Interstate Cannabis Commerce May Be a Chimera
The most impactful but challenging regulatory reform may be interstate commerce. When the legislation finally arrives, IC will allow cannabis firms to legally undertake commerce across state lines, thereby creating a single national weed market. Currently, we have a hodgepodge of cannabis regulations and islands of commerce by state. This morass drives excessive cost & complexity, limits buyer choice and fosters supply distortions & illegal trade between markets (e.g., California-grown flower sold in illicit New York dispensaries).
The value of a national market is obvious to most people, but will true IC become a reality?
They say of big technology investments, don’t confuse the install with the sale. The same may be true for IC if and when it becomes law. The process to get there will be rocky and all the sector benefits may not be realized. Here’s why:
> States still matter
Across America, a mishmash of regulations from state to state differ on everything from how to operate a bank to how to produce alcohol. IC may not change this reality. To wit, California is a market that frequently charts its own path irrespective of national rules. The state is large enough that its cannabis policies (say around testing or packaging) can in effect become de facto standards in other states.
> Partisanship runs amok
A combination of local one-party supermajorities, populism and culture wars is encouraging states to go after businesses. Companies have long feared anti-business Democrats (e.g., AOC’s fight against Amazon over their planned New York headquarters). These days, Republicans are no better. Their free-market ideology now clashes with a desire to assert state interests over federal regulatory authority. The GOP’s stridency has been apparent over issues as diverse as abortion rights and the environment.
> Don’t forget municipalities
This often ignored and underestimated level of government is an important stakeholder in the cannabis industry. Municipalities exert their power via zoning rules, bylaws and inspection approvals. IC’s potential can quietly and easily be kiboshed by zealous local politicians and bureaucrats.
> Its never over till it’s over
What matters is what goes into the signed bill – not what is discussed earlier. There is plenty of scope for industry players to skew the rules to their advantage - or when they see IC running counter to their interests. Right now, these actors range from some large MSOs to nascent social equity participants.
We also cannot discount the possibility that states with significant numbers of cultivation jobs but also high growing costs (e.g., Illinois, Michigan and New York) become protectionist and lobby against IC.
#interstatecommerce #regulations #MSOS #reform