News Americas, LOS ANGELES, CA, Weds. Jan. 13, 2021: California legalized weed in 2018, to much rejoicing. Every quarter since has seen growth in the marijuana market, and the cannabis industry today is generating hundreds of millions of dollars in tax revenue — billions in overall value.
Yet, as brand-new and lucrative as California’s cannabis industry is, it continues to leave one group behind: small business owners. Corporations are dominating the space, from massive grow operations to corporate dispensary chains, making it incredibly difficult for any bootstrapping entrepreneur — let alone a minority entrepreneur — to find success.
Fortunately, there are a few things California can do to close this gap and return the marijuana market to local small business owners, who can do the most good in the space. Here are a few solutions worth considering:
Expand Banking Options
Marijuana remains illegal at the federal level. This doesn’t inherently counteract the state laws permitting recreational cannabis sales and possession, which is why residents and visitors to California and 13 other states can use weed in peace. However, there are certain jurisdictions where the federal law comes into effect.
In particular, the federal law makes it incredibly difficult for financial institutions to provide services to marijuana businesses without facing serious ramifications. Banks are federally insured, and providing services like savings accounts or loans to a criminal enterprise (as the federal government deems marijuana businesses) will cause them to lose that insurance. Larger banks that operate across state borders face additional risks for participating in illegal interstate commerce through marijuana industries.
As a result, most canna-businesses must operate without the support of financial institutions, which means securing initial capital and managing financial services like cash and card payments sans bank. This is fine for larger enterprises that have access to greater capital and can balance the financial risk, but for smaller entrepreneurs, the lack of banking support can be a barrier to launching a business to drive them to other, much riskier financial services that cripple growth.
California lawmakers have started making efforts to rectify this oversight. In November, the state passed laws that make it easier for financial institutions to gain access to business documentation, which allows some canna-businesses to obtain more services from in-state banks and financial institutions. Still, this should be the first step in opening up the banking industry to serve all sizes of weed enterprises.
Make Regulations More Straightforward
Another hurdle for small weed business owners in California is the labyrinth of regulations entrepreneurs must navigate to apply for and maintain their cannabis licenses. Running a legal cannabis shop isn’t as easy as applying for a business license and opening one’s doors; similarly, growing pot for legal sale isn’t like managing any other agricultural enterprise. All marijuana business owners must adhere to strict and sometimes counterintuitive rules regarding cultivation, distribution and sale.
Larger and better-funded marijuana organizations are much better equipped to traverse California’s regulatory landscape. Extra capital can hire lawyers and other consultants to draft suitable business plans and apply for licenses in a timely manner. In contrast, bootstrapping entrepreneurs need to exert immense energy to comprehend the regulations and ensure their small businesses continue to adhere to confusing laws. As a result, small canna-businesses are much more likely to be punished with fines and restrictions which force them to close their doors — if they ever get them open.
Streamlining regulations for marijuana businesses should be a top concern for California lawmakers interested in encouraging the growth of the cannabis industry. Likely, regulations will relax over time as legal weed becomes more acceptable nationwide, but the sooner California moves to make regulations straightforward for business owners, the more small businesses will thrive.
Fund Projects for Social Equity
Finally, social equity is an issue that many states continue to struggle with in regards to their marijuana industries. Despite making up an inordinate proportion of convictions and incarcerations for cannabis-related crimes, people of color are not similarly represented amongst cannabis business leadership. As a result, communities of color continue to suffer from a legacy of marijuana law enforcement and fail to benefit accordingly from legalization.
Unlike other states, California did not build social equity programs into its initial legalization effort, and it shows. While individual cities like Los Angeles and San Francisco have endeavored to create greater equality in their municipal cannabis spaces, the state as a whole has devoted hardly any energy or money to marijuana industry diversity, and much of this effort has only been made within the past year. Working harder to include people of color in canna-business, through entrepreneurship programs, improved zoning regulations and more, will do much to bridge the gap between big, white-owned canna-businesses and small, community-backed shops.
Cannabis is becoming an important element of California’s economy, which means even those who do not partake of the good green herb should be concerned about regulations affecting the industry. Policies that encourage small businesses are better for Californians, so fighting for the above changes to California’s regulations should help the state find greater success overall.
