Cannabis in USA [Lessons for India – Pt. 1]

Owners of cannabis businesses grumble about having to comply with requirements that don’t exist in other states.

A brief history of cannabis legalization in the United States

For decades, state and federal lawmakers and residents of the US have navigated the ever-evolving policies that determine who can legally use cannabis and in what form it can legally be consumed.  Until recently, it was illegal to grow, buy or sell cannabis across the US. In 1996, California was the first state to pass Proposition 215 allowing for the sale and medical use of cannabis. Since then, 16 states plus the District of Columbia have chosen to make it legal to buy and consume recreational marijuana, and the 35 states plus D.C. have approved medical marijuana.

Status of cannabis legalization in US. Source – rollingstone.com

Challenges for the US cannabis industry in 2021

Financial exclusions of the cannabis industry – Businesses within the cannabis industry cannot work with federally insured banks, since the federal government hasn’t legalized cannabis, only the state governments have. This creates a barrier for smaller operations, and only those with private funding continue to dominate. Additionally, professionals are not allowed to hold revenue earned from their cannabis business in a federally insured bank account; they can risk getting their accounts frozen. From a federal standpoint, they consider it drug money and is a serious offense. 

UPDATE – The U.S. House of Representatives on April 19, 2021 passed legislation that would allow banks to provide services to cannabis companies in states where it is legal. This is a step towards removing what analysts say is a barrier to the development of a national industry.

Medical exclusions of the cannabis industry – Hospitals do not receive federal funding if they promote cannabis. Additionally, doctor-recommended cannabis medicine is not covered by insurance. Patients have to pay out of their pocket, and it can cost as much as $120 a week. Due to this, while more doctors and care facilities are in favor of marijuana today than ever before, there is an enormous part of the general public that still believes that cannabis and medical marijuana should be illegal. 

Operating in cash – Since doing banking transactions is an issue, most of the businesses within the cannabis industry must continue to operate by using cash for purchases. The plant is scheduled as a drug by the federal government, many banks are not allowed to accept money or give out loans for cannabis-related businesses. In 2021, the likelihood of banks working with businesses within the cannabis industry is entirely dependent upon federal regulations.

Every state is a different marketRy Russell, a cannabis podcaster in the US, explains that in every state the laws related to owning and running a cannabis business are entirely different. The cultivation, licensing, and retail is very different from state to state which in turn varies the costs across states vastly. In Colorado, a full ounce of average weed often sells to consumers for $190. In Pennsylvania, the price is closer to $500. States like Pennsylvania also require cannabis businesses to maintain enormous amounts of high-definition surveillance footage. That can cost $100,000 a year a store.

Expensive licensing – In states like Illinois, applying for a license costs $5,000, according to the legislation that was approved by the Legislature and signed by Gov. J.B. Pritzker. Completing license applications is also a hectic task since these applications are very detailed. They ask for business plans, all details about personals involved in the business, details of record-keeping, and more. So, until there is a licensing system that is non-competitive and just requirement-based, it can be tough for people to get in and start a business. 

Opportunities for growth of the industry in India 

With the prohibition era nearing its end, India must strategize how to shape an effective, comprehensive cannabis regulatory framework. India has the opportunity to build a $25 billion industry for cannabis, and yet we’re not even close. The most important lesson for India should be to legalize cannabis centrally and not just give states the authority to do this. Additionally, one goal should be to craft businesses around social equity and hiring people from economically poor areas. 

Senator Cory Booker’s tweet emphasizes how the US cannabis industry is not inclusive.

There should also be an increased focus on spreading awareness about the plant and its uses to demystify and get rid of stereotypes. More positive research revolving around the plant should be encouraged and funds should be available for use to everyone to build their businesses. 

What are some other challenges the cannabis industry in India will face in 2021? Let us know in the comments below. 

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