“Why invest in a business that violates federal law and not act to change that law?”
By Aaron Smith, National Cannabis Industry Association
The cannabis industry is facing unprecedented challenges. People are losing money as an oversupply of product, labor shortages, supply chain disruptions and higher costs for key components like fertilizer, building materials and packaging are forcing companies to streamline operations as much as possible. Meanwhile, crushing regulatory environments and tax structures far more costly than any other industry continue to make finding financial success in cannabis very difficult.
In an effort to save money, cannabis businesses are moving away from the sort of advocacy that is necessary if the industry is going to remain sustainable, let alone improve. Unfortunately, this short-term thinking spells disaster.
The Time to Push for Reform Is Now
The current problems in the industry are moving people further away from what should be a prime directive: Federal policy reforms that will dramatically change cannabis in this country for the good.
What would the industry look like if businesses were no longer burdened by Section 280E of the Internal Revenue Code? This extreme taxation mandate effectively doubles or triples what cannabis business owners pay compared to small businesses in other industries. It creates an environment where some deep-pocketed companies can survive while all too many independent and craft operators are forced to close.
What would the industry look like with equal access to lending? How would legalized interstate commerce improve the bottom line for small cannabis companies? These are issues that the industry must address and work on to effect positive change.
Out of Sight, Out of Mind
Most of the industry’s current cash-flow problems are the result of federal prohibition. Congress did not act on the SAFE Banking Act last year and progress this year is frustratingly slow. Reforms to 280E and other much-needed policy proposals are under consideration but are still some years off.
To put it simply, until Congress is forced to make cannabis a priority, changes will not happen and institutional investors will continue to have cold feet due to the federal inaction. Which is why industry members must get involved to get their Congressional representatives and senators to understand why cannabis should be a priority and why they should act.
It’s a critical time for members of the cannabis industry to make their voices heard. Whether it is joining an advocacy group or contacting their congressperson directly (and repeatedly), the industry as a whole needs to speak up. If even half of those in the industry join forces, the chances for significant change increase dramatically.
With the disparities in lobbying at the federal level, it is the grassroots campaigns that will make a difference. As a whole, the cannabis industry spends very little on Capitol Hill, comparatively speaking, and the companies that are spending to lobby only represent a handful of cannabis operators.
For the few MSOs that are lobbying, they are primarily concerned with representing the interests of their company. Will the policies they are advocating benefit small businesses and Main Street Cannabis, or will it just mean more profits and market share for the few? It is essential to make sure that the playing ground is level for all cannabis operators—large and small—when federal legalization occurs.
There must be a unified voice for all cannabis businesses, especially small and independent operators, in the national dialogue around cannabis.
Choose Advocacy, Not Apathy
Business owners should budget for the worthwhile investment of advocacy work so they not only survive, but also have a chance to prosper. It is not necessarily Big Pharma, the alcohol industry or the tobacco lobby that might kill the legal cannabis industry. It is the industry’s own apathy that is more likely to be the cause of an implosion. The success of the industry is in our own hands and we need to get a seat at the table in order to make change.
Many cannabis operators and investors are hoping favorable reform will somehow happen by itself, which is akin to gambling their fortunes on the success of others. Why invest in a business that violates federal law and not act to change that law?
Aaron Smith is co-founder and chief executive officer of the National Cannabis Industry Association, the largest trade association representing legal cannabis businesses in the U.S. and the only one focused on representing independent cannabis businesses on a national level.