Can $100 Million Save the Legal Marijuana Industry in California?

$100 million to California

When cannabis is legalized in any state, it makes users, investors, and enthusiasts in the industry excited because it is one step to global legalization. However, does it all end with legalization? After cannabis is legalized in a state, is the industry abandoned to fend for itself?

Of course not! Legalization is just the first step as afterward, the cannabis business sector blooms. California, in particular, has a vibrant cannabis industry, and as it is with all other entrepreneurial sectors, it should be rejuvenated.

California is taking the bold step by offering an overhaul of its cannabis industry by helping marijuana businesses with its new environmental review requirements.

California Now Offering $100 Million to Rescue Its Legal Cannabis Industry

The California legislature has approved a $100 million plan to boost its legal marijuana industry, which may have been struggling to compete with the black market. Los Angeles will be the biggest beneficiary of the funds provided to help cannabis businesses transition from provisional to regular licenses.

The bill was proposed by California Governor Gavin Newsom, who maintains that the funds will be grants given to cities and counties with legal marijuana businesses.

The Chairman of the Assembly Budget Committee, Assemblyman Phil Ting, said California is yet to reach its well-regulated cannabis market. He asserts that this overhaul with the $100 million grant will take California closer to its destination.

The challenge with the California cannabis market

Several cannabis growers, enthusiasts, manufacturers, and investors have often struggled to transition from the provisional temporary license to a permanent one (annually).

The process is costly, complicated, and time-consuming as it entails a review of the negative environmental impact associated with the cannabis business. The California government wants to reduce such harm, but since the cost is too high for companies, they are setting up this grant to ease the process.

Before the grant was set up, 82% of California's cannabis businesses still had provisional licenses. So with this grant, $22 million set aside for Los Angeles will help the city hire experts and staff to assist such businesses in completing their environmental assessment.

After completing the assessment, legitimate businesses will have a higher chance of succeeding and overpowering the black market. The governor also desires to give cannabis businesses a six-month extension period to transition from provisional licenses.

The businesses must comply with the mandates of the California Environmental Quality Act. The extension given by the governor was highly criticized but primarily understood as an opportunity given to businesses to get the correct license in record time.

California's long history with cannabis legalization and the need for rejuvenation

Amongst the other states, California is known as a leading state with cannabis legalization. The state paved the way for other states to license their cannabis market through Proposition 64 in 2016. The state officials initially anticipated that 6,000 cannabis shops would be licensed within the first few years.

However, only 1,086 retail shops and delivery firms have received licenses. In 2019, industry officials also estimated there are up to three times as many unlicensed businesses like the ones with state permits. This means there is still a need to get more licensed stores, so the numbers are more impressive.

Some cannabis industry leaders believe that enforcement has reduced the number of illegal pot stores, which is commendable, yet unlicensed retailers still outnumber those with licenses.

Details of the bill

The bill was approved on Monday, June 14th, 2021, with $100 million earmarked for the project. It also targets 17 cities and counties, including Los Angeles that will get grants. Los Angeles is the biggest city, will get the largest share of the funding. Other eligible towns for the assistance include San Francisco, Oakland, Long Beach, Adelanto, Commerce, and Desert Hot Springs.

Initially, Pot businesses were required to transfer from temporary licenses to regular annual permits by 2019. But several new companies couldn't comply in time, so the state had to allow for "Provisional" licenses until January 1st, 2020. The governor of California extended the deadline again to January 1st, 2022.

Conducting a CEQA review is a crucial requirement to change from provisional to the new license. The bill stipulates that this review indicates how pot farms and other cannabis-related businesses affect the surrounding environment, from plants to wildlife, water, and air.

The businesses are to propose then ways through which they can mitigate such risks to the environment. Despite the viability of the idea and the state's intention to protect the environment, many cannabis environments cannot meet the deadline.

Some businesses are just at the initial stages of setting up their business and dealing with staff issues. So Sen. Anna Caballero proposed another bill that allows the state to offer provisional licenses for six years until 2028. She later shelved this bill after it received opposition from environmental groups.

The environmental groups insisted that the six-year extension doesn't offer sufficient ecological protection. To avoid a contest between such groups and the legislature, the governor proposed a six-month extension that allows businesses to use the provisional license.

The governor warns that the cannabis business industry might face dire consequences if they are not given enough time to get the regular license. Lawmakers accepted this alternative from the governor, offering cannabis businesses the time required to meet the annual licensure requirement while protecting the environment.

Bottom Line

California has always led to boosting the cannabis industry: other states look to California for legislative guidance. Therefore, this recent move to support the cannabis business with a $100 million grant will boost the licensing process, which other states may emulate.

Legalization is never enough with the cannabis industry because there are still illegal and black market pot shops to contend with. States need to become proactive with ensuring that their cannabis businesses are protected, empowered, and given all the support required to thrive.

No state in America benefits from a thriving illicit and black cannabis market. With this overhaul, the State of California is ready to squash its illegal cannabis market so legal enterprises can compete favorably in the market.