Government Worried Cannabis Overproduction Could Lead to Diversion to Black Market – LPC
It seems that no system is perfect as Oregon’s approach to cannabis regulation has led to cannabis overproduction. By some estimates, it would take the state more than six years to consume the available cannabis if growing stopped today. Last year alone, supply was outstripping demand 2 to 1.
That’s made lawmakers in Oregon worried for two main reasons. For one, cannabis overproduction and difficulty selling through legal channels could lead to product being diverted to the black market. The simple reason: selling illegally would be better than going broke. Margo Lucas, a cannabis grower and vendor in the Willamette Valley, said that she hopes the bill passes to protect the investments and livelihoods of current industry players. She noted that companies in the Oregon cannabis industry can’t seek federal bankruptcy protection. Cannabis is still illegal federally in the United States.
“So when we go out of business, we’re going to go down hard,” Lucas said. “Many of us will lose our homes. You’re going to have a lot of entrepreneurs in this state that are pretty unhappy with the way that this ends if we don’t get some support with this bill.”
Prices have plummeted thanks to cannabis overproduction, from $10 per gram in October 2016 to $5 gram in December 2018.
Selling Cannabis Over State Lines Could Trigger War with Federal Government – LPC
The other main concern about cannabis overproduction is that the US federal government has decided not to interfere with states who legalize cannabis use – provided they abide by certain rules. The STATES Act allows cannabis companies to act within the law, which solves many problems including banking hurdles. However, one of the big stipulations is that cannabis cannot cross state lines, which is another worry with cannabis overproduction – on the state and federal side.
Rob Bovett, legal counsel for the Association of Oregon Counties, said this bill would signal they are doing what they can to reduce cannabis overproduction. The bill in itself could be enough of a gesture to “keep the feds off our back” he said.
In Canada, the cannabis industry has faced the opposite problem. So-called cannabis shortage started to take hold soon after legalization. However, many now believe that they are more likely to be supply chain problems and legal retail cannabis challenges. Health Canada recently changed its cannabis licensing process to cut wait times and hopefully improve the supply chain.
It’s clear though that no system is perfect. In Canada, cannabis shortages have hurt the industry and caused inconvenience to the consumer while the kinks are worked out. In Oregon, cannabis overproduction has been great for the consumer in the short term as prices drop. But the threat of bankruptcy for companies, a growing black market, and the possibility of federal interference are worries too.
Both systems will likely work out the kinks. So what’s better until then, cannabis overproduction or cannabis shortages?
The bill is before the House in Oregon.
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