The Stigma Surrounding Cannabis Sale and Use is Actually a Blessing in Disguise Fo Cannabis Entrepreneurs

Many people are concerned that the stigma surrounding cannabis as an illegal drug that is harmful to the body and could be a gateway to harder drugs is harmful to  business.  I would argue that such a stigma is a blessing in disguise.  The stigma, I believe, is not going to discourage someone who is already interested in cannabis from using cannabis.  The people that already believe the fallacy that cannabis is a gateway to harder drugs were never the kind of people that were going to use cannabis anyway.

However, for California cannabis entrepreneurs this stigma is a blessing in disguise.  Many companies that could make a large splash into the cannabis market are prevented from doing so because of the stigma.  Tobacco companies and alcohol companies would seem to be a perfect fit for entering into the California cannabis industry.  Both of these products are stigmatized as being harmful, addictive and a gateway to harder drugs.  The industries that produce these two products, alcohol and tobacco, are already familiar with a business that is controlled by significant regulation and is taxed heavily.  These organizations are also used to making products that are consumed by the customers and therefore are familiar with issues that surround selling a product that is ingested.  Therefore, the alcohol and tobacco conglomerates would be the perfect companies to move into the California cannabis recreational market.

However, these companies have enough heat on them that they don’t need to incur any more heat by getting into cannabis.  As you will notice, in general tobacco companies and alcohol companies don’t enter into each other’s markets.  I believe this is the case because they are so stigmatized by being in one of these industries that they don’t need any further stigmatization.

This stigmatization also prevents many other small companies and individuals from venturing into cannabis.  There are many people that don’t want to get involved in the “drug business” no matter how lucrative it is.  It is my conclusion that this stigmatization cuts seriously down on the amount of companies and individuals that but for the stigma would otherwise enter the market.  Therefore, I would argue that the stigma of cannabis seriously cuts down on the supply of recreational cannabis products by reducing the number of players that are willing to enter the game.  On the other hand, I don’t believe the stigma significantly reduces the number of people who are going to purchase cannabis products.

Before cannabis goes fully legal in California, there are still plenty of people that have already tried cannabis and certainly want to purchase more.  Especially now that it is completely legal and it will be very easy, come January 1, 2018 to simply walk into a store to purchase it.  Therefore, for California cannabis entrepreneurs the stigma means less competition but the same demand.

Federal Law Criminalizing Cannabis Use is Here to Stay

After yesterday’s post, a lot of people asked me how I could be so sure of federal obstinacy to legalizing marijuana. I realize now that as someone who has been heavily involved in politics for over thirty years, what seems like conventional wisdom in political circles, in most other circles seems crazy. The question usually is, if twenty nine states out of fifty have legalized marijuana in some way, how can the federal government  be so abstinent in choosing not to legalize the sale of marijuana even for medical use?

For this situation to change, either the Supreme Court of the United States would have to say that the federal law is unconstitutional because the Constitution does not give the federal government power to declare marijuana illegal, or a law would have to be passed by the U.S. Congress overturning cannabis criminalization.

Articles X of the Constitution states that: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” One place the Constitution says that the U.S. Government (the federal government) has power over the state and the people is when the issue in question concerns interstate commerce.

When the issue of Civil Rights came up before the U.S. Supreme Court, and more specifically, how and when could the US Government force a local diner to desegregate, the U.S. Supreme Court said that the US Government has jurisdiction over the segregation issue as it relates to a local diner (where the seating is segregated because of race) because the diner probably serves such items as Chicken which in all probability was transported over state lines to the diner; and thus invoking the Interstate Commerce Clause of the U.S. Constitution (and other excuses). What is called the interstate commerce clause is also called the loop hole so big; you could drive a truck through it. If the constitutionality of the federal government in outlawing marijuana is ever brought before the U.S. Supreme Court, then it is this loophole call “Interstate Commerce Clause” that will probably save the law.

In addition, the U.S. Supreme Court is the most “politicized court” in the land, and most of the court was nominated by Republican Presidents who were all very much in favor of the war on drugs. In any case, even though Republicans are supposed to be the party of strict-constructionism, which means the party that is for limiting federal power to only those powers delineated in the Constitution, it is still the party that favors keeping the federal anti-drug laws intact.

