XPost: alt.politics.marijuana, alt.atheism, sac.politics
XPost: alt.society.liberalism
California's legal cannabis market has hit another grim milestone: There
are now 10,828 inactive and surrendered pot licenses in the state and
only 8,514 active ones, meaning dead pot licenses now outnumber active
ones, according to the Department of Cannabis Control's data dashboard.
This inversion comes seven years after the legal cannabis market opened.
While it's not clear exactly when the threshold was crossed, because the
state does not release historical licensing information, California's
legal market has been struggling for years, with thousands of companies
going out of business.
Jonatan Cvetko, a cannabis advocate and executive director of the United Cannabis Business Association, said the figures show that state
regulators and the entire regulatory framework for cannabis in
California is a "complete failure."
"We've finally hit a threshold where we've seen the number of
participants who have come into the industry who have failed outweighs
the number of people succeeding, and succeeding is probably too strong
of a word," Cvetko said.
Company failures are certainly not unique to the legal cannabis
industry. Startup companies in the technology market are notorious for
failing the majority of the time, with one 2023 study estimating that
75% of all venture-backed tech companies fail within five years. And one
2016 study found that roughly 20% of new restaurants in the Los Angeles
area failed between 2003 and 2008.
But Cvetko said business failures in California's cannabis industry are especially bad because California's legal market has only a fraction of operators today compared with California's medical market that existed
prior to legalization.
"This is not anywhere near what we see with restaurants, because we
already had an industry in California, and California destroyed the
industry that we had," Cvetko said.
State law requires a cannabis license from the Department of Cannabis
Control before a company can legally engage in any cannabis work, with
over three dozen license types. A single cannabis business often needs
multiple types of licenses to do its work, so the number of surrendered licenses doesn't directly equate to the number of failed businesses.
David Hafner, a spokesperson for the department, strongly pushed back on
the idea that the data shows a market failure.
"The number of inactive cannabis licenses is not indicative to the
health of the licensed cannabis market, let alone a statement on the established framework for the regulation of it," Hafner said.
Hafner said that some of the drop in active licenses is because of a
procedural change in 2023 that allowed cannabis farms to consolidate
multiple smaller licenses into one large license type. This
consolidation is responsible for 1,071 licenses that are now inactive
but "did not involve businesses closing down or downsizing." according
to Hafner.
Even removing those 1,071 consolidated licenses, there are still 9,757
other licenses that are inactive for a variety of reasons, from being
canceled to revoked or surrendered. The vast majority of dead licenses
are related to growing cannabis, with over 7,100 inactive cultivation
licenses. Those figures reflect a severe drop in the number of
small-scale farms operating in Northern California, which used to be the capital of pot farming in America but has been diminished thanks to
large-scale farming in Southern California.
There are also over 1,100 inactive distribution licenses, nearly 500
inactive delivery licenses and over 300 inactive retail licenses.
Dan Sumner, a UC Davis professor who has extensively studied
California's legal cannabis cultivation industry, said he was not
surprised to see so many farming licenses go inactive. He said he's
documented many large farming operations shut down quickly because
falling wholesale cannabis prices made their businesses unprofitable.
Sumner added that extensive regulations have also made it more expensive
to run a legal cannabis farm.
"If you want to be a lettuce grower, grow lettuce. You don't need a
license to grow lettuce, but if you want to take that same acre and grow cannabis, it's a whole different process, and you have to engage with 10 different agencies," Sumner said.
Cvetko said the industry is struggling because the regulations make it
too expensive to get and maintain a cannabis license, and then
lackluster enforcement against the illicit market has allowed unlicensed cannabis operators to proliferate and sell cheaper marijuana that
undercuts legal companies.
"When you're constantly competing against an unlicensed market that
doesn't have those taxes and overhead, and there's no effective
enforcement, then the state has completely failed to make this a viable industry," Cvetko said.
https://www.sfgate.com/cannabis/article/complete-failure-calif-pot-indust ry-dead-licenses-20165785.php
--- SoupGate-Win32 v1.05
* Origin: fsxNet Usenet Gateway (21:1/5)