Due to major changes in the law, everyone in the cannabis industry will soon have to make a choice: get licensed, go (or stay) black market or quit.
As an attorney, I cannot, and will not, recommend anything other than full compliance with state and local law for those who want to be involved. Unfortunately, it is my opinion that many of those who opt to get licensed will still get squeezed out of the industry. There are two main ways that I see this happening.
First, I don’t think the average person realizes the storm of bureaucracy that is approaching. The industry is about to go from basically unregulated to highly regulated. Costs are about to go up. Way up. Margins will drop considerably. This is inevitable.
While there are many factors that will influence how long this storm lasts, I see a giant reshuffling of the deck. Many of those in the industry who want to remain will simply not be able to. Many new people will come in. This is because there will soon be many hands in the pockets of growers. Growers will either have to accept dramatically reduced margins or increase prices. The age-old tension then comes into play: How much can you raise prices without customers turning to the black market?
The second way people may be squeezed out is if local land-use ordinances become too restrictive. I worry that local government will greatly narrow where commercial cannabis activity (and especially cultivation) is allowed. It’s important to remember that government will have many voices in its ear, including those opposed to the industry.
The wine industry is a powerful one in the Bay Area—what position will it take? Local governments may simply legislate many farmers out of existence; they simply won’t be able to use their land for cultivation. This is a one-two punch because of the insane land prices. Most farmers simply won’t be able to afford to sell land zoned “agriculture-residential” and buy land zoned “diverse agriculture.”
What will happen to all those independent small farmers who produce just enough to support their families? Will they be driven out entirely? Or will they be forced to work for those who can navigate the new rules and have the capital reserves to survive a period of low margins?
I am not confident in the future of the small farmer. The short term will likely be filled with unexpected expenses and dislocation. Prepare yourself!
Ben Adams is a cannabis attorney. He has been practicing law for almost 20 years and concentrates his practice on cannabis compliance and defense.