regulation experiment – Outrun Change

As expected, legalized marijuana market is struggling with regulation and tax burden. – Part 33.

Source: Legislative Analyst’s Office, California Legislature

As I have long been predicting, the legalized marijuana industry in California is struggling. The illegal market is still dominant. Tax collections are far below projection.

Articles for your consideration today:

Legal-marijuana executives report their industry is on verge of collapse.
Tax collections fall short of projection.
Actual tax collections in state of California.

Previous articles on burdens the state of California has placed on the legalized industry can be found by clicking on the regulation experiment tag.

PJ Media – 12/18/21 – Pot Industry in California on Verge of Collapse – Entertaining opener:

“… getting the government involved in anything either makes it more expensive or ruins it completely.”

Guess what? Harsh regulations have throttled the legal marijuana market in California. Surprise! – #32

In what is an absolute lack of surprise to anyone who’s thought about the issue, the severe regulations imposed by the state of California on legal marijuana shops means the majority of marijuana sales take place in the black market.

After five years of legal recreational marijuana, sales in the illegal market are estimated to be twice the volume in legal stores.

This is the 32^nd article I have written covering the legalized recreational marijuana market. You can see my other articles by clicking on the regulation experiment tag.

Politico explains on 10/23/21: California’s legal weed industry can’t compete with illicit market.

One way to measure how severely the legal marijuana business has been restricted is to look at the number of licensed marijuana shops per 100,000 residents. For six Western states that allow recreational sales, here is the number of legal dispensaries per 100,000 people:

More news on the emerging state-legal-federal-illegal marijuana industry.

“LEGAL Colorado Marijuana Grow” by Brett Levin Photography is licensed under CC BY 2.0

8/30/17 – Wall Street Journal- Buzz Kill for Pot Farmers: Lower Prices – Estimates are the increasingly legal cannabis business has industry wide revenue of somewhere around $6B of sales a year compared to the tobacco industry with $119B annual sales.

According to companies who track such things, the prices for legal marijuana have been dropping.

A retail company in Seattle offers the pricing of one specific brand as an indicator. It is currently going for $10 a gram now compared to $15 a gram two years ago (9/15), which is a one-third drop.

Continue reading “More news on the emerging state-legal-federal-illegal marijuana industry.”

Ripple effects of marijuana legalization in California

I have seen two amusing ripple effects of soon-to-be-legal recreational use of marijuana in California.

The first impact is visible in hotels. I am sure you have seen the disclosures at hotels that if you smoke in a no smoking room you will be hit with a large cleaning fee charged to your credit card.

I recently stayed at a hotel which had the typical comment of a $250 smoke cleaning fee on the check-in form, which I had to initial.

In the room, there is a sign in the bathroom, which you can see above. Just in case you weren’t aware that smoking marijuana constitutes smoking, the sign reminds you that if you smoke either tobacco or marijuana there will be a $250 cleaning fee.

Continue reading “Ripple effects of marijuana legalization in California”

Nevada joins the list of states allowing sales of recreational marijuana with heavy taxes on sales – #29

Haven’t had an update on regulatory oversight of the recreational marijuana market in a while. With Nevada now allowing the sale of recreational marijuana, it is time to check out the regulatory world.

As readers of this blog already know, I am watching developments in Colorado and Oregon for the newly state-legal recreational use of marijuana. Just as a reminder, my interest is not in marijuana. My curiosity is focused on how much trouble a burdensome and expensive regulatory structure will create for a newly legalized industry.

My hypothesis is the heavy-handed regulations will be crushing and severely restrain a new industry.

11/29/16 – Brew Bound – Beer Volumes Declining in Markets Where Recreational Cannibas is Legal – Consumption of domestic beer is declining in Washington, Oregon, and Colorado. The business word used is that beer is ‘underperforming’, meaning sales are lower than would otherwise be expected.

Article says the 18-25 demographic is consuming more recreational marijuana and less domestic beer.

