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Tuesday 23 April 2019

Cannabis Licensing

 
In the emerging world of cannabis legalization for recreational and/or medical use, licensing plays a major role. Governments world wide, who prohibited the plant following US and UN pressure, are not willing to just remove the curbs at once. They are looking to try and squeeze out as much money as possible from cannabis through tight regulations. The reasoning is that cannabis is similar to alcohol and tobacco and should be similarly regulated, whereas the truth is that cannabis is a natural herb like celery or spinach rather than industrial alcohol or processed tobacco. The harms cased by alcohol and tobacco to public health are vastly greater than the harms, if any at all, from cannabis.

But then governments will try and milk everything they see. Governments see regulation of cannabis as a way to shore up potential loss of revenues due to the reduction in consumption of alcohol, tobacco and pharmaceutical drugs as cannabis consumption increases. Regulation and taxation is projected as the government doing its bit to safeguard society from the harms of a dangerous substance, though the fact of the matter is that cannabis is a benign substance that was banned by governments to enable the very dangerous substances alcohol and tobacco to thrive, and to earn more revenue from them. Pressure from pharma, medical, tobacco and alcohol lobbies make lawmakers regulate cannabis when they legalize it. 
 
Licensing takes control over the growing and trade of a natural plant from the hands of the many and places it in the hands of the few. It is true that in many US states, where recreational cannabis has been legalized, home growing is allowed enabling households to grow a few plants for personal use. But anybody who wishes to grow plants at a larger scale, or who wishes to trade in the plant, must secure a license from the government. This is downright absurd. Do any farmers growing rice, wheat, corn, tea or coffee, or other such crops need to get a license for it? No. Then why should cannabis growing and trade be licensed? When one considers that the majority of the world's cannabis growers are primarily small farmers and traders, and the precise reason why they choose cannabis as a crop is because they need the money badly, then we see licensing for what it really is. The ones who secure licenses are the well off and politically connected persons. The vast majority of small to medium scale cannabis growers and traders, who would benefit the most from a legal environment to grow and sell their cannabis, are forced to operate out of the black market due to these unfair restrictions.

It is true that governments earn tax revenue from licensing cannabis growth and trade. But what they fail to see is that if cannabis growing and trade were made license free, it would result in all the sales revenues that are lost to the black market, and therefore also the sales taxes and income taxes, flowing into the legal market and the government treasuries. It would also encourage more numbers of farmers to take up cannabis farming as an additional crop. Considering that the black market is still about 50% of the market even in Canada that has legalized recreational cannabis, and that it is 100% nearly everywhere else, one hopes that better sense will prevail on the governments.
 
In India, as in probably most other places where cannabis was grown in the past, there was absolutely no concept of licensing for cannabis till the middle of the 19th century. Anybody who wished to grow cannabis, grew as much as they wished and did what they wished with it. They traded some of it, used some of it and stored away some of it. Of course, the ones who traded in cannabis paid the government its share, just like they did for any other commodity that they traded. With the arrival of industrial alcohol and tobacco, and the increasingly lucrative revenues for the government from tightly regulated opium, the British colonial government started casting its eyes on the cannabis plant. They saw it as a serious competitor to all three - tobacco, industrial alcohol and opium. In order to shrink the market for cannabis, and eventually eliminate it, if possible, the British government started bringing in ever increasing restrictions on cannabis growing and trade, first within its own territories, and then through political and military pressure, in the adjoining Native states. This whole exercise was particularly cruel, since the vast majority of India's cannabis users were the poorest people, the hardworking laboring classes, the religious mendicants, etc who could least afford the alternatives on offer. The rich easily switched over to the new drugs on offer by the government, while the poor were deprived of not just their spiritual, recreational and medicinal plant but also a source of income and a means of enduring the harshness of daily life. License for retail and wholesale were auctioned so that only a few wealthy, well-connected individuals finally ended up having monopoly over the sales. Most small-time retailers, and small farmers who sold their produce directly to the market, were forced to abandon this. Many small farmers gave up cannabis cultivation altogether as a result of this. Retail licensing drastically reduced the number of retail outlets leading to monopoly, increased smuggling and switching over to consumption of alcohol, tobacco and opium. Home growing was stamped out to ensure that people were forced to go to the government sanctioned retail outlets.
 
