More Than $3 Billion At Stake: How Regulatory Red Tape Is Holding Back Australia's Cannabis Legalization

In an exclusive interview with Benzinga Cannabis, athlete-turned-cannabis entrepreneur Jeff Lang, CEO of Byron Bay Bio, and Will Stolk, activist and director of People Like Us Creative, discussed their journey from sports to the Australian cannabis markets. Together, they work on cannabis investments, brand strategy and expanding operations in both the Australian and U.S. cannabis markets.

Their insights highlight key topics for investors, including Australia's restricted medical cannabis market, the dominance of imports and barriers to local cultivation. They also explore growth opportunities, such as consumer demand trends, and the influence of pharmaceutical companies on cannabis legalization. 

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Australia's Medical Cannabis Market: Limited Access And High Demand

While Australia has legalized medical cannabis, the market remains highly restricted. Only around 130,000 new medical cannabis prescriptions are written annually, according to Lang, although there are approximately 4 million regular cannabis users in the country. 

Patients in Australia must go through the Therapeutic Goods Association (TGA) to access cannabis, with the majority of products being imported from Canada and Israel.

The legal medical cannabis market in Australia was valued at AUD 136 million ($91.6 million) in 2023, while the illicit market dwarfs this figure, estimated at AUD 5 billion annually. 

The discrepancy highlights the limited availability and high costs of legal cannabis, making it difficult for patients to switch from illegal suppliers.

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Barriers To Entry: High Costs And Stringent Regulations

Lang emphasized that the biggest challenge for local cultivators in Australia is the stringent regulatory framework. To legally cultivate, distribute or sell cannabis, companies must secure multiple licenses through the TGA, including cultivation, manufacturing and import licenses.

These licenses are costly and come with rigorous compliance, delaying market entry. "It's just too onerous, and no one's making money out of it," Lang said, noting that the market is “overly competitive” and dominated by larger companies with the capital to absorb these costs.

Australia's favorable climate is offset by regulatory hurdles, requiring millions in upfront investment. In addition, the lack of infrastructure for large-scale cultivation makes it hard for local businesses to compete with imports. “It's not worth setting up cultivation in Australia right now,” Lang concluded.

Imports Dominate Cannabis In Australia

According to Stolk, the majority of medicinal cannabis available in Australia is imported from Canada and Israel. Imported cannabis typically arrives pre-packaged, with patients receiving their prescriptions via telehealth consultations. According to Stolk, this reliance on imports is not only costly but also restricts access to fresher, higher-quality products.

"Much of the cannabis that comes in through legal channels is up to two years old and irradiated," Stolk explained, referring to the process used to sterilize cannabis. In addition, the lack of variety in strains has driven many patients to continue purchasing cannabis from the illegal market.

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Australia's Illegal Market: A $5 Billion Challenge

Valued at AUD 5 billion, the illegal cannabis trade vastly outpaces the legal market, where prices remain prohibitively high. Patients can pay upwards of AUD 150 for 10 grams of cannabis from a dispensary, compared to AUD 250 for an ounce on the illegal market. 

"The quality of legal cannabis is also questioned, with many products reportedly failing to meet their stated THC levels," Lang emphasized.

Consumer Trends: A Lagging Market With Room To Grow

Australia’s cannabis consumers are less familiar with the variety and quality of products available in more developed markets like California and Canada, but awareness is slowly growing. 

According to Stolk, this is reflected in the limited variety of products available legally, with only a few strains and derivatives, such as bubble hash and rosin, beginning to enter the market.

"The market is 10 to 20 years behind the U.S.," Stolk said. As the market evolves and consumers become more educated, there is a clear demand for higher-quality cannabis and a wider variety of products, but the regulatory system currently prevents rapid growth.

The Role Of Big Pharma: A Major Obstacle To Full Legalization

Lang and Stolk agree that one of the biggest obstacles to the development of a legal recreational cannabis market in Australia is the influence of big pharmaceutical companies. Lang explained that pharmaceutical companies are some of the largest political donors in Australia and have a vested interest in limiting the growth of the cannabis industry.

"The pharmaceutical industry views cannabis as a threat, particularly as people increasingly recognize its holistic health benefits," Lang said. He believes pharmaceutical companies will likely push for synthetic cannabinoids to dominate the market, further delaying the development of a natural, plant-based cannabis sector.

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Moving Forward: Lessons From The U.S. And Canada

Both Lang and Stolk emphasized that Australia could learn from the successes and failures of cannabis markets in other countries. Stolk pointed to California’s entrepreneurial spirit and more open market as a potential model for Australia but also warned against the heavy taxation that has made it difficult for smaller businesses to succeed in the U.S.

Lang believes that Canada's federally regulated cannabis system offers some valuable lessons, particularly in terms of quality control and distribution, but he also notes that the high costs of legal cannabis in Canada have driven many consumers back to the illegal market. 

“No country has gotten it completely right yet,” Stolk added, but Australia has an opportunity to create a balanced and sustainable market if it addresses the regulatory barriers currently in place.

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