Amid political upheaval, Democratic politicians have gained control of the house, the senate, and the presidency. All 5 states with weed on the ballot in the November elections voted for legalization. New York Mayor Cuomo has vowed to legalize within the city this year. Multiple politicians across the political spectrum are pushing for legalization in their home states, or expansion of existing programs. The House passed the MORE act, a cannabis omnibus bill focused on descheduling and expungement of criminal records. President Biden has come out in support of decriminalization but has stopped short of supporting full legalization. Overall, we are at a watershed moment of momentum behind the end of cannabis prohibition in the US.
But what does this mean? Well, on the bright side, it means that it's a pretty safe bet to say that in the next two years we will most likely see some kind of federal legislation that significantly dismantles the structures of prohibition. Several more states will legalize or expand their existing rules. Cannabis will probably become a bankable industry, with many more traditional financial services available. Interstate trade may become a limited reality, leading to more opportunities for buyers and sellers to source regional specialties. Medical applications of cannabis will become much easier to study and prescribe, shining more light on the potential uses of the plant.
However, on the other side of the coin, this is likely to get very messy. Federal decriminalization will come with massive pushback from the many interest groups that profit from prohibition, from legal and policing groups to private penitentiaries and background check organizations. These objections will most likely lead to a legal quagmire of additions and modifications to the legislation, drawn out legal battles, and little to no consensus regarding what is actually legal for an extended period. Federal law changes will also lead to upheaval in the legal structures of individual states. Each state- with legal weed or otherwise- has their own eccentric labyrinth of cannabis laws, arbitrary enforcement jurisdictions, fee structures, and bureaucratic systems that rely on the illegal nature of cannabis. The transitional period between Federal legislation, State implementation, and local enforcement is going to be chaos.
Legal markets are already complicated, poorly regulated or over-regulated, prohibitively taxed, lack quality control, and are largely socially and financially exclusionary. Most of the data out there is incomplete, most of the political players are uninformed, and many of the industry unicorns are pre-profit. As a result, the traditional market still reigns supreme. Growing cannabis illegally is still far and away the preferred method, and legal growers are often keeping their operations going only by selling a portion of their crop under the table.
So what does impending legalization/decriminalization mean for growers these days? Well, we know already that legalization makes the traditional market price drop, largely as metropolitan customers get easier access to dispensary products rather than having to rely on their under the table weed man. The traditional market also gets flooded with overflow or backdoor product from the legal market, further diluting the price. We can expect the same thing to happen when Federal rules change the landscape. We can also expect that the legal market prices will drop as well, with massive numbers of new businesses entering the market and trying desperately to compete. At the same time, the cost of starting a legal business will still be astronomical, as local and state governments see an opportunity for a windfall in bureaucratic fees and compounded taxes. This price drop, massive influx of new businesses, and cost of entry means that the first few years under the federal legislation will be brutal, with businesses defaulting left and right or getting swallowed up by competition.
Ultimately, the illegal market price will drop, the legal market price will fluctuate wildly, the stability of legal supply chains will be shaky at best, and the regulatory environment will be unpredictable and ill-conceived. People in the mountains are still going to be growing the same as they always have, but how they sell and who they sell to will be even less predictable. We've seen this before, in a smaller scale in the legal markets down the West Coast and Colorado. The winds of change are blowing nationally, but they're going to be more of a storm than a dependable headwind.
Just keep growing
-The OmniCann Team