Today, as places around the world start to legalize cannabis, we see that the first steps taken are to put in licensing in place. The argument is still the same that cannabis is a harmful commodity that must be regulated. For governments that have long tried to justify the unreasonable cannabis prohibition, to one day make it completely legal, as it should be, is difficult. There are licenses for growers, for distributors, retailers, social consumption areas, etc. There are licenses for vertically integrated operators as well as piecemeal operators. There can be temporary licenses for cannabis events. Licenses are issued by cannabis authorities set up at state or national level. Licenses can be for recreational, agricultural or medical businesses. Then there are licenses for hemp and licenses for marijuana, all based on a limit on the percentage of delta9-tetrahydrocannabinol (THC) that a plant may contain. No one has any scientific reasoning for why this limit has been set and what scientific purpose it meets. Licenses in most places are limited in number, usually very expensive and only issued after stringent checks to ensure that guidelines are met. This has resulted in a legal cannabis market catering to a small percentage of the population while a large percentage still use the black market which is license free.

There have been complaints that licenses are not available to the people who need them the most, i.e the persons disproportionately affected by the war on cannabis, the persons who need to find ways to get back on their feet after wrongful law enforcement action and criminal conviction. Licenses seem to be ending up in the hands of wealthy white people and big businesses, who have largely been responsible for prohibition, while the poor and minorities are still in prison or cannot afford the licensing fees and continue to operate in the black market. There is a general consensus that the number of licenses issued are not sufficient and need to scale up to meet demand. In many places, local municipalities prohibit cannabis businesses from setting up, even though state level legalization has been passed and a majority of the people have voted in support of cannabis legalization. 
 
Hopefully the licensing regime will be short term and as cannabis legalization becomes global, we will see the decrease of regulation of the industry, and its long due normalization, that treats cannabis as just another plant growing in our gardens, farms and freely in nature, without either humans or nature having to pay the government for the plant's existence.

Related articles

The following set of articles related to the subject are taken from various media. Words in italics are the thoughts of yours truly at the time of reading the article.  
 
 
'“Beginning Monday, business entry into the adult-use marijuana market will be more accessible for all Michiganders, as the requirement to hold a license on the medical side of the industry will be removed,” said MRA executive director Andrew Brisbo in the release.

The eligibility requirement is being removed for five license types:

- Marijuana retailer.
- Marijuana processor.
- Class B marijuana grower.
- Class C marijuana grower.
- Marijuana secure transporter.'

https://mjbizdaily.com/michigan-loosens-eligibility-requirements-for-recreational-cannabis-licenses/


'Illinois awarded its first licenses to businesses that can sell recreational cannabis when it becomes legal in the state next year.

State regulators announced the five medical marijuana dispensaries where residents will be able to buy small amounts of recreational marijuana products starting Jan. 1.'
https://mjbizdaily.com/illinois-licenses-first-five-adult-use-marijuana-retailers/

  • 'Passage of the 2018 Farm Bill sparked both sharp nationwide increases in licensing and explosive sales growth for 2019.
  • The issuance of U.S. hemp-cultivation licenses saw a year-over-year, nationwide increase of 364% (from 3,546 in 2018 to 16,462 in 2019).
  • Small family farms’ entry to the space drove licensing booms in some states, while other states saw the arrival of Big Agriculture interests in their markets.
  • In 2019, Tennessee led the trend with 3,200 new licenses, marking more than a 13x increase over its 226 in 2018. Conversely, Montana’s comparatively low 277 licenses in 2019 represent nearly 40,000 acres, averaging a Big Ag-style footprint of more than 144 acres apiece.
  • Traditional hemp states Colorado, Kentucky, and Oregon continue to lead in cultivation as the nation overall shows a projected 225,000 acres harvested in 2019, more than a 180% increase beyond 78,176 in 2018.'
https://newfrontierdata.com/marijuana-insights/increases-in-state-issued-hemp-licenses/


