California’s New Rules Turn out to be a Nightmare for the Business

California is one of those states that just encourages legalized cannabis much more than any other state in the United States of America. However, the recent changes in the legal rules and regulations are leaving cannabis business owners speechless. According to the drafts that have been made with new rules, the medical cannabis business will lose nearly 40% of its revenue and business in the near future, if the new rules are adopted.

There are 3 broad sections where changes have been made. According to industry experts, by adopting these changes, cannabis businesses will witness a sharp reduction in their revenues, business and profit margin. Experts are afraid that some of the medical marijuana manufacturing units can shut down as well.

These 3 sections are as follows:

  1.    Contract Manufacturing Restriction

According to the new rules, if applied, many business owners who do not have licenses for cannabis business would shut down. Previously, businesses that do not have licenses ask the licensed manufacturers to manufacture edibles, infusions and other products on behalf of them. However, as per the new draft, those who do not have a license will not be able to deliver or sell any product.

This will not only hamper the business of non-licensed businesses, but also the licensed businesses will suffer as well. As per experts, around 40% of the revenue generated by licensed businesses is expected to fall in a few years, if the draft is adopted by businesses.

  1.    Reduction in Delivery

Apart from the non-licensed business, lawmakers have an eye on transportation as well. As the new draft says, not all vehicles will not be able to carry packages that is valued more than $5000. Previously, it was $10,000 for any carrier.

  1.    More People, More Paperwork, More Problems

Under this section, lawmakers have stated that if there is anyone, other than the owner, has any financial interest or opinion in the cannabis business decisions, that person will be considered as one of the owners.

This means if any employee or partner or anyone connected with the business has power in decision making or financial or business interest, then lawmakers will consider that person as one of the owners. This will slow down the licensing process as all the papers of these people should be submitted.

All these rules are drafted by California lawmakers recently. On 3rd December 2018, the final announcement will be made. Experts are having hard times at this moment as the laws will affect the industry adversely once they will come in action.  

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Reference Link:

  1. https://mjbizdaily.com/draft-rule-changes-ramifications-on-california-cannabis-businesses/


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