Two Years After Prop 64: California Cannabis Industry At A Crossroads

By Andrew DeAngelo.

When the City of Oakland became the first municipality on earth to issue permits for medical cannabis dispensaries in late 2004, my family, our partners, and I decided to apply for one. After a lengthy process, we were awarded one of the licenses and opened Harborside on October 3, 2006. 

We were proud to have this trust placed in us by the City and we set out to create the gold standard of cannabis retail for our community. It had been a lifelong dream of mine and my brother’s to legally sell weed to the cannabis community and world at large. We knew we had to do it right. 

The rest is “hip-story,” as we would say. Harborside set the bar for legal cannabis and people from all over the world emulated our example. Today, when a patient or customer goes into any legal dispensary in America, they will be experiencing a small part of Harborside. I, personally, created many of those best operating practices. I continued to share this knowledge in the public arena as we moved to legalize cannabis for all adults in California, not just medical patients. 

The cannabis community tried to put Adult Use on the ballot in California in 2010 as Prop 19, but while we did get it on the ballot, we did not win the vote and it failed. The lessons learned from this failure were taken into account as another effort was mounted for the 2016 campaign. I helped start the first cannabis industry trade association in the State, California Cannabis Industry Association (CCIA), so we could have a stronger political voice in California and win the next vote. Many others also licked their wounds and went back into the breach once again. 

Activists put together an excellent legal framework for Prop 64 that included reasonable tax rates to keep weed prices competitive with legacy market upon full legalization, and fair local controls that did not include bans unless Prop 64 failed in that jurisdiction. Barriers to entry were low and reasonable. It took a lot of meetings, but activists managed to put together excellent language in the first draft of Prop 64.

Then, a big disruption occurred when it became clear that large donors and celebrity funders wanted in on California weed legalization 2.0. Apparently, everyone was excited to get themselves associated with legalizing cannabis in 2016, in California. 

The thinking was, it could not lose twice. No way. Not after Colorado and Washington. Better get in on this if you want to be the guy who legalized weed. So people like Sean Parker donated and outraised the activists, who didn’t have a prayer in the pay-to-play system of California politics, and they hired a mountain of consultants who did polling and started changing things in the language of Prop 64. The taxes started going up. The local control expanded, including bans. Regulatory agencies were created. Money allocated for law enforcement to enforce. All of it got incorporated into the final product we now know as Prop 64. We were told this was the only way to win the election and create one large legal market. They had the money, they had the mainstream democratic politicians, and they were calling the shots. Operators like Harborside had to hold our nose and hope for the best. We had to support legalization. We did not want to embolden the Feds to attack as they had done after Prop 19 failed. Our survival was at stake, not just our bank accounts. We leaned into Prop 64 and urged our community to support it. To this day, I lose sleep over that decision. 

Guess what? 

The experts, consultants, and celebrities were wrong. We have two years of data to prove that the fundamental framework of Prop 64 is so flawed that it must be fixed or the legal cannabis industry in California will continue to collapse or be owned and ruled by outsiders who do not even live in our State. The illicit market will continue to own upwards of 80% of the market share. And our tax dollars will be put to work protecting foreign owners and launching prohibition 2.0 on all the people here in California who made a living under the Prop 215 medical framework. 

We are at a crossroads. Fix Prop 64 or die is the truth for a lot of companies. Even Harborside had to pivot to the public markets in Canada to sustain our operations and continue our fights over 280e. Somehow, we are still standing. 

The urgency could not be greater for our community. 

We must fix Prop 64 this year, 2020. 

This is supposed to be a liberal and progressive State. We consider ourselves smart. We have one party in rule here; the Democratic party. They consider themselves a progressive party. They consider themselves smart. We should be able to get this done, right? 

For two years I tried, CCIA tried, many other smart people tried. We failed. Nothing substantial changed. I became so frustrated I decided not to run for re-election to the CCIA board and make room for new leaders to give it a shot. 

I get to say all this as a private citizen now. 

The problem of fixing Prop 64 is worse now because we have interests that have two years of stake in this that don’t want change. Regulators want less change not more change. They will fight for it. The League of City and Counties will continue to insist on full local control including the power to ban cannabis despite the will of the voters. And the power to tax at any rate they see fit. These taxes have become a source of revenue and that makes changing the tax rates and structures even more difficult. Local budgets have come to rely on this revenue now. And the League is a powerful force in Sacramento, much more so than CCIA or the entire cannabis lobby. 

The State has the power to take power away from the locals to regain some sanity but the bills to do so fail. The State can lower their excise taxes and ensure voters are respected, but all the substantial efforts to do so have failed for two years in Sacramento. Despite the Democratic party having a super majority and a Governor who claims to support legalization, we could not get it done. 

We need to do better in 2020, but the State government has to focus on homelessness and now coronavirus. Cannabis reform gets further out of reach in such political environments. We get shoved to the back burner. At the highest levels of State government, we cannot even get a meeting together with the before mentioned stakeholders to knock out a deal. A deal is possible if we had some real leadership here. I personally tried to get a meeting together with the Governor office, the League of Cities, Labor, Law Enforcement, and all the Regulators for cannabis to knock out a deal. I could not get the meeting done with a group of people from the same political party who call themselves progressive. They wouldn’t even meet with us. That made it clear to me that until we show them that we have political power, until they fear us a little on the political battlefield, we won’t win. Everyone will be very nice to us, but the bills we need to pass to fix Prop 64 will lose. We are at a crossroads of another year of extinction events, we must gather our power together in unity. 

The cannabis industry has a huge amount of political power in California that we are wasting away. Despite all the flaws of Prop 64, the legal industry still managed almost $3 Billion in sales in 2019 (the illicit market did $10 Billion). It would only take a small fraction of the $3B for us to write our own laws and taxes, just as all the other pay-to-play industries do in California. It sounds corrupt, but hey, it is the way it is. We cannabis people didn’t design this system but we do need to win within it. We’ve been getting our butts kicked for two years w/r/t Prop 64. 

A consolidated effort in the $50 Million range plus some good leadership, and Prop 64 can be fixed forever. Whether this would happen with a Statewide ballot initiative, or just traditional politics in Sacramento and local communities, it is enough resources for the cannabis community to create a much better framework. We could design a new system that would work far better, include everyone in our communities, and be California focused preparing for the day of Federally legal inter-State cannabis commerce. We could proudly brand California cannabis as it should be: the best in the world. 

In the process, California would be a leader in carbon sequestration and soil remediation because more acreage of cannabis would be planted, not to mention industrial hemp, than anywhere in the world. A product in demand during virus, war, and recession would be a welcome relief to a demand-free economic free fall, not to mention a long-term trillion dollar industry. This is the promise of a true legal cannabis and hemp industry in California. 

I urge my colleagues in the cannabis industry and movement to seize this power in 2020 and fix Prop 64. We have the ability to play in this California political system and win. It will take unity and good leadership and real resources to get it done. We are at a crossroads. We need to come together now. Equity folks, stoners, suits, growers, retailers, investors can be a huge political force if we just unite. Let us stare this coronavirus down by coming together and offering real solutions for our State and people. 

I call on all of us to listen to this magical plant and unite to do it in 2020.

Maps courtesy of LA Cannabis News & California NORML