'Using CBD products as an onramp to a marijuana business also makes sense from a cash-flow perspective. When a state legalizes cannabis and announces a future date for its sale, companies need to hire employees, rent space, find distribution etc. There can be delays in licensing and other issues. Selling hemp-based CBD products while the company waits for the THC business to kick in, provides an income stream to draw from.'
https://www.forbes.com/sites/julieweed/2019/08/24/cbd-companies-positioning-themselves-for-cannabis-legalization/


'Applicants that qualify for the city’s social equity program will get priority in having their applications processed.

But only 100 retail licenses will be awarded during the coming application period, and they’ll be available on a first-come, first-served basis, according to the DCR website.'
https://mjbizdaily.com/los-angeles-opens-next-cannabis-licensing-round-for-100-retail-permits/


'Members of the state's Cannabis Control Commission decided this week in favor of regulations to establish licensing for retail cannabis deliveries and for limited on-site consumption facilities.'
https://norml.org/news/2019/09/26/massachusetts-regulators-vote-in-favor-of-cannabis-deliveries-on-site-consumption-facilities


Cannabit from New Frontier Data...
  • 'The 29 U.S. states having reporting licensed hemp cultivation acreage total nearly half a million acres in combined cultivation land area, a massive increase over 2018’s combined U.S. total of just over 100,000 acres.
  • Colorado leads the nation in hemp cultivation and processing land area with over 80,000 acres reported.
  • Oregon, Kentucky, Tennessee, and Montana lead in hemp program expansion efforts.
  • Tennessee leads in total hemp licenses issued in 2019.
  • At least 70% of the 2019 U.S. hemp harvest is intended for extract production.
  • California is poised to be the top-producing hemp state for both conventional and organic production as thousands of acres have already been planted in 2019'
https://newfrontierdata.com/marijuana-insights/hemp-licenses-issued-by-state-2019/


'In the United States, a total of 33 states, as well as the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands, had approved or had in place a comprehensive programme for medical cannabis by the end of 2019. As at December 2019, 11 state-level jurisdictions in the United States, plus the District of Columbia, allowed the nonmedical use of cannabis, and most also allowed commercial production by for-profit industry. It is worth noting that all the states that have legalized the non-medical use of cannabis previously had measures in place permitting the medical use of cannabis.' - United Nations Office on Drugs and Crime, World Drug Report 2020, https://wdr.unodc.org/wdr2020/field/WDR20_BOOKLET_4.pdf


'This marks the first wave of annual permits for the vast majority of California’s marijuana companies – although a handful of annual MJ event permits had already been issued.

Until now, cannabis businesses have been operating with temporary licenses as the state prepared to implement a full annual licensing system. Many of those temporary permits are set to expire in the coming weeks.'
https://mjbizdaily.com/california-begins-issuing-full-annual-marijuana-business-licenses/


'The Bureau of Cannabis Control (Bureau) today announced it has approved the issuance of annual licenses for 12 commercial cannabis businesses in California. The businesses must first pay their licensing fee before their annual license will be issued and active. Annual licenses issued by the Bureau are effective for 12 months.'
https://cannabis.ca.gov/2018/11/02/bureau-of-cannabis-control-approves-first-annual-licenses-for-commercial-cannabis-activity/


'As the marijuana market in the Golden State grows and matures, business owners are facing dueling challenges:
- MJ entrepreneurs are finding it’s particularly tough to obtain a business permit in Los Angeles.
- Lawsuits involving trademarks and proprietary business information are popping around the state'
https://mjbizdaily.com/california-marijuana-notebook-l-a-s-licensing-logjam-mounting-lawsuits-for-mj-businesses/


'Greece on Monday issued the first licences to private companies for growing medicinal cannabis in the country, part of an attempt to tap a burgeoning market worth billions.

