When Canada legalized cannabis last fall, the country began blazing a trail that the U.S. should one day follow. There’s much to emulate about the Canadian government’s approach to legalization, and a few things to avoid, but having marijuana legalized on such a large scale so close to home will no doubt have a profound effect on America’s future treatment of the issue.

Medical or recreational marijuana is now legal in 33 U.S. states, even though its possession or use is illegal under federal law. It’s an untenable situation that individuals engaging in an activity that’s now legal in 60 percent of the country are violating federal law. This is problematic for marijuana users, as well as for the cannabis industry. And even though a market is taking shape to support the use of both medical and recreational marijuana, it’s proving to be a stilted effort at best.

National banks are hesitant to get involved, meaning that cannabis companies are struggling to secure loans and lines of credit. This also complicates leasing, contracting, insurance, banking, income taxes, and more. And beyond all that, growers, dispensaries, and other would-be industry participants must be willing to commit federal felonies daily, exposing themselves to risks like steep fines, forfeiture, and jail time.

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I can’t imagine the country continuing down a path where a burgeoning new industry is notably constrained and a growing percentage of the country is both following the law and in violation of it at the same time.

Canada is just the second country in the world, after Uruguay, to legalize recreational marijuana. Its passage of the Cannabis Act created a blueprint that the U.S. could follow. It also puts us in the prime position to observe the strengths and weaknesses of a large country’s legalization efforts and tailor our own approach accordingly. If Canada’s rollout continues to unfold without any major catastrophes, U.S. lawmakers pushing for federal reform will have a credible model to use to inform their conversations.

Congress could address some of these issues by repealing the federal ban as it relates to conduct that is permitted under state law. But a more sweeping solution like the one adopted by Canada would prove the most beneficial for all parties, our government included.

What’s working so far

The Canadian government took the time to assemble a federal task force to help craft a bill that anticipated and addressed many of the issues that could result from legalization. The legislation is deep and comprehensive, yet manages to leave the majority of regulatory decisions — such as where cannabis can be sold and consumed — in the hands of its provinces, an approach I believe the U.S. will want to emulate.

Under the Cannabis Act, Canadian provinces retain the ability to ban recreational use, a scenario that should be attractive to America’s most conservative states. But residents of provinces that ban recreational use can still order cannabis online from a government-run website. That eradicates the need for illegal drug purchases even in areas that aren’t prepared to condone recreational use of marijuana. An approach like Canada’s, which lets states stay true to their values, also has the best chance of persevering despite a divided government.

Another selling point of Canada’s model is the institution of modest taxes on marijuana. These not only generate revenue but also help displace the black market. The national government is imposing an excise tax of 10 percent or $1 Canadian per gram, whichever is higher, and gives provinces 75 percent of the revenue. That’s in addition to sales taxes, which range from 5 to 15 percent. These taxes are still less than those in California, where higher taxes have resulted in legal marijuana costing about 77 percent more than cannabis being sold by unauthorized dealers. This is also true in other tax-heavy U.S. states: Legal marijuana is being priced out of the market.

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Another factor that drives individuals to the black market is the minimum age to buy marijuana. Canada’s is set at 18 years, whereas in the 10 American states that have legalized recreational use, the purchase age is 21. That means the 38 percent of college students who use marijuana (as of 2017) must continue to do so illegally.

If the U.S. is to truly benefit from legalization, it will need to take similar steps to squelch its black market as Canada has done.

The Canadian government is also sealing conviction records for marijuana consumers who were charged for crimes that have since become legal, without fees and waiting periods. This is a huge benefit to those who were caught in an ineffective and decades-long “war on drugs.”

What needs more work

Although Canada’s approach has been overwhelmingly thorough and positive, changes this big are bound to have a few kinks that need to be worked out. The longer we’re able to observe the transition, the more we’ll learn, but there are a few immediate lessons we can take away from Canada’s efforts so far.

One is the country’s failure to address what to do about people who are currently incarcerated for possession crimes that have since become legal. While the country is actively working to help citizens who have already served their time, those who remain in jail also need assistance.

Critics have noted that Canada’s strict packaging laws, which require companies to use plain packages and regulate font size, styles and colors, have made it more difficult for brands and suppliers to clearly articulate how products differ and recommend the best strains and doses to users. These laws are well-intentioned, as they’re meant to prevent companies from marketing their products to children. But poorly branded products make it harder for buyers to identify the products most likely to meet their needs.

And although Canada has done a phenomenal job structuring a program that squeezes out illegal competition, unlicensed drug dealers aren’t giving up without a fight. Illegal cannabis dealers in Canada have responded to legalization by lowering their prices to make them more competitive. It will be interesting to see how the country will address this.

Looking ahead

Although Canada still has some issues to address, the rollout of its legalization of marijuana has been smooth. It has generated excitement across the country, as well as within the U.S. investment community. Following legalization, American investment dollars began pouring into Canadian marijuana producers, retailers, and grow technologies. The fact that Canada legalized cannabis before the U.S. will give the country a leg up on the cannabis business, leaving the U.S. to play catchup if and when it ever is legalized nationally. Canadian companies are already investing in the U.S. market and looking to license U.S. products, and they have the best shot of building the biggest portfolios of companies. There’s also speculation that Canada could set up a lucrative export business for other countries that have legalized medical use of cannabis.

The U.S. has a lot to gain should it decide to follow in Canada’s footsteps. It could eliminate the costs of incarcerating citizens for something that 33 states now say is legal, drive out a black market, and give people more safety and transparency in purchasing cannabis. By legalizing cannabis, Canada acknowledges that battling citizens who aren’t committing violent acts or hurting others isn’t worth doing. It’s a paradigm shift that other countries, like the U.S., should tap into.

