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The locals can be extremely rough on cannabis businesses and their budgets, and even the passage of Chuck Schumer’s legalization bill won’t change that for the foreseeable future (for better or worse).
Nationwide, cannabis companies and advocates are hailing the Cannabis Administration and Opportunity Act as the savior of the future of cannabis (a copy of the bill is here). If the Act passes, we will finally have federal legalization and the consequences of the current federal conflict will end, or, at least be reversed in the minority of states that continue to outlaw the plant locally.
Such a development would, of course, be huge. With IRC 280E no longer an issue, cannabis companies would have the unfettered ability to secure banking outside of the 2014 FinCEN Guidelines, which means no more all-cash transactions; they would have the ability to raise institutional capital without the threat of criminal liability, etc etc. However, even if the Act passes (and chances of that happening appear slimmer by the month), what’s not going to change (probably forever) is the power of local governments to make or break America’s cannabis businesses.
For the longest time, I’ve preached that the states are in total control of these unique democratic experiments, and they definitely are where they control license categories, compliance standards, taxes, reporting requirements, etc., but that power is ultimately limited by cities and counties. And the Act gives major deference to the states to keep up their independent cannabis regimes.
The catch is that all states pay some (or more like a lot of) credence to local control because of the inherent police powers granted to cities and counties to protect the health and welfare of their citizens. I can’t name a state where local control hasn’t mainly caused major issues for cannabis operators (retail, in particular, gets the short end of the stick in most cities and counties). Cannabis businesses need to realize now that even if the Act passes and even if states maintain their current licensing systems, the cities and counties are going to remain one of biggest barriers to entry.
The notorious trend among cities and counties is to either have an “all open” policy to allow the establishment and operation of all license types, restricting the businesses only by property buffer requirements and/or zoning limitations, or to be incredibly selective about the license types they allow within their borders, creating tall barriers to entry (or, worse, to not allow any commercial cannabis activity at all, which is their right).
Here are some of the local barriers to entry that operators will probably run into indefinitely regardless of federal legalization:
Published: August 10, 2021
Founder & Interim Editor of L.A. Cannabis News