For many states with legal cannabis markets, one of the objectives of legalizing the controversial drug was to cripple the illicit cannabis market by taking away its clientele. While that sounds like a great idea in theory, most of these states have been unable to do any real damage to the illegal market so far. Not only do black market sellers tend to price their cannabis cheaply, but they don’t have to jump through a wide variety of hoops to start selling, and this ensures the black market has an unending supply of affordable cannabis.
California, for instance, legalized marijuana back in 2016, but a mere four years later, the state’s illicit cannabis market has more than three times the number of registered cannabis sellers. Consequently, the state has earmarked $100 million towards supporting its struggling cannabis industry amid the coronavirus and subsequent financial crisis. State Governor Gavin Newsom proposed a measure that would see these funds used to help businesses in the cannabis space turn their provisional licenses into permanent licenses, and it was recently approved by the legislature.
According to Newsom’s office, around 82% of licensed businesses hold provisional licenses, with most cannabis businesses being unable to convert those licenses to permanent ones due to the high costs involved. The state requires permanent license holders to run their businesses in a way that has minimal to zero negative environmental impact, and this usually leads to higher annual operational costs. As many of the registered operators are equity applicants, small businesses and legacy operators, says Newsom’s senior cannabis advisor Nicole Elliot, these costs are often more than they can handle, preventing them from obtaining permanent licenses.
This one-time $100 million grant will be used to help cities in the state employ professionals and staff to assist with the process of turning provisional licenses into permanent ones as well as to aid in business operations. Los Angeles alone will receive $22 million, with the rest of the funds going to cities such as Oakland, San Francisco, Adelanto, Commerce and Desert Hot Springs. Matt Hawkins, managing partner at Entourage Effect Capital and the board chair at Harborside, says the grant will help ease the financial burden on legal companies and allow regulators to process the backlog of licenses much faster.
Newsom has also thrown his weight behind a measure that would extend the Jan. 6, 2022, deadline to apply for provisional licenses by six months. However, it wasn’t included in the most recent state budget bill, and lawmakers are still discussing it.
It is heartwarming to sector players such as XPhyto Therapeutics Corp. (CSE: XPHY) (OTCQB: XPHYF) (FSE: 4XT) to learn that some jurisdictions are taking steps to support the cannabis industry during the pandemic. This is a far cry from the stance of the federal government, which doesn’t recognize state-level cannabis firms as legitimate business concerns.
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