Lyle Hauser is the founder and CEO of The Vantage Group, a Florida-based private equity firm and specialized business consultancy that serves early-stage companies, including cannabis and cannabis technology companies.

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  • Due to the lack of any regulation or clear guidelines on marketing, they have already failed. States with medical marijuana allow up selling, confusing new age testimonials, and concentrated marijuana products. It is really clear the advertising, deceptive content marketing, and portrayal of marijuana as a wellness product is going to backfire in a dangerous way.

    Vulnerable patients in medical marijuana programs, were told that marijuana cures cancer, and other lies. Apparently no one is concerned about how the marketing could impact children and expand usage. Highly concentrated extracts and gimmicks to get people to inject higher quantities of psychoactive compounds will lead to more adverse events.

    Articles like this one are deliberately deceptive, they all avoid how this stuff is being marketed. Not one clever medical journalist, would dare expose the marketing and it’s adverse impact on health. I see a correlation with the anti vaxx movement. Clearly identifying the marketing could expose advertisers behind sites like this, and the continuing lies and propaganda gullible people are exposed to.

  • From the article:

    >>>”These taxes are still less than those in California, where higher taxes have resulted in legal marijuana costing about 77 percent more than cannabis being sold by unauthorized dealers.”

    Actually, the taxes are just a small part of the problem. The major factor is that legal sellers want to charge black-market prices. — Marijuana’s black-market price is primarily composed of the “prohibition premium” – that amount which compensates the seller for the risk of going to jail.

    With legalization, that risk is gone and so SHOULD be the prohibition premium. But sellers all think they have the right to become instant millionaires.

    After the dust settles on re-legalization, average quality marijuana will sell for $50 an ounce, or less. It’s just a plant. – Prices will naturally float near those of fine pipe and cigar tobacco.

    Only when sellers let go of their fantasies and accept reality will the black-market fall away.

  • Under the Cannabis Act, Canadian provinces retain the ability to ban recreational use,

    ==============

    That is outright false.

  • Foremost, speaking from my research into recreational cannabis production, my chief concern is for “other ingredients” (some listed on product labels, most are not) in commercial-grade fertilizers, as well as chemicals Health Canada permits Licensed Producers of MJ to apply to cannabis plants under production.

    Take, for example, 20-20-20, a fertilizer used in cannabis production. The FDA Canada policy framework oversees this range of fertilization products. 20-20-20 contains 20% Nitrogen mass/volume, 20%Phosphorous, and 20% Potassium. Yes? This leaves 40% mass/volume of the contents of the bag. Are these “contents” required to be listed by law? They are not. Does the FDA know what these contents are? It does not. So what’s the problem? 

    Recent and longitudinal research-1 indicates that nickel, mercury, lead, arsenic, and cadmium have been showing up in commercial- and consumer-grade fertilizers. Worse, cannabis is a bioremediator, therefore these toxic heavy metals are passed onto to end-use consumers. This is particularly troubling when we consider cannabis edibles will be legal for recreational consumption in October 2019. Many of the chemicals currently approved by Health Canada for use on MJ plants-2 are not intended for use on plant matter that will be ingested/digested by humans (e.g. certain miticides in the group, Scirocco, for example, contains over 50% Paraquat mass/volume, a substance deemed “extremely poisonous to humans” by the US CDC-3). 

    What I propose is that safe alternatives to these chemicals be regulated into policies governing/approving pest control, and fertilizers “other ingredients,” not simply for cannabis producers but especially in food crops policy formations.

    Best,
    – Clayton McCann MA, MFA, PhD Student & Cannabis Studies Research;
    McMaster University, Department of Anthropology
    _____________________________________________________________
    Footnotes: 
    1: https://www.advancednutrients.com/articles/heavy-metals-in-plants/
     Karadjov White Paper: https://advncd.us/UofM/Eliminating-Heavy-Metal-Toxicity-in-Medical-Marijuana.pdf
    Shaffer White Paper: http://www.pirg.org/toxics/reports/wastelands/WasteLands.pdf 

    2: https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/licensed-producers/policies-directives-guidance-information-bulletins/testing-cannabis-medical-purposes-unauthorized-pest-control-products.html– 

    3: https://emergency.cdc.gov/agent/paraquat/basics/facts.asp

    • Clayton, unfortunately footnotes aren’t evidence when all your conclusions are invalid interpretations of those listings. So just a few facts ( without extraneous footnotes);
      20/20/20 fertilizer does not contain 40% unlisted mystery elements. For instance, the nitrogen provided is commonly contained in CaNo2 (calcium nitrate), which when dissolved leaves your nitrogen, but also some calcium. The same applies to the other components which accounts for 99.99% of what you’re ascribing to toxic elements. Any naturally occurring heavy elements are the same contained in virtually all available commercial fertilizers, EVEN Organics!
      Your claim that a grower would use a miticide (bug killer) that also contains a herbicide makes no sense whatsoever, on any planet.
      I mean, really this is what results when the 1% can purchase their admission to college…

    • “Steel industry wastes, recycled into fertilizers for their high levels of zinc (essential to plant growth), wastes can include the following toxic metals: lead[72] arsenic, cadmium,[72] chromium, and nickel. The most common toxic elements in this type of fertilizer are mercury, lead, and arsenic.[73][74][75] These potentially harmful impurities can be removed; however, this significantly increases cost. Highly pure fertilizers are widely available and perhaps best known as the highly water-soluble fertilizers containing blue dyes used around households, such as Miracle-Gro. These highly water-soluble fertilizers are used in the plant nursery business and are available in larger packages at significantly less cost than retail quantities. Some inexpensive retail granular garden fertilizers are made with high purity ingredients.”

      Sorry, John. It turns out you do have to know something about fertilizers to speak to how they’re made.

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