$350,000 in cash? California marijuana taxes still make growers - and tax collectors - nervous

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On tax days, it’s not hard to spot marijuana growers waiting to exhale in downtown Eureka.
They haul cash in grocery bags and boxes, making their way to a state office where they can pay their taxes.

One grower “holds his breath as he walks into the building,” said Terra Carver, executive director of the Humboldt County Growers Alliance. The distance is “no more than 20 yards, but the fact that he was holding $350,000 (makes it) ... a public safety issue.”

California still doesn’t have a better way to collect taxes from its burgeoning, licensed marijuana industry three years after voters passed an initiative to legalize recreational cannabis and 23 years after they sanctioned medical marijuana.

That won’t change as long as marijuana is considered an illegal drug by federal authorities, which makes banks reluctant to do business with the cannabis industry.

But from Eureka to San Diego, the state is making some headway in easing obstacles that kept cannabis entrepreneurs from paying their state taxes and fees on time.

For starters, California finally has state tax collectors stationed in the heart of the so-called Emerald Triangle, which produces most of America’s marijuana. The tax collectors work out of a Humboldt County building with support from state and local law enforcement officers.

That’s a big change. Until last year, state-licensed marijuana companies from Humboldt, Mendocino and Trinity counties had to drive hundreds of miles with bags full of cash to pay their taxes at the nearest state offices in Sacramento or in San Francisco.

“It has been unacceptable that legal cannabis farmers have to drive up to five hours to pay their taxes or have a face-to face with their regulatory agencies,” said Sen. Mike McGuire, D-Healdsburg. “This isn’t safe for the farmer, it isn’t safe for the public and it definitely isn’t a good way to do business.”

On the opposite end of the state, California tax offices in San Diego County simply refused to accept money from cannabis companies in 2016 and 2017 after state workers worried their offices weren’t equipped for that kind of cash businesses.

Their fears persuaded elected representatives overseeing regional tax offices for what was the Board of Equalization to prohibit cannabis growers and retailers from making cash payments at state offices in their districts.

“You have to think about hostage situations,” former Board of Equalization member Diane Harkey said at a December 2016 meeting where she explained why she was reluctant to permit cannabis cash transactions at offices she oversaw without significant investments in security.

Her colleague former Board of Equalization member Jerome Horton at the same meeting suggested state workers should receive “combat pay” for working with hefty cash payments.

Russell Lowery, Harkey’s former chief of staff, said the Board of Equalization allowed alternate payment arrangements at the time, such as tax collectors meeting cannabis growers at banks and depositing funds directly into state accounts. Those visits were not promoted because of security fears, he said.

State Treasurer Fiona Ma, who was on the Board of Equalization at the time, said the state did not lose money because of the inconvenience.

“Everyone who was supposed to pay, paid,” she said. “They all knew they had to pay. They just had to hire more security or armored cars because they had to drive.”

The Board of Equalization no longer has power to allow varying tax collection policies around the state.

Its tax-collecting responsibilities have been handed to the California Department of Tax and Fee Administration, which reports to the governor instead of a board run by regional elected leaders.

Tax department Director Nicolas Maduors said cannabis companies now can make cash payments at 11 offices around the state. The department has invested security features at its offices and no one has been harmed.

“We recognized that cash acceptance is going to be a big challenge and there were certain places in the state where cash was not accepted,” he said. “We need to make sure that all taxpayers no matter where they live in the state have access to service.”

State workers are still nervous about the practice, and he asked that The Sacramento Bee not identify the locations that accept cash. Cannabis companies call ahead of time. Transactions take place in the presence of security officers.

“We’re doing all that we can with law enforcement, retrofitting facilities to make sure we can keep people safe,” he said.

Next month, several state departments plan to open a new “one stop shop” for the marijuana industry in Eureka. It’ll open in the Eureka Times Standard building with space for the Bureau of Cannabis Control, Department of Public Health and State Water Resources Control Board.

The tax department does not plan to move from its county-managed building with the other cannabis regulatory departments.

Gov. Gavin Newsom’s administration projects the state will collect more than $500 million in marijuana-related taxes next year. It doesn’t all come in cash.

Many marijuana businesses have found ways to work with credit unions and other alternative financial institutions to pay tax. Lawmakers are working to expand those opportunities. Last week, a bill that would encourage charter banks and credit unions to work with the cannabis industry cleared a Senate committee.