Continue reading “Nevada joins the list of states allowing sales of recreational marijuana with heavy taxes on sales – #29”

Slivers of evidence for results of state-legal recreational marijuana use – #28

The reason I am watching the newly state-legal recreational marijuana markets is to see the impact of heavy regulation on the industry.

A related issue is the social results of recreational marijuana. Here are a few articles providing some early hints of the results. Perhaps these are nothing more than slivers of hints. Yet there are some early indications. On the other hand, perhaps these are merely transition and implementation issues.

11/2 – Wall Street Journal – A Brave New Weed / The costs so fare from marijuana legalization are higher than advertised – This grand experiment in legalizing marijuana is going full steam. As ought to be expected, there are substantial costs.

The massively important question is whether the increased costs in some areas are worth the drastically lower costs in other areas (mass incarceration, militarization of law enforcement, severe enforcement costs).

Continue reading “Slivers of evidence for results of state-legal recreational marijuana use – #28”

Tension between federal law and state-legal recreational marijuana – #27

I am watching developments in Colorado and Oregon for the newly state-legal recreational use of marijuana. Just as a reminder, my interest is not in marijuana. My curiosity is focused on how much of a drag a burdensome and expensive regulatory structure will create for a newly legalized industry.

My hypothesis is the heavy-handed regulations will be crushing and the expected result will be to severely restrain a new industry.

A related tangent is the tension between recreational marijuana use being legal in certain states under state law yet still illegal at the federal level. Here are a few articles I’ve read on this tension.

7/22 – Slate, originally at Inc. – Why Colorado Marijuana Businesses Suddenly Have an IRS Problem – Tax attorneys and accountants are saying there may be something in the range of 30 marijuana businesses in Colorado under IRS audit for their 2014 and 2015 taxes.

Continue reading “Tension between federal law and state-legal recreational marijuana – #27”

Election results on recreational marijuana – #26

Results from the fall 2016 elections show spread of recreational marijuana. That means there will be a lot more states to keep an eye on to see how severely the regulations affect in a new industry.

Currently I’m trying to keep an eye on developments in Colorado and Oregon, since they are further along in the experiment of regulating the industry. At this point I’ll also keep an eye on California, which is one of the states which just voted to allow recreational use. Since I live in California, it will be easier to keep an eye on the regulatory environment.

11/8 – Washington Post – Marijuana wins big on election night – Looks like I’ll need to spend a lot more time watching the crushing effect of overregulation on newly legal industries.

Continue reading “Election results on recreational marijuana – #26”

Update on marijuana regulation: #24

Not much that I’ve noticed in the news about regulation of the recreational marijuana market. Here are a few things of interest. Reminder: Reason I’m following this issue is to watch a natural experiment on whether over-regulation will crush a new industry.

4/20 – Kelly Phillips Erb at Forbes – On 4/20, It’s High Time to Think About Taxes, Revenues & Marijuana – Great survey of how we got to the place we are today.

How the marijuana laws have developed, the Department of Justice’s effort to look the other way when states have legalized either medical or recreational marijuana, and the IRS’ stand that most costs of running a marijuana business are non-deductible.

Also, some discussion on how likely Congress is to make changes to federal law. Current assessment: not likely. Doing so would appear to be soft on crime. Current mess with opioid abuse would make any efforts to legalize marijuana appear to be bad.

6/16 – MarketWatch – Microsoft gets into the weed business – One of the requirements in those states where recreational marijuana is legal is the need to track every bit of marijuana from the seed that germinated into a plant all the way to the specific end product the marijuana went into.

Continue reading “Update on marijuana regulation: #24”

Update on marijuana regulation – #23

I have not noticed a lot of coverage of the efforts to regulate the newly state-legal business of recreational marijuana. Here are a few articles catching my interest.

As a reminder, I am watching the efforts in Colorado and Oregon to develop a new industry which is highly regulated. This is a natural experiment to test my hypothesis that heavy-handed regulation will constrain a new industry.

1/5 – Denver Post via The Cannabist – Federal judge tosses Colorado marijuana banking lawsuit – State of Colorado chartered a credit union, the Fourth Corner Credit Union, with its business model of serving the state-legal marijuana industry. The credit union requested a master agreement allowing it to access the Federal Reserve system and thus participate in the banking system.