Greece legalised cannabis for medical use last year and in March lifted a ban on growing and producing it. Two licences were granted on Monday, and another 12 will be issued by the end of this year, the Economy and Development Ministry said.

“There is huge interest, mainly from Canada and Israel ... some of them (potential investors) are huge,” Stergios Pitsiorlas, the deputy economy minister, told a news conference.'
https://in.reuters.com/article/greece-medicine-cannabis/greece-eyes-pot-of-gold-as-medicinal-cannabis-licensed-idINKCN1NO201


'“We have now three final retail licenses that have been issued on top of the two that opened (Tuesday),” Hoffman told the Globe. “They’ve got to get their inventory into Metrc (the state’s seed-to-sale tracking system), and they’ve got to let us come out and do a physical inventory inspection.

“Those three stores will be open as quickly as that happens. That’s at the control of the licensees.”'
https://mjbizdaily.com/massachusetts-marijuana-regulators-approve-more-recreational-retail-licenses/


'The state’s Department of Licensing and Regulatory Affairs is recommending that licensed dispensaries and processors be allowed to temporarily supplement their supplies by buying product from registered primary caregivers.'
https://mjbizdaily.com/michigan-wants-to-help-medical-marijuana-dispensaries-through-licensing-transition/


'Nevada issues 61 additional provisional recreational marijuana retail permits, Connecticut doubles the number of medical cannabis dispensary licenses in the state, and some publicly traded MJ firms release third-quarter results.'
https://mjbizdaily.com/nevada-cannabis-licensing-connecticut-dispensaries-q3-marijuana-earnings/


'Taking into consideration the required investments for a prospective Ontario private legal retailer, we cannot in good conscience issue an unlimited number of licences to businesses in the face of such shortages and the federal government's failure to provide certainty around future supply.

That is why today we are announcing that Ontario will be taking steps to ensure that private cannabis retail stores open in phases. In the initial phase up to 25 licences will be issued so operators can open for business on April 1, 2019 and stay open.'
https://news.ontario.ca/mof/en/2018/12/ontario-takes-a-phased-approach-to-cannabis-retail-licensing-due-to-national-supply-shortages.html


'It shocked some cannabis industry watchers last year when Santa Barbara County developed front-runner status among California’s 58 counties by accruing the most marijuana cultivation permits.

Humboldt County – the centerpiece of the famed Emerald Triangle to the north – finished second.'
https://mjbizdaily.com/california-county-marijuana-cultivation-leader/


'Plenty of entrepreneurs are showing interest in opening medical marijuana businesses in Missouri, a market that experts predict could be favorable to cannabis commerce.

The Missouri health department said it has received more than 250 forms and over $2 million in application fees in the first week of accepting applications from those seeking to grow or distribute medical marijuana.'
https://mjbizdaily.com/200-plus-firms-apply-for-missouri-medical-marijuana-licenses-in-first-week/


'Arkansas regulators are notifying 32 medical marijuana dispensary license winners statewide, after the Medical Marijuana Commission unanimously approved the final scores produced by an independent evaluator.'
https://mjbizdaily.com/arkansas-medical-marijuana-dispensary-scores/


'Business interest in Missouri’s medical marijuana program remains strong, with the state receiving more than 400 applications for retail, cultivation and processor licenses.

The state reported that 418 business application forms have been filed, generating more than $3 million in “pre-license” fees for the state. The state started taking the forms last month.

The breakdown in license interest: 226 dispensaries, 128 cultivators, 64 processors.'
https://mjbizdaily.com/missouri-gets-400-plus-applications-for-medical-cannabis-business-permits/


'“If they think that peoples’ licenses running out is going to stop people from growing pot, they’re nuts,” said Tobias Hafenecker-Dodge, the owner of Humboldt Growers Network, who noted that he has seven grow licenses in Humboldt County that are on the verge of expiring.