Carver of from the Humboldt County Growers Alliance said the state had done a “good job” working with her industry.

“The complication doesn’t necessarily come from the state. The complication still rests on the federal level because a lot of our businesses are still unable to bank,” she said.


Bill Allowing Locals to Ban All Cannabis Deliveries Defeated in Committee

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 A bill that would have allowed local jurisdictions to ban cannabis deliveries originating outside their jurisdictional borders, was defeated in its first committee hearing today after cannabis activists and industry representatives objected to the bill.

Cal NORML wrote to the committee and testified against the bill, and promulgated an Action Alert that generated hundreds of letters to lawmakers in opposition. Thanks to all of our members and supporters who took action!

In introducing the bill, Asm. Cooley noted that he has been involved in both cannabis and local control issues for many years, citing his success as mayor of Rancho Cordova in enacting a local tax on cannabis businesses (however, that tax is overly high and was objected to by Cal NORML). Several times he referred to locals getting past a "parade of horribles" and tried to argue that passing the bill would somehow encourage locals to license cannabis businesses. He conceded that Prop. 64 allowed locals to ban adult-use cannabis businesses, not medical ones.

Unsurprisingly, the League of Cities, Rural County Representatives of California (RCRC), and California Association of Counties (CSAC) expressed support for the bill, as did the City of Santa Monica.

Amy Jenkins of the California Cannabis Industry Association testified that the CCIA must "sadly and regrettably" oppose. She gave statistics on the abysmal failure of local jurisdictions to license an adequate number of cannabis retail outlets as the reason that delivery access must be permitted.

Ellen Komp of Cal NORML and Sabrina Fendrick of Berkeley Patients' Group challenged Asm. Cooley's assertion that patients who required access would be able to grow their own, citing restrictive local cultivation ordinances, the lack of renters' rights, and the inability for disabled patients to grow their own.

Also opposing the bill were representatives from Epilepsy CA, the CA Hispanic Chamber of Commerce, Weedmaps, and the city of St. Helena, as well as a score of veterans.

After the public testimony, Asm. Grayson (D-Concord) spoke first, saying that while he is in favor of local control, he wouldn't be able to support the bill because delivery is necessary for those who need cannabis. "No doubt that my mother would be alive today had she had access," he said. "I thought delivery allowed people to have access when locals banned storefronts."

Asm. Eggman (D-Stockton) then spoke up, saying, "I don’t think you can take something away from people after you have provided access." Noting she is also a veteran, she mentioned the opioid crisis as a consideration.

Asm. McCarty (D-Sacramento) then chimed in saying he could not vote for the bill, noting that while Sacramento was "killing it" bringing in tax revenue from licensed dispensaries, people were driving as much as 100 miles to those dispensaries, and many don’t have access to transportation. "By having more jurisdictions shut it down, it just means fewer tax dollars coming into California and perpetuates the illegal market," he said.

Committee chairman Evan Low (D-San Jose) announced that he would be voting in favor of the bill in order to keep the conversation going, but said he would vote against it in future if it was not amended.

The vote fell on bipartisan lines, with Republicans Bill Brough (Dana Point), Vince Fong (Bakersfield), and Jay Obernolte (Hesperia), and Democrats Jacqui Irwin (Oxnard), Jose Medina (Riverside) and Kevin Mullin (San Mateo) joining Low in voting Aye.

Voting No were Assembly members Bloom, Chen, Cunningham, Eggman, Gloria, McCarty, and Ting; Chiu, Dahle, Gipson, Grayson, Holden and Wood abstained. The final tally was 7 in favor and 7 against, with 6 members not voting.

In the meantime, 24 cities and the county of Santa Cruz have filed suit against the Bureau of Cannabis Control over its regulation allowing state-licensed delivery services to deliver cannabis statewide.

Los Angeles hiring cannabis social equity program manager

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The Department of Cannabis Regulation (DCR) in the city of Los Angeles is looking for someone to run its social equity program.

The project is part of a handful of efforts in California intended to get minorities and those negatively affected by the war on drugs involved directly in the state’s legal marijuana industry.

According to an online job posting, the position pays $95,776 to $140,021, requires a master’s degree and at least three years of experience with either economic and community development or providing services to low-income, minority or underserved communities.

