Talk about a buzz kill. California marked the six-month anniversary of recreational marijuana sales in June with consumers and the cannabis industry complaining about everything from steep prices to high taxes to a scarcity of licensed pot shops. And things could get worse. Although they knew about the deadline for months, many marijuana companies were

Talk about a buzz kill. California marked the six-month anniversary of recreational marijuana sales in June with consumers and the cannabis industry complaining about everything from steep prices to high taxes to a scarcity of licensed pot shops. And things could get worse.

Although they knew about the deadline for months, many marijuana companies were slow to submit their products to laboratories for state-imposed quality standards which went into effect on July 1. Industry officials say that created a bottleneck that led to spot shortages of cannabis, particularly in San Diego where consumer demand soared during the summer tourist season. Comic-Con alone drew at least 135,000 visitors in mid-July.

The shortage represented an inconvenience for legal consumers. The situation led the United Cannabis Business Association to sending a letter to delay the start date of the new testing and product packaging rules. The group, speaking on behalf of nearly 150 companies, said that there aren’t enough labs to handle the testing. The association also said companies had to destroy or ditch nearly $400 million in existing products that don’t meet the new standards, according to the Associated Press.

The problems raised a lot of questions, several addressed here with input from government regulators and the marijuana industry.

Q: California is one of the largest marijuana cultivators in the world. How could it be facing a possible shortage of commercial cannabis?

A: California legalized the sale of medical cannabis in 1996. But the industry was very loosely regulated. And the quality of the pot that made it to the marketplace varied greatly.*

*- This means if you were then or are now a medical user, it is important that you either know your grower (pesticides or organic, backyard grown or done by a professional grower) and you asked questions, much the same as any patient curious about their medicine. Or you were a stoner before you became a patient when realizing the benefits.

Everything changed in late 2016 when California voters overwhelming approved Proposition 64, which made it legal for any individuals to possess and grow small amounts of marijuana. The law also cleared the way for the sale of recreational cannabis in licensed stores. And it required testing standards for commercial weed by state approved companies which paid state fees. The state is trying to protect consumers from such things as pesticides and solvents, was the PR line.

The state and the legal cannabis industry spent a lot of time debating the standards since they weren’t experts like the medical side who they didn’t want any input from. But it looked like things were getting worked out; the state initially said that uniform purity and potency testing would begin on January 1, 2018. Like anyone late to the party, things got bogged down and the date was pushed to July 1st.

“We really thought testing was going to begin in January,” said Greg Magdoff, chief executive officer of PharmLabs, a San Diego-based company that is licensed to do such work. We hired drivers up and down the state because we were told by the state that we had to have our own employees pick up the samples.

“We’re ramping up again. It’s long nights and weekends. There’s a lot of stress.”

Q: Is it true that there are not enough labs to handle the testing?

A: The answer isn’t clear to the bureaucracy. There are 31 labs statewide, including three in San Diego. The Union-Tribune visited PharmLabs on Friday and found workers hustling to handle a crush of business.

Some companies have already come into compliance, including OutCo, a cultivator, distributor and retailer near El Cajon.

“Smart companies are ready to go,” said Virginia Falces, OutCo’s communications director. “But we’ll have to see what next week brings.”

Q: In many areas of California, there are no licensed recreational marijuana stores. Why? The public said yes to weed when it approved Proposition 64.

A: Proposition 64 also says that counties, town and cities have the option of banning the sale of recreational marijuana, which also is known as adult-use pot. The provision was added to the initiative to make it more palatable to [stoner and short attention span] voters.

The stigma attached to marijuana has been fading since medical marijuana was studied and approved. But statewide, about 70 percent of communities have said no to recreational sales.

San Diego has been a notable exception. There are more than a dozen licensed stores here, and more are expected. But this is the only place in the county where those stores exist.

“Many cities don’t want to be first to jump in; they want to see how things go,” said Dallin Young, executive director of the Association of Cannabis Professionals, a San Diego-based trade group.

Q: Are things likely to change?

A: It’s possible, if not likely.

In March 2017, the San Diego County Board of Supervisors voted 3-2 to ban new marijuana facilities from opening and they moved to phase out existing ones. But that could change in November if voters choose pro-marijuana candidates. Two available board seats are on the midterm ballot.

At the same time, Chula Vista voters might approve a plan that would allow local companies to grow, manufacture and sell marijuana.

US acceptance of marijuana has been growing rapidly. On June 26th, Oklahoma approved the sale of medical marijuana, making cannabis legal, to varying degrees, in more than 30 states. Michigan — home to about 10 million people — will vote on recreational pot in November. The measure has been polling favorably.

But there are a lot of frayed nerves for the ‘legal pot’ cannabis industry, partly because U.S. Attorney General Jeff Sessions said in January that he would not abide by the Obama administration’s decision not to prosecute companies that sell pot in states where it is legal to do so.

Sessions was overshadowed by President Trump’s stance on medical marijuana in April. But the whole matter gave investors a reason to be extra cautious about pumping money into cannabis.

Marijuana also is still listed as a Schedule I drug at the federal level, which places it in the same category as heroin. That has largely shut the cannabis industry out of the banking system. Banks don’t want antagonize the government by accepting marijuana money. They do launder drug cartel and CIA drug money but that’s above the level of legal companies which have no power in banking.

There’s been a lot of talk about creating a special bank in California to meet the cannabis industry’s need. There is even a provision in Prop 64 for the legal pot slush fund, if you really read the bill.

Union-Tribune reporters Gustavo Solis, David Garrick, Merrie Monteagudo, and The Associated Press contributed to this updated report. Thanks for the tip, Petey Wheatstraw.

PT Rothschild

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