Tech could learn a lot from cannabis entrepreneurs

By Dan Raile , written on July 31, 2015

From The Disruption Desk

On Wednesday night in San Francisco, at a cannabis entrepreneurs meetup, Humboldt cannabis farmer cum lobbyist Hezekiah Allen, Executive Director of the Emerald Growers Association, gave an update on the fruits of recent advocacy in the California legislature.

A lot of cannabis industry action has historically taken place in spaces similar to that used for the meetup, a nondescript warehouse under a freeway overpass in a neglected nook in SOMA. Most of the time, those involved take pains to stay off the radar. Not so at the meetup, which differed little from the professional networking and speaking events that take place nightly among the technologic set. Actually, there was even some overlap – the gathering was held in the offices of the cannabis delivery software platform Meadow.

The crowd was diverse by age and gender if not by race, and comprised a mix of edibles and concentrates manufacturers, delivery entrepreneurs, cultivators, and retailers, with a smattering of lawyers and hackers.

The central issue of the 90-minute discussion was California Assembly Bill 266, which swept through the Assembly 60-8 in June and will head to the Senate this fall. Since it first appeared, the bill has been a moving target, adding articles and shifting the proposed framework regularly. It’s provisions are being negotiated among law enforcement, industry groups and patient advocates. No party thinks it’s perfect, and all have compromised. But it at least has the look of a good-faith attempt to carve a useful framework out of a thorny thicket.

It certainly lacks the adversarial bombast attending this summer’s “sharing economy” regulatory battles.

Still, the bill is complicated if not convoluted, and still very much a work in progress. With the oversight of nine state agencies, it seeks to define a comprehensive business-licensing and regulatory structure for the entire state’s medical cannabis sector, currently administered under a patchwork of local regulation. It mimics the three-tier separation – among producers, distributors and retailers – of alcohol regulations.

Allen, who wears a tie in Sacramento but appeared in jeans and headband Wednesday, gave a breakdown of the current state of the law. The collective ownership classification that currently applies to various cannabis concerns will be dissolved in favor of business licenses. Seperate licenses for small, medium and large growers, with a graduated schedule of fees, will be available for cultivators, though similar provisions have been dropped for distributors and retailers. A uniform and rigorous testing regime will be created.Previous cannabis-related felony convictions will not exclude individuals from working in the sector.

The bill still has a few sticky shortcomings: delivery-only operations are categorically denied legal status, and none of the provisions would apply in the City of Los Angeles, which passed a restrictive voter initiative in 2013.

It’s no mistake that cultivators have secured the most favorable regulatory burdens of any interest group thus far. The Emerald Growers Association has adopted a professional and focused approach to its lobbying on their behalf. Allen urged the other interest groups to overcome their competitive differences and band together as well.

“If you’re not at the table, you’re on it,” he said, repeatedly.

Allen also mentioned that well-moneyed forces are gathering to jump into the distribution tier, an entirely new sector but one with significant overhead.

Cannabis is and has long been big business in California, highly lucrative but very risky. A ballot measure to legalize recreational use is being written and expected for the 2016 election. Though that measure has yet to crystallize, momentous changes are all but inevitable. In the months leading up to the appearance of AB 266 on the Senate floor, a flurry of lobbying activity could be instrumental in assuring those changes are well-considered and agreeable for the players in the sizeable existing economy. It will require a lot of work, a lot of collaboration, negotiation and compromise, but it seems to be working so far.