The FRB denied the application. The credit union sued.

A federal judge threw out the suit on the basis that allowing the credit union to operate would “facilitate criminal activity” since marijuana is illegal under federal law.

Continue reading “Update on marijuana regulation – #23”

Update on marijuana regulation – use of pesticides in Colorado – #22

My hypothesis is that state legalization of recreational marijuana sales is a giant natural experiment to test whether heavy-handed state regulation will constrict a newly legalized industry.

My interest in this topic is limited to watching how regulation slows economic development. Recreational marijuana is a new enough and small enough industry that we can actually watch the impact of regulation. Here are a few articles on recent news I have noticed:

10/4 – Denver Post at The Cannabist – Deep dive: Why Colorado has struggled to regulate pot pesticides – Article points out the EPA has provided no guidance on what pesticides are safe on marijuana.

According to the article, this left state regulators and the marijuana industry arguing about what pesticides are allowed and what is banned. Multiple comments indicated regulators wanted more restrictions and industry wanted very light restrictions.

The article follows the typical arguments you would expect for any industry that is regulated by the state or federal government. See if the following sounds like the same story as in dozens of other industries:

Continue reading “Update on marijuana regulation – use of pesticides in Colorado – #22”

Update on marijuana regulation – Ohio says no, North Dakota thinking about it – #21

Haven’t seen much news from Colorado or Washington on regulating marijuana. On the other hand, I haven’t been looking much. As a reminder, I’m watching this topic to see how badly heavy-handed regulation restrains a new industry.

Some news from other states moving toward legalization. North Dakota is taking some steps. Ohio stops.

1/2 – Rob Port at Say Anything Blog – Read What Medical Marijuana Supporters Are Hoping To Put On North Dakota’s Ballot – Article summarizes the proposed initiative to authorize medical marijuana in North Dakota.

Continue reading “Update on marijuana regulation – Ohio says no, North Dakota thinking about it – #21”

Update on marijuana regulation: Supporting businesses are starting up, including a CPA firm – #20

For background, I am watching the newly state-legal recreational marijuana markets develop in Colorado and elsewhere. My hypothesis, and the reason for my coverage, is that heavy-handed state regulation will strangle a new industry.

10/1 – Accounting Today – Blazing a Trail / A Colorado CPA finds success serving the growing marijuana industry – A CPA in Colorado started getting so much work from cannabis businesses that he started a new firm and moved all that work out of the old firm. The new firm has three partners with total of 10 staff (I think that includes the partners).

Several surprises in the article.

Continue reading “Update on marijuana regulation: Supporting businesses are starting up, including a CPA firm – #20”

Update on marijuana regulation – #19

Image of fake license plate courtesy of DollarPhotoClub.com

Here are a few articles on the status of legalized marijuana in Colorado. Remember I’m following this issue to see what impact heavy-handed regulation has on a newly legalized industry. Two recent articles and an older one I just found.

8/11 – AP at Bismarck Tribune – Colorado may ban ‘candy’ name on marijuana treats – The state government has proposals out that would require better disclosure that an edible product contains THC. A red stop sign with the letters THC would be required on the label. Candy type items won’t be labeled as candy. Liquids would only be produced in single serving containers.

6/6 – Newsweek – The Unexpected Side Effects of Legalizing Weed – Article labels as unexpected a number of side effects from legalizing recreational use of marijuana in Colorado.

Continue reading “Update on marijuana regulation – #19”

Update on marijuana regulation – #18

I haven’t seen much news on the legalized marijuana industry lately. Maybe I’ve not been paying enough attention.

For a reminder, the reason I’m talking about this issue is my hypothesis that overregulation will severely constrain this brand new industry. This is a natural experiment on how regulation affects an industry.

6/22 – Bloomberg Business – This Survey Says That Marijuana Prices Are Crashing in Colorado – Article cites a survey by a brokerage firm providing the following estimates of recreational marijuana prices at retail: Continue reading “Update on marijuana regulation – #18”