However, he believes a last-minute solution will be found.“None of that is actually going to happen. … The state, they’re going to get 30 days from now, and they’re just going to extend the licenses,” Hafenecker-Dodge predicted. “They need to keep up with us, end of story, and they will.”

One 70-year-old grower in Mendocino said his temporary license will expire this month, and if he can’t get an extension, he’ll keep growing the way he has for 40 years.

“Catch me if you can,” he quipped.'
https://mjbizdaily.com/chart-california-marijuana-business-licenses-expiring-at-a-rapid-clip/


'It is essential that the licensing process provide an avenue for marginalized people to acquire the requisite capital to develop their cannabis businesses and that a percentage of licenses are designated for them. Additionally, revenue from the cannabis industry should be invested into those marginalized communities to redress the historic economic inequality. '
https://lawyerscommittee.org/wp-content/uploads/2019/03/LCCRUL_NAN-Letter-to-NY-Assembly.pdf


'There are now 159 #CannabisLicence holders in Canada. Last week, we approved 2 new licence holders, 1 additional licence for an existing licence holder, 1 licence amendment to allow sale of cannabis oil, and 2 site expansions'
https://twitter.com/GovCanHealth/status/1107730477430001665


'Licensed medical marijuana growers in Illinois would be able to supply adult-use cannabis for four years after legalization, according to a report commissioned by licensed MMJ businesses.

However, the study noted, a significant increase in the number of retail licenses is needed to meet consumer demand.'
https://mjbizdaily.com/illinois-medical-marijuana-growers-could-meet-four-years-of-recreational-demand/


'“One of the things that we have been really good at is acquiring licenses when they’re actually allocated by the government, which means that we don’t have to go out and buy them later for tens of millions of dollars when we can acquire them for a few hundred thousand dollars,” White said after announcing the deal on Monday.

“What we’ve seen in Verano is they also have the ability to do that very same thing,” he said. “What very few people know is they won more licenses than anyone in the state of Nevada in the recent round of license awards there.”'
https://www.cnbc.com/2019/03/16/harvest-ceo-850-million-verano-deal-is-just-the-beginning-for-us-pot.html


'Washington state’s recreational cannabis cultivators are using less than half their allotted licensed canopy, according to a report conducted by the state’s Liquor and Cannabis Board (LCB), which could open the door for the state to step down their licenses to a lower tier.

“Licensees were generally concerned that the (LCB) may decrease their canopy due to under use,” the report notes.

Current rules state that licensees must produce 50% of their licensed canopy or the LCB may reduce the licensed tier. The survey found that many businesses wouldn’t reach the 50% mark.'
https://mjbizdaily.com/washington-state-marijuana-canopy-space-underutilized/


'The California Senate on Thursday moved to close a licensing gap for state marijuana growers, the latest problem to bedevil the shaky legal marketplace.

Scores of cannabis cultivators have seen their temporary licenses expire before the state has been able to replace them. Companies caught in that backlog have been stranded in a legal lurch – technically unable to do business in the legal marijuana economy.

Voting 32-4 without debate, the Senate passed a bill that would allow the state to extend those temporary licenses until replacements are approved.'
https://mjbizdaily.com/california-senate-approves-bill-to-extend-temporary-cannabis-licenses/


Regulations on the plant have been overly restrictive since the plant started emerging from prohibition. People unfamiliar and afraid of the plant have felt that a cautious approach is best. At some point the question needs to be asked, how much regulation is really necessary for a herb?

