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A Sobering View From Out in Marijuana’s “Crown Jewel”

I don’t get surprised too often, but I did this week when I saw that The Motley Fool was referring to my home state of California as “marijuana’s crown jewel.” Pardon me if I don’t get too excited. Yes, I know that California is the largest marijuana state (revenue-wise) in the country, and stands to become even more so should voters in the Golden State decide to open things up for recreational or adult-use marijuana in November. In fact, estimates are that California would generate more that $1 billion in tax revenue should the state completely legalize cannabis. As The Motley Fool notes,

As much as Colorado has been a shining success for the legal marijuana industry, it’s far from its crown jewel. That title would go to California, which is expected to have a recreational marijuana initiative on the ballot this coming November. If marijuana were legalized for recreational use in California, it would be the biggest win so far for the movement, and it would likely remain its most important victory shy of the federal government changing its stance on the drug.”

The story goes on to list the three reasons why California is marijuana’s crown jewel:

  1. California’s economy is monstrously large.
  2. California’s existing dispensary network is massive.
  3. California will draw big names.

All of these reasons make sense, although I would point out that to some extent, California’s dispensary network is a house of cards, particularly in Southern California, where inconsistent legal enforcement forces many dispensaries to move around and change locations in order to stay one step ahead of the law and local ordinances that are frequently ignored — until they’re not. In fact, I just read where the city of Santa Ana has more unlicensed than legal dispensaries. But, I get what The Motley Fool is getting at. With some 38 million people and an economy that would rank 8th in the world if it were a separate country, full legalization in California would be a very, very big deal and probably get the attention of the federal government. But, that’s the big problem — the federal government. And in the midst of The Motley Fool’s analysis of why California is the Cannabis Industry’s crown jewel, they add this sobering note:

Although California’s grassroots campaign to legalize recreational marijuana may result in an approval this November, it still doesn’t mean that common investors like you and me should be anywhere near the marijuana industry. Until the federal government decides to change its tune, the industry will continue to find itself behind the eight-ball. Arguably the biggest issue is that the marijuana industry has no easy access to capital or basic banking services. Most states that have medical marijuana laws on their books allow for banks to follow a long list of regulations in order to serve the industry. Yet banks, in general, are avoiding marijuana-based businesses altogether for fear of federal prosecution at a future date. Most marijuana businesses can’t even get checking accounts let alone lines of credit, meaning cash is king in the marijuana business, and security is a serious problem.”

Well, that about says it all, doesn’t it? It’s easy to get excited about the potential for the growth of legal marijuana, particularly if California goes fully legal. That’s especially true given the huge strides the Cannabis Industry has taken, particularly with full legalization in places like Colorado and Oregon. The polls show a rising wish by the people for marijuana legalization, and many feel it is only a matter of time until it comes about. I agree with all of that, but The Motley Fool’s sobering analysis of why you shouldn’t invest in marijuana anytime soon has got to bother all of those who have made the great leap and keep hoping against hope that the Feds will do something sometime soon. I’m not a prophet, but the people over at The Motley Fool have a pretty good grip on things. In other words, it’s nice to be living in the midst of marijuana’s crown jewel, but until the Feds wake up and smell the cannabis, it’s going to be tough sledding — even out here in the Golden State of Marijuana.

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