Right now the big “anti-drug” party is in control of all the law making branches of government. To abolish the federal laws that outlaw marijuana, you would have to pass such a law through both the U.S. House of Representatives and the U.S. Senate and then your would need the President of the United States to sign it. Almost every Republican that runs for political office anywhere runs on a tough anti-drug platform and this anti-drug fever seems to override any Republican sympathy for libertarianism or bringing power “back to the states”. The bottom line is that as long as there is republican control of  the House, the Senate or the Presidency, the federal anti-marijuana laws will remain in force. Therefore, don’t count on a reversal of federal law when making strategic business decisions about marijuana.

(Author’s note: there are not a lot of citations in the article because most of it came from the top of my head. It never occurred to me that there was a chance for federal reversal on this issue. I really would like it if my conclusions on this issue were wrong. So if you disagree with me, by all means tell me. I would love to hear it).

The Chaos of California Legal Cannabis Begins

Almost every intelligent person residing in California is aware there is some problem with the marijuana or cannabis laws in California. However people are not truly aware of how deep and dysfunctional the legal framework around Cannabis truly is.

To fully understand the cannabis legal environment in California you would have to take the equivalent of a one year  law school class focused on California Cannabis Law. That is ninety hours of class time. The problem is there is currently no one in California today that could truly teach such a class. The reason for this problem is threefold.

First, the law surrounding cannabis in California is so fluid and new that no one truly comprehends the whole picture. On November 16th, 2017, three California state agencies released 272 pages of regulations that will go into affect on January 1st 2018.  Below are the regulations divided by the agencies that released them.

When commenting on these regulations. Lori Ajax, The Chief of Bureau of Cannabis Control,  commented in the Orange County Register  about the current regulations:  she said they plan to continue taking public comment into 2018 and fine-tuning the rules as needed.

“I think they’re good, but I think there are improvements that can be made,” she said. “I think we’re going to get a better idea once we start issuing licenses and see how implementation is going.”

Therefore no one knows, except for maybe some divine presence, what the final California regulations are going look like even four months from now.

Second, there is a direct confrontation and contradiction between California Republic’s State law and the government of the United States Federal Law. Federal law should always trump state law. However, the reason that the contradictory system is allowed is because of the federal tradition in this country.

This federal system is not a problem for France or Poland. Unlike those other republics, our Constitution clearly states that the federal government is restricted to making only certain laws. And any laws outside of the federal purview, and this purview is clearly delineated in the US constitution, should be struck down by the federal courts. Ever since the founding of the current federal republic in 1789, the federal government has been slowly expanding the federal purview to the point where the U.S. Congress felt comfortable in outlawing cannabis nationally in 1917. There are many experts and layman still today that think the federal laws on cannabis are unconstitutional. It is this history that has prevented the federal government from imposing the federal will on the states. Without the federal government imposing its will and if California state laws don’t change, this contradiction will continue. A similar conflicting and contradictory legal situation between one or more states was solved by the US Civil war from 1861-1865 and by the Civil Rights Movements in the 1960s.

Third, if anyone tells you that the Supreme Courts may soon say such federal laws are unconstitutional or anyone tells you that “the federal law will soon change” are completely ignorant of the current political climate. I can say without a doubt it will be at least ten years (and probably much longer) until the federal government changes the law. In business, such a delay might as well be three lifetimes. If the federal government refuses to impose its will, and at the same time refuses to change its own laws, (and I assume the state of California will not decide to go back to criminalizing the sale and use of Cannabis) then there is no easy fix for this conflict of laws.

However, where there is Chaos there is opportunity. At the end of prohibition huge profits were made by people who were ready to jump into the game. I was talking to my friend Marco Robert and we were discussing how Josef Kennedy Sr. jumped right into the legal market at the end of prohibition and turned his family into one of the richest families in the world.

Fortune favors the bold and he who is afraid to travel where angels fear to tread will seriously regret not taking the road less travelled.