The L.A. social equity program has been a point of contention for many in the city’s struggling legal cannabis market and has not yet been fully rolled out.

Other California cities that have social equity programs include Oakland, Sacramento and San Francisco.

California state marijuana excise tax could go up July 1

California state marijuana excise tax could go up July 1

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Although the California marijuana industry has hoped for tax relief as it struggles to compete with a thriving illicit market, a tax increase could be on the way.

A tax hike would hit cannabis companies’ bottom line and could drive more consumers into the illicit market in search of cheaper marijuana products.

But an increase isn’t a foregone conclusion. Moreover, a tax cut could occur.

The California Department of Tax and Fee Administration (CDTFA) uses a 60% markup rate, along with the average market price of wholesale marijuana, as a basis for the state’s 15% marijuana excise tax.

That markup rate has to be recalculated every six months, and CDTFA Director Nicolas Maduros told an industry conference this week in Sacramento the excise tax may go up this summer.

“We’re responsible for resetting that markup rate every six months, so it will be reset July 1,” Maduros said, when asked during a panel with other MJ regulators.


“It’s based on market data, and I think particularly once …track-and-traceis more fully utilized, that we’ll have some better pricing data to figure out what that markup rate should be,” Maduros said.


The state track-and-trace system launched in January but is only used by cannabis companies with annual business licenses.

And so far just a fraction of the legal companies have obtained those permits, which means most of the industry isn’t feeding data into the track-and-trace system.

“We’re administrators, so it’s not up to us to sort of use that as a way to lower or increase the tax burden. We’re simply looking at what the facts are. It’s up to the legislature … to determine what the actual tax rate is,” he said.

When asked if the markup rate – and therefore the excise tax – could increase, Maduros said: “It could.”

It’s worth noting, however, that the rate also could either decrease or stay the same.

A CDTFA spokesman said in an email that there’s also no cap on how much the markup rate could increase – or decrease.

What a markup could mean

Maduros said after the panel that any decision on the markup rate and the excise tax will not be made until June at the earliest.

The markup recalculation would not affect the state cultivation tax, which is $9.25 per ounce of flower, $2.75 per ounce of leaves and $1.29 per ounce of fresh plant.

California Cannabis Industry Association Spokesman Josh Drayton said that a tax increase “would only further damage the supply chain as it competes against the illicit market.”

But, Drayton emphasized, it’s possible the excise tax may either stay the same or even decrease, and said it’s too early to tell what will happen with the CDTFA’s recalculation.

“I think we need full implementation of Metrc and track-and-trace before we consider any increase,” Drayton said.

“We have not seen any data that would support an increase in the excise tax for any part of the supply chain.”

Separately, a state bill to temporarily reduce state cannabis taxes is awaiting hearings in the California Legislature.

If successful, Assembly Bill 286 would reduce the excise tax from 15% to 11% and suspend the cultivation tax until 2022.



California only made half as much on 2018 marijuana taxes as expected

When California, the most populous state in America, legalized recreational marijuana last year, many had high hopes for the industry, writes Joseph Misulonas. But unfortunately, it appears initial projections for the success of the industry were a little off.

The California Department of Tax and Fee Administration announced that in 2018 the state collected $345.2 million from marijuana taxes. While that is a huge number, it's actually only slightly more than half of the state's initial projections of $643 million in tax revenue that they predicted they would receive in 2018. 

Many have argued why the state didn't make more money off of legal sales. The biggest reason seems to be the tax rate. California has some of the highest cannabis taxes in the nation, and customers can sometimes pay tax rates up to 45 percent on their marijuana purchases. These high prices are forcing many cannabis users to continue purchasing black market marijuana. This would also explain why California cannabis sales actually decreased between 2017 and 2018, despite it being legal recreationally last year.

Despite the fact that almost everyone acknowledges the tax rate is an issue, California legislators continue dragging their feet on the issue and not passing bills to lower the rate, despite several proposals to do so.

Employers May Lose Cases for Firing Medical Marijuana Users

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 Health-care worker Katelin Noffsinger told a potential employer that she took medical cannabis to deal with the effects of a car crash, but when a drug test came back positive, the nursing home rescinded her job offer anyway.

A federal judge ruled in September 2018 that the nursing home, which had cited federal laws against cannabis use, violated an anti-discrimination provision of Connecticut‘s medical marijuana law.