'That such a fundamental regulatory function still faces such significant challenges further indication of the state’s overall lack of readiness for establishing and regulating the world’s largest cannabis consumer market. It also serves as a cautionary reminder to keep the industry from getting out ahead of a new market’s regulations, and for policymakers to keep the process as simple and clearly communicated as possible.'
https://newfrontierdata.com/marijuana-insights/licensing-crisis-lends-a-toxic-tarnish-to-the-golden-states-legal-cannabis-market/


  • 'Results from a gap in California’s cultivation licensing between those growers holding active licenses, inactive licenses, or temporary licenses soon to expire mean that:
  •  Prices will be higher — With the California market already constrained, the licensing gap will drive up prices; the combination of higher prices and higher taxes will push legal consumers out of the market.
  •  Demand will increase in the illicit market — By restricting licenses, suppliers will be driven back into the shadows where there is ample demand nationally for California product.
  •  Tax revenues will decrease — With lower demand, lower output, and lower sales, tax revenues will continue to fall short of estimates.
  •  The counties hardest hit by license expirations will be in Northern California (e.g., Humboldt, Mendocino, Monterey, and Santa Barbara), which will extend a significant economic impact beyond simply output, sales, and harvest taxes. Lower employment and higher costs for social services will ensue.'
https://newfrontierdata.com/marijuana-insights/will-provisional-licenses-save-californias-cannabis-industry/


'Since the last day for a 90-day extension is Dec. 31, 2018, the longest any given temporary license would allow a California MJ company to legally operate is March 31, 2019.'
https://mjbizdaily.com/california-marijuana-notebook-seeking-permanent-relief-from-licensing-headaches/


'The Hawai‘i State Department of Health (DOH) has issued a Notice to Proceed to Acquire and Cultivate Cannabis to Hawaiian Ethos, LLC for their first production center on Hawai‘i Island. The licensee has passed state inspections and met all requirements to begin growing cannabis and to manufacture cannabis products for medicinal purposes at their approved facility. Hawaiian Ethos is the seventh dispensary licensee to complete and operate a medical cannabis production center in the state.'
https://governor.hawaii.gov/newsroom/latest-news/doh-news-release-doh-approves-production-center-for-hawaiian-ethos/


'According to the CDPH, the Type S license category was designed in “response to demand from cities and counties wishing to implement equity programs.” Without S licenses, many in Los Angeles are concerned a key piece of the city’s ambitious social equity program—designed to help make up for the disproportionate consequences of the drug war—will be impossible.'
https://www.leafly.com/news/industry/california-co-working-licenses-could-help-further-equity-in-cannabis


'Roughly 6,500 businesses statewide currently hold temporary licenses. Three quarters of those licenses are for cultivation. Regulators say there aren’t enough resources to process annual license applications for everyone by the end of the year. And once temporary licenses start expiring in January — with all of them set to expire by March 31 — businesses would have to shut down until the state catches up. That’s where Senate Bill 1459 comes into play. The bill will let the state issue a new category of provisional licenses through Jan. 1, 2020. Provisional licenses will be good for 12 months, with no option for renewal.'
https://www.ocregister.com/2018/10/09/california-needs-more-time-to-vet-and-license-marijuana-businesses/


'To promote a diverse market with both small and large players, Health Canada will scale fees according to the size of the business and apply lower fees for micro-scale licence holders. Some classes of licences—namely those for research, analytical testing and hemp production—will be exempt from fees. To support access to cannabis for medical purposes, those who produce, cultivate and sell cannabis exclusively for medical purposes will be exempt from the annual regulatory fee.'
https://www.canada.ca/en/health-canada/news/2018/10/health-canada-announces-the-approach-to-cost-recovery-for-the-regulation-of-cannabis.html


'Effective immediately, fees will be reduced for all cannabis businesses in Portland. The proposal contains additional reduction in fees for small businesses and businesses whose owners or staff were impacted by cannabis prohibition. It also offers deferred license payments, eases requirements for some license types, and offer credits for early assistance building permitting meetings for qualifying businesses.'
https://www.portlandoregon.gov/civic/article/698853


'Germany intends to award the country’s first domestic licenses for medical cannabis cultivation in the first quarter of next year, with the first crop expected in 2020.'
https://mjbizdaily.com/germany-wont-award-first-cannabis-cultivation-licenses-until-early-2019/


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