The most important event in California’s marijuana industry is official legalization on January 1. It will cause a surge in demand that will attract more investment, and cause the industry to grow exponentially. As well several regulatory legislation will be implemented to streamline growth, processing, and sale.
According to Matt Karnes, industry analyst and New York GreenWave Advisors’ managing partner, the Californian marijuana industry will generate $5.2 billion in 2018, but the problem is most of the transactions will be done out of banks. Nevertheless, the state will collect an estimated $1 billion in weed taxes.
Karnes says there is need for changesfederal law so the financial system can support the industry. Currently, the federal law classifies weed a Schedule l substance alongside heroin, and any bank that will work with pot growers and businesses risks losing its federal charter.
When a bank wants to support legal cannabis-related businesses, it has to report to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), and to date, only 5 percent of banks have done that. Karnes says that currently only 1 percent of all banks in the US working marijuana-related businesses.
According to Tyler Beuerlein, the vice president of business development at Hypur, a company that provides financial technology services in the marijuana industry, there are fewer than 25 credit unions and banks that have more than 15 weed-related accounts, are actively pursuing marijuana clients, and are freely banking the Santa Monica Cannabis industry and the entire marijuana industry.
As reported by the Los Angeles Times, the current legislation discriminates against small businesses by giving large businesses authority to get the maximum number of licenses possible. Unlike large businesses that have large amounts of cash, small businesses usually lack funds and have to resort to borrowing, which in this case won’t be possible as currently, most banks do not support the weed industry.
Changes in the industry can be good or bad news depending on the subject’s perspective. For small businesses, the fact that big business is working its way into the weed industry is no good news, as they are likely to be pushed out of business. Large growers will eventually flood the weed market with the products, and as a consequence, drive down the prices and margins of marijuana Santa Monica leading to closure of several small businesses.
On the other end, entry of big businesses in the industry is good news for consumers, as they will get plenty of supply at lower prices. Without competition, weed prices will rise with time. As well, competition brings innovativeness allowing consumers to get a large variety of products.
We expect a lot changes to California’s weed industry come 2018. Most of them are aimed at protecting consumers against poor quality products and other forms of exploitation by marijuana dispensary Santa Monica business people. All in all, we have to wait and see the progress.