California legal cannabis industry rides out 'wave of extinction' as legislation grows in DC

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The keynote speakers at the North Bay Business Journal’s 2019 North Coast Cannabis Industry Conference focused on California and national issues, illuminating the status of cannabis on Capitol Hill as well as consumer sentiment in the Golden State.

Aaron Smith, co-founder and executive director of the National Cannabis Industry Association, noted at the Tuesday conference in Santa Rosa that there is much more federal legislative activity on cannabis than when his group, which advocates for marijuana policy reform, first started almost a decade ago.

“There was one piece of cannabis legislation in Congress when we started,” Smith said. “Now there are dozens.”

He highlighted two pieces of federal legislation: The STATES Act would take marijuana off the federal schedule of illegal drugs and provide some banking protection for the industry. The SAFE Banking Act would carve out an exemption to money laundering law and controlled substances legislation for financial institutions doing business with the cannabis industry.

Smith said a third bill, the Marijuana Justice Act which addresses social justice issues around marijuana prohibition, adding he expected a compromise between those provisions and the STATES Act to be signed into law.

Rounding out the morning keynote portion was Tamar Maritz, director of business development at BDS Analytics. She focused on consumer trends in the industry and the impact of state regulations.

“California’s first year of adult use sales did not turn out as expected,” Maritz said, noting that the state saw $2.5 billion in sales in 2018, the first full year of adult legalization. “This is obviously due to … the state’s licensing challenges throughout the supply chain.”

She was referring to the troubled rollout of permanent licenses for growers and distributors and other regulatory speed bumps.

One of those triggered a “wave of extinction” in July, Maritz said. That’s when the state implemented testing requirements for cannabis products, resulting in a fire sale of not fully tested products and a 17% dip in available merchandise.

The illicit market remained strong, she said, largely due to the cheaper cost of unregulated cannabis at $6 per gram, compared with $9 per gram after taxes and fees.

Maritz also noted dried flower or buds had lost market share over time in favor of other products like vapes. According to her company’s research, bud was 34% of all legal sales in the state at the end of last year, down from 56% in the first quarter of 2017.

Staff Writer Chase DiFeliciantonio covers technology, banking, law, accounting, and the cannabis industry. Reach him at or 707-521-4257.

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