The MSO’s Big Fat Interstate Commerce Wedding
Be careful what you wish for
“If you fail to plan, you are planning to fail” Benjamin Franklin
If MSOs & investors think that the cannabis industry is tough now, wait till interstate commerce (IC) is relaxed and implemented (a big assumption). Clearly, SAFE-like banking reforms are critical. Operationally, its IC that really matters.
Whether its state-by-state free trade, the recently floated SHIP Act or something very different, the competitive landscape will change significantly.
MSO operational challenges and risks hinge on 3 fundamental and unanswered questions:
1. What will change, including taxes?
2. On what timing?
3. And how will change be put into practice?
Unfortunately, many MSOs don’t have a lot of capital and time to work with right now. And as we witnessed in Canada, American operators will not have all the regulatory answers till the last minute. Strategic deliberations need to be happening now.
This planning effort should be focused on the most likely regulatory scenarios and their impacts on your production, supply chain, and brands. Fundamentally, liberalization will challenge how MSOs will compete (e.g., will they continue to be vertically integrated?) not to mention their vision & mission.
Like many things in cannabis, leaders should look to manage internal and external expectations around what is possible, and when.
They might want to explore the business lessons from other free trade initiatives. One relevant case study is the EU’s 1993 move to a single market. This trade harmonization brought together 31 disparate governments and a myriad of market structures under a single regulatory framework.
What can we learn from this experience?
1. Many stakeholders had a voice
> A cornucopia of different political, social, labour and industry groups weighed in throughout the regulatory journey, shaping policy as they went. In the U.S., the final regulatory outcome won’t be what an ideal market ought to look like. A variety of stakeholders each with their own interests (i.e. axes to grind) will have a say. Balancing these interests is what politics is about. And IC is all about politics.
2. Liberalization took time
> When you need 31 government to acquiesce, the legislative and bureaucratic process will be slow and cumbersome. Don’t expect a speedy process from Congress, particularly when special interests and States Rights are involved, and various government agencies don’t want to relinquish their high tax revenues.
3. Full harmonization has not been achieved
> Some governments initially delayed the implementation of certain measures (they later fell in line). Selected industries like energy and defence were exempt from the get-go. Certain non-tariff barriers stubbornly remained in force years later. There will be many shades of IC grey come liberalization time - with the devil lying in the details and the roll out.
#MSO #interstatecommerce #regulations #strategy #US #legalization