It was the latest in a series of clashes between U.S. and state laws around the country that came out in favor of medical cannabis users trying to keep or obtain jobs with drug-testing employers.

The Connecticut decision was the first ruling of its kind in a federal case and followed similar recent rulings against employers by state courts in Massachusetts and Rhode Island. Earlier rulings had gone against medical cannabis users in employment cases by state supreme courts, including those in California, Colorado, Oregon, and Washington, over the past few years.

Advocates hope new the new decisions are a signal of growing acceptance of cannabis’ medicinal value.

“This decision reflects the rapidly changing cultural and legal status of cannabis, and affirms that employers should not be able to discriminate against those who use marijuana responsibly while off the job, in compliance with the laws of their state,” said Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws (NORML).

Medical marijuana, like the cannabis cuttings growing in a Sira Naturals cultivation facility in Milford Massachusetts, is reshaping employment law. A U.S. District judge in New Haven, Connecticut, ruled in favor of a woman who alleged a prospective employer discriminated against her when she sought a health-care job and informed the company she used medical marijuana to treat post-traumatic stress disorder (PTSD) resulting from a car crash. The judge found that the nursing home violated Connecticut’s anti-discrimination law protecting medical cannabis users despite marijuana remaining illegal at the federal level. (Associated Press File Photo/Steven Senne)

 

Noffsinger sued Bride Brook Health and Rehabilitation Center in Niantic in 2016. She had been offered, and accepted, a job as recreation therapy director at the nursing home, contingent on her passing a drug test.

She told the nursing home that she took synthetic marijuana pills — legally under state law and only at night — to treat the post-traumatic stress disorder (PTSD) she developed after the 2012 car accident. But the company rescinded the job offer after the drug test came back positive for THC, the chemical in marijuana that gets people high.

As a federal contractor, the nursing home worried that it could be cut off from that revenue if it employed somebody who tested positive for drugs.

On Sept. 5, 2018, U.S. District Judge Jeffrey Meyer in New Haven ruled Bride Brook discriminated against Noffsinger based solely on her medical cannabis use in violation of state law. He denied her request for punitive damages. The case is now heading to a trial on whether Noffsinger should receive compensatory damages for lost wages from not getting the job.

A lawyer for the nursing home, Thomas Blatchley, declined to comment.

Noffsinger’s attorney, Henry Murray, said his client would not comment on the lawsuit. He said Noffsinger has taken another job in the health-care industry that doesn’t pay as much as the Bride Brook job.

In his ruling, Meyer said the federal Drug Free Workplace Act, which many employers including federal contractors rely on for policies on drug testing, does not actually require drug testing and does not prohibit federal contractors from employing people who use medical cannabis outside the workplace in accordance with state law.

The decision will likely be used in arguments in similar cases elsewhere, said Fiona Ong, an employment attorney with the Baltimore firm of Shawe Rosenthal.

“This is a very significant case that throws the issue in doubt for many of these federal contractors,” Ong said. “It’s certainly interesting and may be indicative of where the courts are going with this.”

Thirty-one states, Washington, D.C., Puerto Rico, and Guam now allow medical marijuana, while 15 others have approved low-THC products for medical reasons in certain cases, according to the National Conference of State Legislatures. Nine states and Washington, D.C., have legalized recreational marijuana.

Only nine states including Connecticut, however, specifically ban employment discrimination against medical marijuana users, who could continue to face difficulties in obtaining or keeping jobs in the 41 other states, employment lawyers say.

In Massachusetts, the state’s highest court ruled in 2017 that a sales and marketing company wrongly fired a worker after her first day on the job after she tested positive for cannabis, which she used under the state’s medical marijuana law to treat her Crohn’s disease. Also in 2017, the Rhode Island state Supreme Court said a college student was wrongly denied an internship at a fabric company where officials refused to hire her after she acknowledged she could not pass a drug test because she used medical marijuana.

In both cases, the two women told the companies during the hiring process that they used medical marijuana, but would not consume it while on the job.

The American Bar Association called the Connecticut, Massachusetts, and Rhode Island cases “an emerging trend in employment litigation” and cautioned employers to consider state medical cannabis laws when analyzing their drug use and testing policies.

