Marijuana Moment is one of my daily reads. They cover what is happening by state and federal government, including bill tracking, local and international info, science and health, and business aggregating all the information out there. How many of you know that Thailand legalized cannabis?
California, one of the most mature states in the sector, legalized recreational weed in 2016 and medical in 1996. That means most people have been buying their weed legally since the late 90s because getting a medical card was more accessible than obtaining a driver’s license.
The price differential between what legal cannabis products are being sold in California vs. NY is vastly different. A pre-rolled joint in California is around $5 vs. NY, where the price can be $20-50, depending on the brand. Not surprising that many of the Cali brands are working with NY farmers to build their brands out here for the legal market. Also not surprising you can find many of these Cali brands in illegal stores where they can make some margin.
Building a new industry is not easy, but what is holding back growth is one thing only, Federal taxes. That tax law is called 280E. It forbids businesses from deducting ordinary business expenses from gross income associated with Schedule I or II drugs—another charming throwback to the Reagan administration. Essentially nothing can be deducted like in a regular business forcing anyone in the cannabis business to be taxed around 70%. Many companies are taxed almost twice as much as they make. How do you build a new industry on that? Remember that 37 states have legalized weed.
If technology businesses were taxed at 70% gross when the industry started to ramp up in the early 90s, would we have Google, Facebook, Linkedin, Airbnb, Salesforce, etc., etc.? This tax impedes the cannabis industry that will generate over $50B in 2028, not including the illegal market blossoming in NY. The only business that benefits from all of this is the federal government. Maybe they are just not making enough with FEMA, Fannie Mae, Student Loans, and all the other businesses they run.
American Express, Amazon, and Anheuser Busch are just a handful of large companies spending lobbying dollars to make changes at the federal level that will allow cannabis to be treated like a regular business. It kills me that, once again, companies have to spend money on lobbying because that is how business is done in Washington, aka corruption.
My bet is on Gavin Newsom, who sees firsthand how his state is being hammered and probably has his eyes on something bigger than just running California. My hope is he will sue the federal government to legalize cannabis. It will change everything.
Why must we spend billions on this when the federal government could do the right thing? After watching our Congresspeople interrogate TikTok CEO Shou Chew, I guess it isn’t surprising, just depressing.