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National News - November 2019

Nevada Corruption Probe
Hits Testing Labs

According to a report by the Las Vegas Journal-Review, the new anti-corruption task force in Nevada has already started conducting surprise spot inspections at several of the states testing facilities.  Governor Steve Sisolak birthed the multi-agency team in an effort to “Root out corruption or criminal influences” in the states legal marketplace.

It all started with a federal indictment from New York, in which was detailed a failed attempt by a group with foriegn ties to acquire a retail cannabis license by donating money to the political campaigns of two Nevada officials.  Gov. Sisolak has ordered the task force to also investigate “onging issues” such as “serious allegations of manipulated test results”, and the state’s licensing process, which has become a web of litigation.

Alongside this news came the announcement that Nevada will place a temporary freeze on the sale and transfer of new and existing marijuana business licenses.  This hot market saw four provisioning centers sold in the second half of 2018 for between $40 and $290 million dollars each.  Will Adler, a marijuana consultant and policy lobbyist, thought the decision fair, given recent controversies.

Northeast U.S. Governors
Seek Marijuana Coalition

The governors from New York, New Jersey, Pennsylvania, and Connecticut (and possibly Rhode Island) seek to coordinate regional legalization efforts, creating a shared set of ideas regarding social equity, market regulation, and taxation.  The efforts are believed to be the first of their kind, which could incite governors to take similar action in other regions of the country.

The primary concern is taxation.  The governors wish to prevent residents from simply driving a few miles to the next state and paying less in taxes, and so a uniform taxation policy would ensure all states collect revenue from their respective citizenry.  The proposed Northeastern cannabis union also claims the desire to consolidate laws on production and cultivation, ensure a ‘fair and competitive’ market in the region, share collective social equity rules, advocate for the Secure and Fair Enforcement (SAFE) banking act, and prioritize a diverse community of small businesses.  

According to cannabis attorneys and speculators, these states could legalize as a unit as soon as 2020.

New Mexico Task Force
Supports Legalization

New Mexico’s recently appointed Marijuana Legalization Work Group came to their final conclusions, issuing a 16-page report that recommends the state legalize adult use, as well as suggests that New Mexico expunge criminal records for low level convictions.  Financially it estimates $63 million in new state and local taxes after one year, $94 million by year five, at a 17 percent average tax rate.  The report also voiced support for a social equity policy, and suggests that operating fees “should not be set by statute” but rather “language limiting licensing fees to the cost of regulation and/or with ‘no more than $500/mo. Unless necessary to meet the cost of regulation’’”.

Of interesting note was the recommendation that localities should not be allowed to ‘opt-out’ of the adult-use program, and that home growing should not be permitted.  The report cites an effort to prohibit the black market as the reasoning for both.

Legal Profits in Cali Killed
by Regulation, Black Market

Legitimate marijuana business in California was assumed to be a profitable venture, but that may not be the case.  Cannabis producers are not seeing the returns they had anticipated, many of them unable to keep promises to investors.  “The regulated market has been a fraction of what everybody expected it to be,” reported Mikey Steinmetz in a ‘60 Minutes’ interview.  Steinmetz has been unable to generate the profits his investors expected to see from their $175 million investment.  He points to both over regulation and taxation, and the black market, as culprits. 

California law allows localities to ‘op-out’, which a whopping 80% of them did.  This left a rather large area where non licensed sales have thrived.  According to Mendocino County Sheriff Tom Allman, “The black market has greatly increased.”  The sales are not from just back-alley drug dealers, the majority come from illegal storefronts, who look and operate as if they are licensed.  Steinmetz put his frustrations to words, “Unlike other industries, we have this kind of in-the-shadows, unspoken-about competitor, right?  So it’s not like California is fully raging, fully legal.”

Echoing Steinmetz thoughts on over regulation and taxation, marijuana processor Casey O’Neill expressed his dismay with the sheer amount of fees he encountered, “Permits, for consulting, $2,500 a year for the water board discharge permit.  It’s $750 a year for the pond permit.  It’s $1,350 application fee to the county, plus another $675 when they actually give you the permit annually.” After totalling his more than $50,000 in licensing fees, permits, taxes, etc, for a harvest of 45 plants, he said he now realizes his dream of doing what he loves for a living was just that, a dream. 

Seke Ballard Offers Social
Equity Loans in Illinois

African-American businessman Seke Ballard would like to see more fellow African-Americans in the role of marijuana entrepreneur.  His company, Good Tree Capital, who already doles out loans for small cannabis businesses, announced they will cover the $2,500 application fee for 100,000 social equity qualifiers with a no interest loan, totalling $250,000 in social equity loans.

Based in Seattle, Good Tree is now focusing their efforts on Illinois, where the social equity application window extends from Dec. 10 to Jan. 2 of this coming year.  Ballard has even gone as far as to move to Bronzeville, a suburb of Chicago.  He says his decision to back social equity applicants came after he learned that too many of them lack information in regards to state resources that could help them break into the cannabis industry.

Medical Licensing
Process Begins in Utah

Director of Utah Department of Health’s Center for Medical Cannabis, Rich Oborn, was quoted as saying he expects “dozens of interested applicants” for the 14 medical licenses that will be issued.  The state initially planned to completely control medical cannabis via 7 government ‘pharmacies’ (Utah’s preferred term), but that plan fell through due to concerns over state employees handling a product that was illegal on the federal level.

The 14 private licenses will be granted in a two phase rollout, eight in phase one, and six in phase two.  Utah hopes to have the entire process complete by July 1 of 2020.  The application deadline is Dec. 2, 2019.

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