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TOLERANCE, TAXES AND TEAMWORK

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For years, the city’s cannabis industry has been tangled up in the regulatory mess known as Proposition D—a flawed measure that effectively capped the number of “somewhat legit” collectives in Los Angeles at 135.

Now with the passage of Proposition 64 and the Medical Cannabis Regulation and Safety Act (MCRSA), the broken-ness of Los Angeles’ cannabis laws is intolerable. This is due to new state rules regarding local power and licensing. If the city can’t undo Proposition D, then it can’t cash in on medical or recreational cannabis. Simple.

Luckily, the L.A. cannabis industry is finally starting to see a light at the end of a smoky tunnel. Last month, the city approved a city council initiative to amend Proposition D for the March 2017 ballot. Now the billion dollar question—How much cannabis activity is the city willing to tolerate in return for the much-needed tax revenue?

United we stand, divided we fall

Up until recently, two groups of L.A. cannabis business interests were backing competing proposals on the March ballot—Proposition M and Proposition N. One group, the Southern California Coalition, was an early backer of the city council’s ballot measure, Proposition M. This group wants to see as many as 495 shops fully legalized in L.A. along with licensing for all facets of the industry—cultivation, manufacturing and delivery.

“City officials say that the broad language of Proposition M is by design. Essentially, the city wants to start from scratch and work with the industry to come up with smarter regulations that are mutually palatable.”

The other group, the United Cannabis Business Alliance (UCBA), supported Proposition N, a self-written initiative that had also qualified for the March ballot. Like Proposition M, the UCBA initiative sought full legalization of cannabis businesses in L.A. But, Proposition N was aimed at preserving the current monopoly held by the 135 Prop D-compliant collectives.

On December 9, 2016, the two factions joined forces. In a bid to form a united front, the UCBA voted unanimously to scrap its measure and publicly throw its support behind Proposition M. Now the city and the entire cannabis industry will be working together. The idea behind this is to eliminate the risk of potentially splitting the pro-pot vote with dueling initiatives that essentially seek the same thing. Now, the passage of Proposition M is all but certain.

Proposition M                                                                    

So what exactly does Proposition M address? Honestly, not much—just taxation and enforcement. Proposition M gives very few details about how exactly the industry will be governed. The measure simply states that the power to regulate the industry will be returned to the city, without placing industry rules to consider. In fact, the only rule specifically set forth in Proposition M is the one-thing voters must approve—new tax rates for cannabis businesses.

City officials say that the broad language of Proposition M is by design. Essentially, the city wants to start from scratch and work with the industry to come up with smarter regulations that are mutually palatable.

For now, Proposition M only hints at a regulatory scheme that would potentially license not only collectives in the city, but also cultivators, manufacturers, transporters, testing labs and researchers for both medical and recreational cannabis. The measure further indicates that it would give licensing priority to existing collectives in compliance with Proposition D, which is viewed as a concession to the UCBA. If the initiative passes, local licenses will likely be available as early as September 30, 2017.

Placing all this power in the hands of the city without any formal assurances makes some in the industry nervous, while others are more optimistic. At the end of the day though, the decision to vote for Proposition M revolves around one single question: Can we trust our industry to properly educate our local politicians to ensure smart regulation in 2018? We certainly hope so.

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