(Editor’s note: This story is part of a recurring series of commentaries from professionals connected to the cannabis industry. Tiffany Devitt is chief of regulatory affairs for CannaCraft and vice president of the California Cannabis Industry Association board of directors.
In February, California state Sen. Anna Caballero, a Democrat, introduced Senate Bill 1326, which would establish a framework for permitting the export of marijuana and MJ products into other legal states.
The legislation also would allow for the import of marijuana and MJ products into California, upon mutual agreement.
This is arguably an important milestone on the road to a national marijuana industry – something cannabis entrepreneurs have long sought.
But is now the right time for California to open its borders?
Don’t get me wrong: I’m all for being hospitable and welcoming.
But I’m also of the opinion that one shouldn’t invite others over for dinner when the house is on fire.
And make no mistake: The California cannabis industry is aflame – and not in a good way.
The smoke we’re seeing is not the smoke of thousands of homegrown, terp-rich blunts.
It’s the smoldering remains of a once-vibrant California cannabis industry that has buckled under the pressure of the state’s regulatory missteps and excessive taxation.
The regulated market – meaning those of us playing by the rules – faces crushing competition from an illicit market that’s making billions.
Absent the tax, licensing and regulatory burdens we face, our criminal counterparts are making stunning profits while undercutting our prices by as much as 70%.
Unfettered by rules, regulations and respect for local jurisdictions, they have thousands of sales outlets in every city and county in the state while we have licensed retail outlets in about 20% of municipalities.
California’s legal operators are teetering on the brink of failure, trying to carve out a sustainable business from the tiny sliver of California cannabis consumers that have both access to licensed retail and enough disposable income to cover the tax and regulatory markup.
Not so simple
In this context, it’s unsurprising that some cannabis operators and sympathetic policymakers are looking out of state for a solution.
But the notion that the grass is greener – or at least easier to sell – across state lines is probably misguided at this time.
The hope is that interstate agreements will give California marijuana cultivators an outlet for selling their oversupply of flower and thus allow farmers to shore up the plummeting prices.
But how likely is that?
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The most probable candidate for an interstate marijuana commerce agreement is an adjacent state such as Oregon (which has already laid the groundwork for such agreements).
But as awesome as California cannabis is, Oregon doesn’t need or want our weed.
They already have an oversupply, and, like ours, their regulated market is shrinking.
In other words: Their house is on fire, too.
What’s more, since Oregon cultivators and manufacturers aren’t subject to California’s $161-per-pound cultivation tax or our rigorous environmental compliance requirements, they can and will undercut California providers on price to reduce their stock.
So, rather than expanding the market for California flower and California-made products, we might find that we’ve made things worse by inviting another lower-cost competitor into the market for very little in return.
Hold your fire
So, here’s my message to Sen. Caballero: Thank you for your steadfast leadership.
Thank you for trying to right the ship.
We look forward to working with you to pave the road for interstate commerce.
But, if not done the right way and at the right time, interstate commerce could further destabilize local businesses and employers.
Let’s put out our house fire first, because if we walk into such agreements before the smoke has cleared, we’re likely to step off a cliff.
Tiffany Devitt can be reached at tiffany@cannacraft.com.
The previous installment of this series is available here.
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