Several bills are pending before Congress that would undo marijuana’s Schedule I classification as a controlled substance with no medicinal value. But Armentano of NORML said it is unlikely they will go anywhere while Republicans control Congress.

Some employers, though, have dropped marijuana from the drug tests they require of employees, saying the testing excludes too many potential workers in a challenging hiring environment.

TD Ameritrade Urges Their Clients to be Cautious About Legal Pot Stocks

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Canada’s federal legalization of cannabis and the continued expansion of legal use in the United States have led to an explosion of interest in marijuana investments, this year especially. But the U.S. brokerage firm TD Ameritrade is warning their clients and investors in general to be cautious about legal cannabis stocks. In a video posted on the firm’s YouTube channel in late September, TD Ameritrade highlights the risks and acknowledges the seductive appeal of investing in marijuana. Many who’ve observed the cannabis market’s recent volatility feel TD Ameritrade is offering sound advice. Others say the bullish trends of the market are real and that TD Ameritrade is playing it too safe.

TD Ameritrade Video Warns Investors Against Straying Into The “Wild West” of Cannabis Stocks

Cannabis is rapidly moving from the black market to the stock market. But one investment firm is warning, not so fast. TD Ameritrade is urging investors to be cautious and do their homework before buying stock in cannabis companies. Their reasoning is simple: the market still carries significant risks.

The firm’s video begins with a brief history of legalization in North America. It then presents viewers with an image of the North American Marijuana Index which tracks cannabis companies’ stock prices and market capitalization, showing how the value of the index has nearly tripled since its 2015 inception. In short, the setup makes clear why so many investors are attracted to the cannabis industry. Its potential for growth is undeniable.

Then, the other shoe falls. The video says everything that’s exciting about the cannabis industry also suggests it’s a market bubble. It draws parallels between the cryptocurrency frenzy of 2017, the housing market bubble of 2008 and even the dot.com bubble of the early aughts. The bottom line, TD Ameritrade’s video seems to claim, is that the excitement around the industry is overlooking its uncertain regulatory future. And that leads to extreme volatility and in turn, high risk for investors.

Can TD Ameritrade’s Words of Warning Dissuade Young Investors

Exhibit A in TD Ameritrade’s case against cannabis investing is September’s rollercoaster ride for the Canadian marijuana company Tilray. Tilray was the first Canadian cannabis producer to raise capital through an IPO on the NASDAQ. So when trading went public in July at about $17 per share, Tilray’s stock price shot up to $300 per share by mid-September. But almost as quickly, Tilray gave up those gains. The stock was so volatile, in fact, that the U.S. Securities and Exchange Commission (SEC) halted Tilray’s trading five times in a single day.

The SEC also issued an investor alert on marijuana investments and fraud in early September. And these, TD Ameritrade says, are signs that it may be prudent to hold off on significant cannabis investments until the industry matures. Yet it’s not clear whether investors, especially young ones, will heed the firm’s warnings.

Cannabis stocks are attracting young investors in droves. And it’s not only because legalization a generation-defining issue. Fee-free trading apps like Robinhood and TD Ameritrade’s own platform have made it easier than ever for young investors to buy cannabis stocks online. And they aren’t wrong, according to famous short seller Andrew Left. Left acknowledges that it’s hard to tell the difference between real players in the marijuana sector and fly-by-night scammers. But at the same time, he’s convinced the growth is real and here to stay.

So before you invest, make sure to do your homework. Research any company you’re considering investing in. Look up reports and SEC filings—anything you can find. There are also red flags that should dissuade you from investing. These include SEC suspensions, hyped up press releases and company insiders holding large amounts of stock.

Oklahoma Begins Medical Marijuana Approval Process, Issuing First Patient Licenses

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Cannabis has been a pressing issue in Oklahoma lately. Earlier this summer, voters approved the legalization of medical marijuana. Since then, the state has been moving fast to implement the new program. As Oklahoma begins the medical marijuana approval process, issuing its first patient licenses, the state has taken a big step toward making medical marijuana a reality.

Oklahoma and Medical Marijuana

Last weekend was a potential landmark for medical marijuana in Oklahoma. On Saturday, the state’s medical marijuana application system went online. It was instantly flooded with applications from patients, businesses, and caregivers.

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According to the Associated Press, it was a big first day. In particular, the state received 1,054 applications from patients, 634 applications from business hopefuls, and three more applications from potential caregivers.

