Wendel Rosen Business & Legal Updates

California Agencies Open the Door to Cannabis Cultivation Conglomerates

Outdoor Cannabis Farm

iStock.com/RobertKovacs

Last week three California Agencies issued a series of regulations governing recreational canna-business which is scheduled to launch January 1, 2018. The most controversial aspect of the regulations is what they don’t include. They don’t include limits on the number of cultivation licenses one person or entity can own or control.

For years, many in the cannabis industry have feared that big tobacco (R.J. Reynolds), big pharma (G.W. Pharmaceuticals) or big agriculture (Monsanto, Archer Daniels Midland) would swoop in and take over the cannabis industry once it was legalized and reached sufficient scale to make it profitable. Last November, California voters approved Proposition 64, the Adult Use of Marijuana Act., which required the California Department of Food and Agriculture to issue cultivation licenses for various size grows: Small (Type 2 up to 10,000 square feet), Medium (Type 3 up to one acre) and Large (Type 5 more than an acre). But Proposition 64 explicitly stated that “No Type 5 … cultivation licenses may be issued before January 1, 2023.”  Senate Bill 94, includes the same size descriptions and limitations, precluding large grows of more than an acre per premises until January 2023.

Many saw the five year waiting period for large grows as a barrier to entry that would allow the smaller local farmers to get a foothold in the legal recreational market, while discouraging and/or delaying big tobacco/pharma/agriculture since they wouldn’t be able to buy up, or convert their existing hundred-acre farms into pot plantations.

But the local cannabis industry was also hoping the recently proposed regulations would include a second barrier to entry; limits on the number of cultivation licenses any one person or entity could hold. The regulations issued last week don’t include such limitations.

Absent such limitations, local canna-businesses are concerned that big tobacco/pharma/agriculture will apply for unlimited cultivation licenses, effectively preempting the local cannabis industry just as it gets started.

2 Responses to “California Agencies Open the Door to Cannabis Cultivation Conglomerates”

  1. Ron Robbins

    That would be a shame. I hope they set a limit as to how many cultivation licenses corporations can set before they stump the continued growth of the market. You think California is going to jump ahead of it before big pharma and the tobacco companies abuse the situation?

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  2. Josh Cohen

    The California agencies were heavily lobbied before they rolled out these regulations so I’m not sure what could motivate them to change them now.

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