The passing of California’s Proposition 64, which legalized the sale of cannabis and related products, appeared at the time to be a major triumph after decades of efforts for activists. With the state finally on board, the future possibilities seemed unlimited, and soon, cannabis would be as normal a part of everyday life as alcohol and tobacco.
During the long political battle before Prop 64, advocates for legalization boasted of the major financial and legal benefits the state would receive from its passing. By legalizing cannabis, the state could claim hundreds of millions of dollars in taxes, and ending the prosecution of sellers and users would free up significant state legal resources.
Once the proposition had passed and the legalization rollout plan was underway, it became apparent that lawmakers took these arguments a little too seriously. By the time recreational cannabis cultivation and sale were officially legalized in 2018, what should have been a momentous start to a new industry stumbled out of the gate thanks to the intensity of the regulatory burden and taxation.
Taxation impacts cannabis from farm to shelf. Growers pay as much as $10 per ounce in cultivation taxes, and dispensaries are hit with a 15% excise tax before sales are made. This translates into a 50% price hike for consumers, meaning users are paying significantly more money than before legalization.
Outside of high taxation, the enormous number of local and state regulations makes running a legal cannabis business, at its best, an expensive and frustrating experience. These regulations are often drafted without fully understanding of the extent of their impacts on legal cannabis operators (LCOs), explains Chris Eggers of CCSS in Chapter 22 of his book Securing Cannabis: A Comprehensive Guide To Increase Security, Reduce Costs, Reduce Liability, and Avoid Landmines.
This one-two punch of high taxes and burdensome regulations gives the upper hand to illegal sellers, who procure and sell their illicit products untaxed via unlicensed storefronts. This illegal product is frequently stolen from legal sellers, who make prime robbery targets due to their reliance on cash transactions and easily fenceable goods.
Regulators were not entirely blind to the heightened security concerns that the industry would face, which is why state regulations emphasize security requirements. While the intentions were undoubtedly good, the requirements are often simultaneously too lax and too restrictive to create an effective security system.
Required elements for a security system include:
- A security plan.
- A basic video surveillance system to cover all areas where cannabis products are handled.
- Access control system.
- Alarm systems.
- Inventory management system.
- Secure logistics and transportation.
- Employee security training.
- Security guard presence on-site.
While these requirements may seem good enough on paper, they do not consider the full security status quo. They allow unaware LCOs to do the bare minimum to pass inspections, which provides a false sense of security. Certain requirements, like on-site security personnel, could be better handled by a robust remote monitoring system.
Regulators may also be unaware of the dire situation regarding properly insuring a legal cannabis operation. LCO insurance premiums are far more expensive than those of comparable industries, and policies are often intensely restrictive regarding what security system elements are allowed. This creates a situation where many LCOs are either severely underinsured or completely uninsured, meaning all it takes is one major security incident to send the business into insolvency.
The chapter ends with a comprehensive checklist of industry pain points that regulators could help address. To access this checklist and every other piece of information you need to create an effective and compliant security system, we recommend reading full book. Securing Cannabis: A Comprehensive Guide To Increase Security, Reduce Costs, Reduce Liability, and Avoid Landmines is now available here!
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