By the end of the day, the state had received around $1.5 million in application fees.

 

On the same day, the state also started issuing its first round of licenses. Over the weekend, authorities gave licenses to 23 patients.

This first small round of licenses was reportedly completed mostly as a way of testing the state’s system for receiving and reviewing applications, and for issuing licenses. If authorities are satisfied with the online system’s weekend performance, they plan to resume issuing licenses this week.

So far, the state’s online application portal seems to be working well. By the end of the weekend, state officials reported only a couple of minor errors. The main issue was that people with Yahoo and iCloud email accounts didn’t receive automated confirmation emails. The glitch was apparently fixed quickly.

 

The weekend’s licensing activity was the latest chapter in Oklahoma’s medical marijuana drama. Earlier this summer, voters approved a bill to legalize medical marijuana.

Despite winning the majority vote, the bill still faced significant opposition that carried over, even after the vote.

In particular, there was a lot of back and forth as advocacy groups and lawmakers attempted to make various amendments and revisions to the medical marijuana program. One of the biggest debates centered on whether or not the state would allow smokable marijuana.

 

Shortly after voters approved the legalization of medical marijuana, there was a surge of voices calling for the ban of smokable cannabis. The Oklahoma State Board of Health actually issued a ban on smokable medical marijuana.

The Board said that actual bud or other plant matter should not be allowed in dispensaries. It said it would still allow patients to grow their own smokable cannabis at home.

However, Oklahoma Governor Mary Fallin struck down that ban earlier this month when she signed a number of revised regulations.

The revised set of rules signed by Gov. Fallin did not include a ban on smokable marijuana. Similarly, the new rules also got rid of an attempt to require every dispensary to have a pharmacist on site.

For proponents of medical marijuana, Gov. Fallin’s revisions were important steps to ensure that medical marijuana is accessible to a broad range of patients.

Now that the state’s application system is up and running, the state can start officially issuing licenses. Advocates of medical marijuana hope to see marijuana sales begin sometime in the near future.

Marijuana in the Midterms

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Marijuana legalization is going to be a lead issue in the 2018 elections. Advocating for an end to our decades-long failed prohibition is not only good policy, but good politics. Regulating the adult use of marijuana is currently supported by a majority of Americans from all political persuasions, and any candidate for local, state or federal office would be wise to advocate for the will of the people and make ending prohibition a core plank in their election platform. Supporting sensible reform to our nation’s marijuana laws is not just overwhelmingly popular, it is the economic, scientific and moral thing to do.

  With nine states having passed adult-use marijuana regulations, and 30 states authorizing medical-marijuana access, issues surrounding cannabis policy have taken center stage in local, state and federal elections. Over 90 percent of Americans support medical-marijuana access, and 60 percent support legalizing and regulating marijuana in a manner like alcohol.

If you look back at just the past year, it is clear that if we want the implementation of marijuana-reform laws to succeed, we need to begin voting out officials who are permanently afflicted with reefer madness and replace them with forward-thinking individuals who will fight for rational marijuana policies at all levels of government.

 

With a majority of states now engaging in activities that are in conflict with federal prohibition, it is absurd that House Judiciary Chairman Bob Goodlatte (R-VA), House Rules Chairman Pete Sessions (R-TX) and Senate Judiciary Chairman Charles Grassley (R-IA) refuse to even hold a hearing on this issue.

However, it is not just members of Congress who deserve our attention. With ongoing efforts to delay the rollout of legalization and regulation of marijuana in Maine and Massachusetts, mostly at the behest of those states’ governors, we need to push 2018 gubernatorial candidates to take proactive and positive stances on marijuana policy. If you look to New Jersey as an example, which recently saw the exit of anti-drug zealot Chris Christie and the election of pro-legalization Phil Murphy, you can see the positive impact of having a reform-friendly governor on the tenor of the debate. Already, the state is moving to expand and reinforce its long-suffering medical-marijuana program, and Murphy’s election catapulted the topic of full legalization to the top of this year’s legislative-priorities list.

