California has blazed the trail of efforts to reform Cannabis laws, standing at the forefront as early as 1972 with the nation’s first ballot initiative attempting to legalize Cannabis. Although the 1972 effort (Proposition 19) failed, California voters did legalize medicinal Marijuana 24 years later in 1996. Today, with full legalization, the Cannabis market in California has evolved and grown to become one of the leading potential growth engines for the state.
Rosano Partners has a 6 Agents dedicated team led by Korena Ellis: kellis@rosanopartners.com and George Cornelson: gcornelson@rosanopartners.com who are executing, leases and sales in retail and industrial cannabis facilities and are expanding to execute license deals in the California Cannabis Market.
As the legal Cannabis market continues to evolve, regulations are still flux. While a slew of rules currently governs both the production and consumption ends of the market, there are still adjustments that are being made. While common in emerging industries, such flux and uncertainty can cause investor concern. For example, California’s changing Cannabis delivery regulations have caused problems for investors seeking clarity about the ability for retail locations to thrive without competition from asset light door-to-door services.
Aside from regulatory clarity, the logistical strain of permitting presents the most formidable problem. Currently, the state is engaged in a dual licensing regime. That is Cannabis operator have to get license in the city or municipality where they are located at and with the state. In addition, the City of Los Angeles has fallen behind in its permit issuance due to a late start. Although the city has issued 180 licenses, 600 applications remain in process.
Finally, banking comprises one of the most important and obstinate barriers to conducting business in the Cannabis industry; however, this might soon change. As US commercial banks are chartered and regulated by the federal government, they must comply with federal laws on Marijuana sales. As such, they continue to deny service to Cannabis producers and retailers. As the industry seeks to enter the space and exploit the large profit potential, bank executives and lawyers are exploring new regulations and loopholes. The State Treasurer’s office has also begun exploring ways to facilitate banking activities in the Cannabis industry either through regulation or the creation of alternate financial channels. Given the amount of attention and focus on this issue, we predict a solution soon. Currently, REITs and non-bank financial companies (finance companies, hedge funds, and other entities involved in “shadow banking” AKA “non-banks”) have filled the void.
