possible real-world implications for the cannabis industry exist, several insiders said.

At the top of the list would be potential bureaucratic turnover.

For example, the head of the newly created Department of Cannabis Control, Nicole Elliott – a longtime Newsom backer – would almost certainly be replaced by a new governor.

That alone would be “hugely disruptive,” said Jared Ficker, a principal at Axiom Advisors – longtime Newsom allies – and also a cannabis executive with Herbl Distribution Solutions in Santa Barbara.

“If the recall is successful, we have all new personnel – it would be just another delay in the good work going on to continue to fine-tune implementation of the state’s commercial cannabis program,” Ficker warned.

He added that any vote cast in favor of a recall by a member of the marijuana sector “would be a vote against your own interest.”

Another consideration, according to one industry insider, is that Elder – Newsom’s most likely replacement – has historically been opposed to affirmative-action policies and other steps taken to assist the Black community.

“Elder is a nightmare for anyone who believes in the fairness of opportunity and that it is in the interest of all of us to do well,” Karim Webb, who owns L.A. social equity company and retailer 4thMvmt, told MJBizDaily via email.

But the biggest practical result would be more uncertainty for cannabis business owners, said Jim Araby, an organizer with the United Food and Commercial Workers Union Local 5 and a Newsom ally.

“If Newsom gets recalled, the biggest enemy of the cannabis industry gets even larger, which is uncertainty,” Araby said.

“We may not agree with everything the governor’s done, but better to have him in office than another year of uncertainty.”

John Schroyer can be reached at john.schroyer@mjbizdaily.com.