In April 2017, I relocated to Los Angeles to bury myself in the compliance documentation scene for cannabis businesses. But let’s step back for a second. What is compliance documentation in the first place?
As challenging and expensive as it may be, the legalization of cannabis in a jurisdiction like a state is actually the easy part. It’s the formation of regulatory oversight that is the arduous task. Unfortunately, many cannabis consumers and business owners don’t participate in this phase of legalization.
That’s sad, because the devil is in the details. Fair and balanced regulations require all parties to have a voice in their development, implementation, and enforcement. Often, conservative forces that like to challenge such laws (and ban cannabis businesses) don’t emerge until after legalization has occurred. The mere fact that adult use cannabis becomes legal frightens them and often calls them to action.
Regulations are hard fought. Conservative forces want to restrict or ban cannabis businesses, while progressives fight for minimal or open regulations that allow all players, including small solopreneurs and family businesses, to participate.
Consider a state in which adult use cannabis production and consumption has been legalized, such as California, Colorado, Oregon, or Washington. While individual jurisdictions, like counties and cities, cannot form legislation that goes counter to state law (such as outlawing the possession or consumption of pot), they can ban cannabis businesses.
Well, they can unless state law explicitly says they cannot. Unfortunately, the legal language in states like California and Colorado allows cities and counties to form such bans. The logic behind such efforts is typically that of protecting a community’s way of life. Fear of diversion to minors and the black market is often cited, as well as an illogical prediction of increased crime rates (it is the preservation of the black market that supports criminal activities, not the other way around).
Thus, the regulatory landscape has quickly become almost overwhelmingly complex. In The Greenrush Bonanza: Part 1, I discussed how family farmers and small businesses in Northern California are typically ill-equipped to deal with such regulatory complexity. Too often, such small businesses are good at one thing (cultivating cannabis, for example), but relatively poor at balancing their spreadsheet or devising a comprehensive strategy of ensuring regulatory compliance.
Unfortunately, complying with regulatory code is not an easy or inexpensive task. Application fees alone can exceed $10,000. Startups wanting to operate multiple businesses (such as a cultivation facility and a distribution service) must obtain multiple permits or licenses, each of which can carry an overall cost of between $20,000 and $250,000 (depending on the jurisdiction and permit sought).
The next time one of your friends or colleagues quips “I’m thinking about starting a cannabis business,” ask them a few hard questions. Where? Is the property zoned properly? Are they aware of setbacks, which are “safe distances” from things like schools and churches?
In a conversation I overhead in Los Angeles last week, someone said that speculative parties are mapping the zones in the city where cannabis businesses are allowed to operate (where the regulatory language states they are zoned correctly and outside of any setbacks). Property values are skyrocketing in such areas based on the potential revenue they could produce if operated as a cannabis business.
The issue of capital is critical for aspiring cannabis business owners. I’ve witnessed dozens of startups flounder or die because of a lack of capital (not to mention a deficiency of strategy and business planning).
If a company seeking a processing license in, say, Costa Mesa, California can’t afford the $26,000 application submission fee (which in no way guarantees that the application will result in a legal permit or license), they can’t play the game. Fair or not, this is how regulations are being formed at the local level in states like California.
If you want to learn about how to gain the right to run a cannabis business in a legal state, subscribe and follow this series. I’ll use it as a platform to teach readers about the confusing and volatile world of cannabis regulatory oversight.
I know that doesn’t sound very sexy, but anyone wanting to launch and operate a cannabis businesses has to go mad scientist on all of this. Or they simply will not be able to open their doors in the first place—let alone thrive and make a sustainable, fair profit (the fantasy of most startup founders).
Check out the other articles in this series:
- The Greenrush Bonanza, Part 1
- The Greenrush Bonanza, Part 3
- The Greenrush Bonanza, Part 4
- The Greenrush Bonanza, Part 5
All text and photos, unless otherwise noted, Copyright © 2003-2018 Gooey Rabinski. All Rights Reserved.
Gooey Rabinski is a technical writer, photographer, and compliance documentation specialist for cannabis businesses who has contributed feature articles to magazines and media outlets such as High Times, CannaBiz Journal, MERRY JANE, Emerald Magazine, Grow Magazine, Herb.co, The Kind, Skunk, Cannabis Culture, Whaxy, Heads, Weed World, Green Flower Media, Cannabis Health Journal, Green Thumb, and Treating Yourself.
He is the author of Understanding Medical Marijuana, available on Amazon Kindle.