O Cannabis Canada is the largest country, and second ever, to legalize recreational cannabis

On June 18 in Ottawa, Canada, a crucial piece of legislation making recreational cannabis legal at the federal level was passed. The simply titled “Cannabis Act” was passed by a vote of 52 to 29 in the Canadian Senate.

The act will go into effect on Oct. 17, 2018. Medical cannabis has been legal federally in Canada since 1999, and was greatly expanded in 2013, but this will be the first time recreational cannabis will be legal in Canada in any capacity. Other than Uruguay, Canada is the only country to ever legalize recreational cannabis at the federal level.

“We’re unique in Canada because it’s being rolled out on the national basis,” Fasken Communications Law Partner Barbara Miller and expert on cannabis legalization in Canada told CULTURE B2B. “The benefit up in Canada is that since it’s national legislation, tax law and criminal law, and banking is all federal, it doesn’t matter what province you’re doing it in, you’re safe.”

Canada is taking an entirely different approach to recreational cannabis legalization than the U.S. While there will be some variations in cannabis law province to province, there will also be overarching federal regulations and protections.

 

Federal Cannabis Regulations

 

Age Limit

One of the main goals of the Cannabis Act is to keep cannabis out of the hands of youth. The legal age is 18, though most provinces will have a legal age of 19. There are a number of restrictions already laid out, with more to come, specifically regarding cannabis and minors.

 

What will be allowed?

Canadians over the legal age in their respective province will be allowed to possess, cultivate and purchase cannabis in the following forms and amounts, according to Canada’s Department of Justice.

However, the Cannabis Act will not allow the sale of edible cannabis products and concentrated cannabis products until approximately one year after Oct. 17.

Canadian adults will be able to do the following:

  • Possess up to 30 grams of cannabis in flower form.
  • Share up to 30 grams of legal cannabis flower with those of legal age.

The 30 gram limit is based on dry cannabis flower, and equivalents for other cannabis products are: 150 grams of fresh cannabis, 450 grams of edible product, 2,100 grams of liquid product, 7.5 grams of concentrates (solid or liquid) and 30 cannabis plant seeds.

 

  • Purchase dried or fresh cannabis flower, and cannabis oil from a provincially-licensed retailer.
  • Residents who live in provinces or territories without legal recreational cannabis retailers will be able to purchase cannabis online from federally-licensed producers.
  • Use licensed seeds or seedlings, to grow up to four cannabis plants per personal residence for non-commercial use.
  • Make edible cannabis products at personal residences without using organic solvents to create concentrated products.
  • Approximately one year after recreational legalization, edible cannabis products and concentrates will be legal for sale.

 

It may seem odd that Canada has chosen to stall on legalizing edibles, or derivatives as they’re referred to legally in Canada. Miller explained why. “There is a concern that when you convert this into a derivative you have to have separate regulations about potentially mold, how long you can keep it, regulations around that,” Miller explained. “Another concern is that when you put it through an oil, you have a pretty good idea how long it will take to work and get into your bloodstream and how long it will last. When you [consume a derivative] it might last longer, it might take longer to get through your system and have the effects that you’re looking for. So they’re trying to study that and create new regulations.”

Individual provinces can and will create additional regulations that will override some of these allowances.

“The federal government, while it has legalized it on a federal basis has left the distribution and sale to the provinces. So what has resulted is that each province has passed their own legislation.”

 

What will be prohibited?

With legalization of cannabis comes regulation. Here’s a list provided by Canada’s Department of Justice of cannabis-related offenses, from least severe to most, that are explicitly prohibited in Canada:

  • Possessing over the aforementioned limit (punishable by ticket for small amount, or up to five years in jail).
  • Distributing or selling cannabis illegally (punishable by ticket for small amounts, or up to 14 years in jail).
  • Producing more than the allowed amount of cannabis (punishable by ticket for small amounts, or up to 14 years in jail).
  • Using combustible solvents (punishable by ticket for small amounts, or up to 14 years in jail).
  • Crossing the Canadian federal border with cannabis (punishable by up to 14 years in jail).
  • Giving or selling cannabis to a minor (punishable by up to 14 years in jail).
  • Making a youth commit a cannabis-related offense (punishable by up to 14 years in jail).
  • Cannabis-impaired driving (punishable by up to 14 years in jail).

In addition to prohibiting the sale of cannabis to minors, the Cannabis Act has strict rules for producers and advertisers. The following are regulations regarding production and advertisement of cannabis, similar to restrictions already placed on tobacco:

  • No products may be manufactured that appeal to youth.
  • No cannabis products may be packaged or labeled in a way that appeals to youth, packages must be plain and uniform.
  • Cannabis may not be sold in vending machines or at self-serve displays.
  • Cannabis may not be promoted in any way that youth could see the advertisements.

Violating any of these prohibitions may be punishable by a fine of up to $5 million or three years in jail.

 

Cannabis Laws by Province

While the Cannabis Act lays out the legal groundwork for cannabis regulation at the federal level, provinces in Canada can also impose their own regulations. “The federal government, while it has legalized [cannabis] on a federal basis has left the distribution and sale to the provinces,” Miller explained. “So what has resulted is that each province has passed their own legislation. We have 10 provinces and three territories, so all 13 of these jurisdictions have passed their own legislation.”

There are two main differences province to province, the legal age to consume cannabis, and where the cannabis will be sold. While most provinces will restrict the sale and consumption of cannabis to those 19 and over, there are two provinces (Alberta and Quebec) with the legal age set at 18. Where cannabis products will be sold is another regulation that varies by province. In Canada, alcohol is sold through provincially-owned outlets. You have to go to a state-run liquor store to buy any alcohol. Some provinces will follow this model, some are allowing private cannabis retail outlets, and others will have a mix. There will be a few other regulatory differences between provinces as well when it comes to the ability to grow cannabis at personal residences and public use.

