Onerous regulations have cut out thousands of California pot growers from entering the market since legalization at the beginning of the year.
In fact, according to the California Growers Association (CGA), zoning restrictions and high taxes are having such a negative impact on the industry that it is forcing thousands of cultivators underground.
In Sonoma County alone, zoning restrictions have cut out more than 3,000 pot growers and, according to a report released by the CGA, current tax policies will only serve to prop up the black market because it prevents “good-faith” growers from complying with the new cannabis regulations.
So, instead of legalization paving the way for a smooth and all-round profitable entry into the cannabis market, regulations are strangling growers and forcing them into the black market.
Barrage of regulatory complications
Apart from the fact that by February 7 only one percent of growers had obtained licenses, Californian counties are adding to the barrage of compliance regulatory complications.
To date, only 13 of California’s 58 counties have put regulations in place for entry into the commercial market, while 20 others are still struggling to reach decisions on how to approach the legalization process.
Twenty-five California counties have placed outright bans on the legal marijuana market.
Confusion reigns about the state’s regulatory compliance system. The CGA conducted a survey and disclosed that 57 percent of its members found that “lack of clarity” played a significant “barrier to entry” into the legal marijuana market.
Further complications were the number of permits and licenses required, together with unclear and slow issuing processes.
Add to this the high rate of taxation being imposed on the cannabis industry, and CGA members believe that current tax policies will not only prop up the black market but will also prevent good-faith operators from entering the legal market.
The CGA says the findings disclosed in its report, and the many concerns raised by industry players, should be taken into careful consideration by both state and local governments as they proceed along the legalization road.
The intention of legalization should not be to over-regulate and over-tax the cannabis industry because this will only fuel increased black market activity. Instead, says the CGA, lawmakers should lend a sympathetic ear to the issues raised by marijuana operators to make it easier, and not more difficult, for them to conduct their businesses within the legal framework.
The strong arm of the law
Meanwhile, state officials are now targeting hundreds of pot industry players that are still operating without licenses.
Apparently, about 500 letters have been sent out by the California Bureau of Cannabis Control (BCC) warning unlicensed operators to “cease and desist”. It is estimated that between 200 to 300 dispensaries are still operating illegally within the Los Angeles city limits.
According to the BCC’s communications chief, Alex Traverso, the letters have been sent to a mix of operators – those that have no intention of obtaining a license, as well as those who want to enter the legal market but who haven’t been able to successfully battle the barrage of red tape.
The Valentine’s Day “present” – the date on which the letters started to be sent out – do not stipulate deadlines or lay down ultimatums. Instead, pot business owners are encouraged to start complying with the licensing regulations. However, the letters do include a note of warning.
Illegal operators are told to desist from any further commercial marijuana activities until such time as they obtain a valid license and so by-pass any further state law violations.
Violating California’s new licensing compliance regulations carry penalties amounting to three times more than the licensing fee for each criminal and administrative violation. Licensing fees range between $500 and $125,000, depending on the type and size of the cannabis operation.
Not only will the California Department of Food and Agriculture (CDFA) inform state and county agencies of any illegal cultivation activities, it will also use its hot-line to inform authorities about any tip-offs concerning illegal cannabis activities, warns its director of public affairs, Steve Lyle.
In the end, pot growers are caught between a rock and a hard place. Many cultivators are being “zoned out” of the industry, while others are finding the cost of legality too rich for their purse strings.
Perhaps it is time, as the CGA suggests, for lawmakers and county officials to adopt a more sympathetic ear to the plight of cannabis growers who want to enter the legal market, but who are being forced out because of administrative red-tape.s