market structure - california
- Vertical integration is allowed among most cannabis license types in California, except for testing.
- There is no difference in the market structure for medical and recreational ("adult-use" in California).
- Distributors under a full distribution license are responsible for distributing, testing, handling packaging and labeling quality control, as well as collecting and remitting taxes for cultivators and retailers.
- Only licensed distributors can transport cannabis from one licensee to another.
- Given the burden on distributors, there is speculation that cultivators, manufacturers, and retailers will mostly obtain their own distribution licenses so they can control their supply chain costs.
- Existing medical licensees will have priority in applying for (recreational) licenses through December 2019.
- Large cultivator licenses will not be available until 2023.
- Once enacted, large cultivators will not be allowed to hold testing, distribution or microbusiness licenses. They will be allowed to concurrently hold retail and manufacturing licenses, however.
Key players in california cannabis
- MedMen is an LA-based company that has invested in cultivation operations and dispensaries in California, Nevada and New York. They have raised $99.2 million and plan to continue making strategic investments in the cannabis industry.
- Other key competitors in the California cannabis financial market are Casa Verde and the Arcview Group.
- Casa Verde is a venture capital firm investing in various B2B aspects of the industry.
- The Arcview Group has invested over $115 million in 141 companies in the industry.
- Additionally, Cannabis Science is a biotech company in Irvine developing cannabinoid-based therapies. Their 2017 market cap is an estimated $253 million.
- Medical Marijuana Corp, from San Diego, has many subsidiaries that are producers, manufacturers or retailers of cannabis products. Their market cap is $480 million.
legal overview - us
- Federally, all marijuana use and sale is banned and is in the same legal category as heroin (Schedule 1). Possession in federal-owned space, like parklands, inside a "legal" state is still not allowed.
- Under the Controlled Substances Act, doctors are prevented at the federal level from prescribing cannabis, but they are allowed to "recommend" its use under the First Amendment.
- On January 5, 2018, President Trump (via Attorney General Jeff Sessions) issued a memo advising federal prosecutors to be more aggressive in prosecuting marijuana cases, effecting undermining state law.
- However, the Rohrabacher-Farr amendment prevents the federal prosecutors from spending money on "the implementation of state medical cannabis laws".
- The DEA responded stating that they felt fighting opioid trafficking was a higher priority for their department.
legal overview - california
- The California Legislature passed the MAUCRSA bill in June 2017 that legalized adult-use (recreational) cannabis.
- Both medical and recreational cannabis in California are now governed under a single regulatory system.
- The possession, use, and sale of recreational cannabis became legal for adults over 21 on January 1, 2018.
- Possession is capped at 28.5 grams for private use.
- Taxes for cannabis are set at 15% for "excise and cultivation".
- The latest developments in cannabis regulation in California has been the progress in local authorization (at the city level) of on-site consumption. West Hollywood, San Francisco, Oakland, Alameda and Palm Springs are the only cities issuing permits for on-site consumption.
upcoming federal legislation impacting cannabis
- The VA Medical Cannabis Research Act left committee in May. It will allow the VA (Veteran's Affairs) to conduct research on medical cannabis.
- The Marijuana Justice Act was introduced in the House and Senate last summer. It would fully legalize cannabis, as well as retroactively expunge convictions for marijuana possession.
- The Respect State Marijuana Laws Act of 2017 proposes to amend the Controlled Substances Act (CSA) to say that penalties do not apply to those governed under state law.
- The Ending Marijuana Prohibition Act of 2017 would remove it from the CSA.
- The Medical Marijuana Research Act of 2017 would allow qualified researchers to access marijuana.
- The Marijuana Effective Drug Study Act of 2017 also would allow for more research into medical marijuana.
current political atmosphere
- Federal interference in marijuana prosecution is protected by a larger debate on states' rights set forth in the Constitution's Tenth Amendment.
- Some recent discourse has called for the federal government to get out of the issue entirely.
- There are several proposed bills in Congress regarding marijuana, some calling for full legalization, some more mildly just asking for more research.
- Top Democrats that are quietly being considered as contenders for the 2020 Presidential race are backing proposed bills discussed above that would decriminalize marijuana.
- Although he has previously taken a tougher line on marijuana, President Trump announced last week (on June 8, 2018) that he supports Congress in ending the federal ban on marijuana. This would then allow states to fully and completely decide on legalization.
your research team applied the following strategy:
In order to examine the market structure of legal cannabis in California, we used several sources that described the various parts of the supply chain following the enactment of MAUCRSA.
When looking at key players, there are many facets to the market where companies could dominate. As MedMen was given as one to focus on, we used the market space they operate in, financial, to find other major investors in the industry. We then sourced other lists of the biggest cannabis-related companies in the US and found those that were operating in California to provide a broad overview of some large cannabis companies in California.
For the legal overview of cannabis, we first researched the state of regulations on cannabis in California, including the latest regulatory progress for the state. We then looked at how cannabis is regulated at federal (US) level, including any upcoming, proposed legislation and the most current political atmosphere.