Those outside of the cannabis industry often believe that dispensary owners and farmers are making wads of cash. Unfortunately, that couldn’t be farther from the truth. There may be some brands that have successfully scaled against the wind, but most are barely breaking even. The heavy taxation and cost of compliance are two heavy burdens, and many other hard-to-solve issues compound them for a mess with few solutions.
Rather than attempting to solve everything at once, it can feel more manageable to break the industry down into problematic parts. These are the top three things that seem to plague every state.
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Exponential taxation
Every state sets a tax rate for its cannabis program at launch. Cities and municipalities tack on sales taxes on top of that rate. At the time of purchase, a large chunk of consumer money goes directly to the government. This universal cannabis operator struggle has more impact in some places like Washington, where rates reach as high as 47 percent on some purchases. But even those on the lower end are feeling the impacts.
While this is an issue that can be agreed upon in almost every state-siloed cannabis industry in the U.S., it is the one that is least viable for traction with lawmakers. In fact, Ohio Governor Mike DeWine is floating a 10 percent tax hike for its fledgling weed sector. Lowering taxes across the board may be the fastest way to bolster the space. However, movement may be possible on other industry-impacting issues.
Interstate commerce
Interstate commerce refers to opening borders between states for business purposes. Currently, it is illegal to cross state lines with weed–especially if the plant is not legal in one of those destinations. Lawmakers have attempted to work with neighboring officials on bills that would open up cannabis business between states, but there has yet to be movement. This could also be more easily accomplished if rescheduling were to lower restrictions on the plant.
Allowing cannabis to be imported and exported around the U.S. might have cascading benefits. Cultivators in ideal locations like Northern California could ship terroir-forward sun-grown to those living in more arid or harsh climates where such agricultural products aren’t possible. Taking the cultivation burden off those states would potentially shrink indoor operations, likely saving environmental resources.
While it seems all positive, this would not be an easy shift. There are established brands in unideal locales, where growing weed outside has more complications than benefits, that take pride in their indoor. Additionally, craft weed is not always scaleable, and supple land is not lying empty waiting for new weed farms in California. Either way, interstate commerce could take pressure off all around. That could be a good thing for everyone.
Lab testing
There is a real problem with lab testing in the weed industry. Many states require rigorous testing for cannabis products sold in the regulated market. This should make it easy to find clean and safe products. Unfortunately, that has not always been the case. Recalls and secret shopping have shown that pesticides and residuals continue finding their way into weed despite having a clean lab result. This may lead some to question whether the lab system works as is.
Cannabis labs operate for profit rather than in-house for the regulatory bodies or agencies. This has created a need to win accounts, opening the door for bad actors. Some labs have been accused of offering clean test results for dirty weed, inflated cannabinoids, or even terpene content in return for their business. That is good for them. And, turns out, detrimental to the consumer.
Labs need an overhaul, but it will take a dedicated look at how they are run before any movement–let alone change.
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Medical struggles in adult use states
Legalization movements are often patient-led. Medical cannabis came first in a lot of legal states. As regulators took on the task of transitioning medical dispensaries and processors to recreational, many patients have been left behind.
Adult use regulations always cover lab testing, but that is not a perfect system. Patients can be subjected to dirty products consumed before a recall is issued or be forced to shop in a market tailored to an entirely different consumer. But it is not all that simple.
Adult use laws bring hope for more access, innovation, and destigmatization. Instead, it has left a lot of medical patients without their trusted brands or dispensaries. Lots of the original brands have either changed trajectories or gone out of business. Meanwhile, new products are often tailored toward fun nights out rather than chronic pain. It is possible that the weed world could do better with this class of consumers.
The cannabis industry needs help
Cannabis entrepreneurs entered the brand-new weed world excitedly, and many are left dejected as they face a litany of uphill battles. Those with knowledge of the space know that legal weed operators are facing challenges beyond these four issues. But, while much is left to be done, tackling one thing at a time is the only manageable way to move towards a cannabis industry that works for everyone.