There are a number of races this year that are worth watching from a marijuana-reform perspective. In Texas, the opportunity to replace Senator Ted Cruz with pro-legalization Beto O’Rourke would add a new, outspoken supporter to the US Senate. In California, there is an outside chance that Democratic Senator Diane Feinstein, who long opposed our efforts despite the vast majority of her party now being in support of reform, could be ousted by current California Senate President Kevin de León, who has a far better record on cannabis issues. Also of incredible importance are the many gubernatorial elections being held, particularly in Maine, where the current governor (and ardent prohibitionist), Paul LePage, will be term-limited out of office. Governor LePage has spent every day since the 2016 election working to slow down or outright prevent the implementation of his state’s marijuana-legalization initiative. We need to ensure that whoever takes the position after him is progressive and aggressive in implementing legalization.

 

Even on the local level, these elections have a huge impact. In Easton, PA, an effort to decriminalize marijuana failed in the past month due to just one vote, and counties in states that have legalization are often empowered to “opt-out” of allowing retail marijuana outlets in their jurisdictions. Local politics, in many ways, matters just as much if not more than what is happening at the federal level, and reform supporters need to be just as diligent in lobbying their local officials and candidates as those at the top of the ballot.

With the clock ticking down to Election Day, get informed, be sure you are registered, and go out and “smoke the vote” this November.

Wall Street Analyst Estimates US Cannabis Market Will Reach $47 Billion

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For years, “$20 billion by 2020” was an oft-heard refrain from market analysts who saw a bright and prosperous future for the legal cannabis industry. Now, with that horizon fast-approaching, analysts are setting their sights on what the next decade has in store. And one analyst, RBC Capital Markets’ Nik Modi, is seeing green.

Analyst Says Concentrates and Edibles Could Propel Sales To $47 Billion Annually

RBC Capital Markets, an investment bank that’s part of Royal Bank of Canada, issued a memo to clients outlining the rapid growth of the U.S. marijuana sector. The memo, authored by Nik Modi, shows how cannabis sales in the U.S. are gaining ground on beer and wine sales.

Projecting a compound annual growth rate (CAGR) of 17 percent, Modi estimates that the legal cannabis category could reach $47 billion in sales annually in the United States within the next decade, according to Business Insider.

Yet the cannabis market in the U.S. faces uncertainties that Canada does not. Regulatory environments are constantly and rapidly shifting as states implement legalization and adopt different approaches to dealing with federal prohibition. Investing in the industry still carries risk.

 

But RBC Capital Markets analyst Nik Modi brushed off concerns about the unpredictability of legal cannabis in the U.S.. Instead, he drew clients’ attention to a shift in consumer trends that is already having a major impact on domestic retail markets.

Data from BDS Analytics, included in Modi’s memo, shows that the margin on cannabis flower has steadily declined since the beginning of recreational sales in Colorado in 2012. That’s indicative of a larger national move away from flower and toward cannabis edibles and concentrates.

In Colorado, flower made up 70 percent of legal sales when shops opened in 2014. By the end of Q4 2017, flower accounted for just 46 percent of total sales. Picking up the slack were edibles and concentrates. Both are surging in popularity everywhere, and Modi thinks those forms of cannabis can propel total sales beyond $47 billion a year by 2027.

 

Including Illegal Cannabis Sales Drastically Shifts Financial Forecasts

Another eye-catching aspect of Modi’s analysis is another BDS Analytics chart showing the estimated U.S cannabis market size. The chart compares cannabis sales to spirits, wine, cigarettes, and beer. From spirits at $58 billion to beer $117 billion, all four categories best cannabis at $50 billion. But interestingly, the chart includes total legal and illegal cannabis sales to arrive at the $50 billion figure. It’s unclear what proportion of that amount is made up by illegal sales.

Other cannabis market analysts say that illegal sales still account for the majority of total marijuana purchases in the U.S. But as legalization continues to channel consumers into the legal market, illegal sales are slowly declining.

While access to legal cannabis expands nationwide, the size of the illegal market remains difficult to measure. So does predicting how much of it will move aboveboard in the coming years.

 

RBC Capital Analyst Praises Big Investment in Canadian Cannabis

The letter RBC Capital Markets sent to clients also lauded Constellation Brands’ recent $4 billion investment in one of Canada’s largest medical cannabis producer Canopy Growth Corp. Constellation Brands is the firm behind the popular beverage companies Modelo, Corona and Svedka. The company has been moving incrementally into the Canadian cannabis market, upping its stake each time. Nik Modi says he’d like to see more companies make similar moves in the cannabis space.