By Doug Poretz
The kneejerk reaction to a discussion about the cannabis industry is to be jubilant. After all, we see high growth among a wide segment of players from growers to lighting companies, a virtual tsunami of all sorts of deals and capital events at very high valuations, more states legalizing it for medical and/or recreational use, and there’s even fairly serious movement to change federal banking and other restrictive regulations.
Well … maybe that jubilation should be tempered just a bit – especially when cannabis possession accounted for nearly 6 percent of all arrests in the U.S. (2017). Appreciate that rate of arrests in the context that there are hardly any arrests at all in states where cannabis has been legalized. The national rate is 6 percent because in many non-legal areas of the country, possession accounted for from 20 percent up to 40 percent of all arrests. And, in one Georgia county, it reached 55 percent. (Source: Washington Post, April 15).
Wait! Take another look at that last paragraph. Now imagine dollar signs. The dollars spent to enforce cannabis laws. The dollars spent by the defendants on non-productive costs like legal fees instead of being a vigorous consumer. The unrealized dollars from the growth of new cannabis businesses. And the tax revenues those states will not collect from those businesses.
This isn’t simply a matter of stupidity by some policy-makers; it’s because the real war is between the emerging cannabis industry and other larger and more entrenched industries.
Those industries consist of very large players owned largely by mega-wealthy institutional investors, are represented by powerful associations and multi-million dollar lobbying budgets, and they possess the ability to get any major politician in DC on the phone fairly close to instantaneously. They also have eyeballs. So, they see the cannabis industry racking up annual sales of about $12 billion from the legal U.S. market, with prospects for an order of magnitude growth within a very few years. I don’t think that when they see that situation, they sit back, take a sip of their beer (or martini) and say: “Well that’s interesting; wish those guys the best of luck.” Nope. I think they say: “Wow! See that growth! We should go for a big piece of it.”
So, if the big players in big industries do get tempted to get a piece of the cannabis market, what would they do?
Well, one of the things they’d do is try to slow down the growth of the business until they can execute on their own strategies. And one way to do that would be to leverage their power at the state and local levels (as well as in DC) and make certain that they don’t allow an environment to emerge where the acquisition and use of cannabis becomes normalized, because that would lead to more legalization and a greater industry ownership by the bigger cannabis companies. Are the businesses in those other industries (like Big Pharma, for example) for cannabis, against it, or just preparing to wrest it away from the industry’s existing leadership?
So the reason why you should temper your jubilation about the industry is not because the industry is growing so beautifully, but because its beautiful growth is attracting some powerful forces aligned against the very people and businesses that are making it grow.