California Legalization

In a few weeks, pot will be legal and regulated in California, which marks an important benchmark in the history of de-prohibition, if not the most important. It will take 5 to 10 years before we can even see the impacts, intended and otherwise.

The California rules for a large part are innovative and haven’t been tried anywhere else, but I think one of the biggest “inventions” was to push down specific conditions and approvals to the local communities, relieving the state of the NIMBY disputes that were so plentiful in the other states. It also adds over 500 government entities to the regulatory mix, increasing costs and taxes. We’ll see how it works.

Right up to before the draft rules were issues, there was a rule that limited farmers to licensing about 1 acre or so, and in five years that limit would be lifted. The idea was to build in an advantage to the smaller existing farms to attract them into the system. But when the rules were released, there was no limit on the sizes of farms. It likely might not have made much of a difference, but for only five years it seems like it would be a harmless try.

Come January 1 there will be a lot attention paid to California as the new retail stores open for business. This will be accompanied with a lot of drama and razzle-dazzle typical of the openings in other states, but California will be contributing it’s own style to the hype. Keep in mind that there is a mature, robust, and functioning marijuana production and distribution system in California, scaled up to be able to handle the entire continent. The new state system will be operating at a tiny percentage of the current market, grabbing the tail of a dragon with the hope of climbing onto it’s back to ride it off into the sky. The whole event on the first of January is for show and marketing hype.

Nevada retail prices are the highest in the nation, twice those of WA and CO, three times that of OR. California will no doubt open at Nevada levels or even higher. It will be many months before prices settle down to the right levels.

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