Top 10 Stories in Cannabis in 2021

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In the midst of a global pandemic and the health crisis that ensued 2021 was a notable year for the cannabis industry.   While the overall trends were positive there were some disturbing developments in the biggest single state market-California.

National

Congress Tries and Fails to Enact Meaningful Legislation

Hope emerged in Congress with the introduction of 69 bills or resolutions between the Senate and the House of Representatives. That included the Cannabis Administration and Opportunity Act and the SAFE Banking Act, which the House again passed in 2021.  We believe that at least one of these bills or resolutions will pass both the House and Senate and be signed into law in 2022.

US Postal Service Vaping Ban

Based on the authority in the Prevent All Cigarettes Trafficking Act, the USPS banned vape pen hardware and vape ingredients from being shipped to customers via U.S. mail.  Other delivery companies such as FedEx, DHL and UPS followed suite forcing companies to scramble to find alternative methods of delivery.  This had a big impact on small producers unable to quickly find cost-effective alternative methods of transportation.

The Rise of Celebrity Cannabis Brands

In 2021, we saw the arrival of numerous celebrity cannabis brands hitting the retail shelves. Media personalities such as Seth Rogan, Jay-Z, Justin Bieber, and Lil Wayne all launched their own cannabis brands this year.  It remains to be seen how many of these will be successful over the long-term.

5 New Markets Open Up

The year marked the opening of 5 new cannabis markets with a market potential of $5.1 Billion after year 4, according to MJ Biz Daily.  The new markets are:

  1. Alabama-medical
  2. Connecticut-recreational
  3. New Mexico-recreational
  4. New York-recreational
  5. Virginia-recreational

Availability of Debt for MSOs and Public Companies

This year marked the beginning of debt financing becoming available for larger MSOs and public companies.  With a handful of the big companies sourcing debt below 10% interest rate without an equity component a major milestone was reached.  The availability of reasonably priced debt together with public equity gave the large players an enormous advantage over private companies in their M&A activities.

加州

Tax and Regulatory Revolt

Spurred in large part by a post by FlowKanna a coalition of cannabis cultivators and brands appealed to the Governor and the Department of Cannabis Control (DCC) to fix two main problems: very high cultivation taxes and too few dispensaries selling product.   Coalition participants openly refused to pay the taxes and fees imposed by the regulations.  The coalition pointed out that the illicit market with 73% of the overall sales was crushing licensed operators who were struggling to survive.

The Falling Price of Wholesale Cannabis 

The price of outdoor cannabis fell over 50% from the same time last year. This was triggered by a supply surplus, the proliferation of the unregulated market, and limited retail distribution options.

Small Farmers Struggle to Survive

The imposition of high cultivation taxes and stiff regulations made it challenging for small farmers to survive under the current regulatory scheme. Of the 10,000 growers in operation when Proposition 64 was passed in 2016, only 2,000 remain in 2021.

Unlicensed Cultivation and Manufacturing

MJBiz Daily, the LA Times and other media released a series of articles on illicit cultivation operations in the High Desert area outside of Los Angeles.  The coverage revealed a massive unregulated market consisting of thousands of large cultivation and manufacturing operations that steal water, threaten neighbors and act with impunity.

Consolidation of the Three Regulatory Agencies in California

In an attempt to simplify regulations and improve access to licensing, the original three cannabis regulatory agencies were consolidated into a single department-the DCC.   The idea was that consolidating the three agencies into one would create efficiency, save money, and simplify administration.

For more information, please contact:

Kresimir Peharda, Chair of the Cannabis Practice

kpeharda@yklaw.us

Andrew Koussevitzky

akoussevitzky@yklaw.us

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