Cannabis  regulations by province or territory, based on information that is currently available:

Alberta

Legal age: 18

Stores: Provincial, private and online retail sales allowed

Grow at home: Yes, indoor only

Public use: Where tobacco is allowed

 

British Columbia

Legal age: 19

Stores: Provincial, private and online retail sales allowed

Grow at home: Yes

Public use: Where tobacco is allowed, never on playgrounds, sports fields, skate parks, and other places where children frequent.

 

Manitoba

Legal age: 19

Stores: Private and online retail sales allowed

Grow at home: Only with medical license

Public use: Smoking or vaping is not allowed streets, parks, campsites or nearly any other type of public place, but edibles are not mentioned.

 

New Brunswick

Legal age: 19

Stores: Provincial and online retail sales allowed

Grow at home: Yes

Public use: Private property only

 

Newfoundland and Labrador

Legal age: 19

Stores: Provincial, private and online retail sales allowed

Grow at home: To be determined

Public use: Private property only

 

Northwest Territories

Legal age: 19

Stores: Privately owned liquor stores and government run online retail sales allowed

Grow at home: Yes

Public use: Private property and on trails, highways, streets, roads and in parks when they’re not being used for public events.

 

Nova Scotia

Legal age: 19

Stores: Provincial and online retail sales allowed

Grow at home: Yes

Public use: Where tobacco is allowed

 

Nunavut

Legal age: 19

Stores: Online retail sales allowed

Grow at home: Yes

Public use: Where tobacco is allowed

 

Ontario

Legal age: 19

Stores: Provincial and online retail sales allowed

Grow at home: Yes

Public use: Private property only

 

Prince Edward Island

Legal age: 19

Stores: Provincial and online retail sales allowed

Grow at home: To be determined

Public use: Private property only

 

Quebec

Legal age: 18

Stores: Provincial and online retail sales allowed

Grow at home: No

Public use: Where tobacco is allowed

 

Saskatchewan

Legal age: 19

Stores: Private and online retail sales allowed

Grow at home: Yes

Public use: Only on private property and not in front of minors

 

Yukon

Legal age: 19

Stores: Government-run storefronts and online retail sales allowed

Grow at home: Yes

Public use: Only on private property

 

Miller told CULTURE B2B that for medicinal cannabis, Canada will still be using the old system, where residents can go to a doctor, get a prescription, the doctor emails a prescription to a licensed producer and the licensed producer ships the cannabis directly to a residence. Online sale of recreational cannabis directly from producers will not be allowed initially, but may be allowed eventually.

 

Profitability

Recreational Cannabis Profit Projections

At this point, the potential profitability of Canada’s recreational cannabis market is entirely speculative. Still, data based on United States’ sales numbers, Canada’s current cannabis market, and other factors point to a potential for huge profits.

Research firm Deloite released a report, entitled “Recreational Marijuana: Insights and Opportunities,” which assessed available data on Canada’s cannabis consumption to make some profitability projections.

“On sales of recreational marijuana alone, the Canadian marketplace could be as much as C$5 billion per year to start—a number on par with the Canadian spirit market (whiskey, vodka, rum, etc.),” the report reads. “At the upper threshold, which takes into account the people who are ‘likely to consume,’ marijuana sales alone could be as high as C$8.7 billion, similar to sales generated by wine.”

These annual figures are based on the number of self-reported cannabis consumers currently residing in Canada, multiplied by the amount of cannabis they use in grams annually, multiplied by the proposed price of cannabis per gram. Those figures are just based on cannabis sales alone, they don’t take into account all of the other profit to be made from cannabis, including testing facilities, cannabis accessories, tourism and more. Those profits are expected to be in excess of C$20 billion annually.

This data is in line with Statistics Canada’s estimate that Canadians spent C$5.7 billion on cannabis in 2017. Those numbers included both medicinal and black market cannabis usage, but it stands to reason many medicinal and black market users may convert to recreational if price and access are comparable or improved.

A report by the Canadian Imperial Bank of Commerce (CIBC) estimates that recreational cannabis will be a C$6.5 billion industry by 2020. Which is likely why some Canadian national banks have chosen to finance cannabis businesses. CIBC, along with Bank of Montreal and Toronto-Dominion Bank, have all decided to provide cannabis businesses with traditional financing.

Publicly Traded Cannabis

Since cannabis is going to be legal at the federal level, that opens up the option of cannabis as a publicly traded commodity. The Canadian Stock Exchange and the TSX Venture Stock Exchange are currently permitting cannabis stocks to be traded publicly. This has led to an increase in private equity for the forthcoming cannabis industry.

 

Federal Cannabis Legalization Leads to Legitimacy

As we’ve seen in the U.S. with cannabis legalization at the state level, legalization leads to legitimacy. It’s easier to control a substance when it’s legal than when it’s not, period. With Canada legalizing recreational cannabis at the federal level, it adds a further layer of safety and legitimacy.

Uniform regulations will help keep cannabis products safe throughout the country, and out of the hands of minors. Legal banking services for cannabis businesses will avoid the issue we have in the U.S. with a huge cash flow, and nowhere to put it.

Federal recreational cannabis legalization is truly the next frontier for the industry. And Canada is the brave pioneer. If current profit projections pan out, there will likely be more countries to follow soon.

 

 

 

 

 

 

 

 

 

 

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