The ABC’s of Cannabis

Alcohol prohibition in the United States was supposed to improve health, reduce crime and solve many social problems. Instead, it was an abject failure. See any similarities to the war on cannabis? When the 18th Amendment was repealed in 1933, the United States alcohol industry (beer, wine and spirits) was in shambles. Thousands of moonshiners and bootleggers produced a product that was either high quality or could poison you. Most of the liquor was manufactured in Canada and Cuba. Post-prohibition, the federal government allowed each individual state to make their own rules in regards to ABC (Alcohol Beverage Control), in other words the production, distribution and sale of alcohol.

 

I believe we’re heading that direction now with cannabis. I’ve recently met with people who are lobbying various state capitals for an ABC-type of state-by-state control of the production, distribution and sale of cannabis. The states embrace this model as it has an 82-year history of licensing, quality control and most importantly – taxes being collected. The proposed model would only allow state licensed cannabis farms to sell to a state licensed distributor (middleman). Each batch of cannabis would be quality controlled tested (paid for by the farm) and the trimming of the agricultural product could be contracted at a central location for greater efficiency. The distributor could then only sell to state licensed dispensaries. The taxes paid to the state would occur wholesale level (farm to distributor) and again at the retail level with sales taxes.

 

You can see how the government would embrace this model as each state retains control over the current black market and brings cannabis into the light. As each of the 50 states adopts this model, the black market for cannabis goes away. How many of you buy black market liquor when you can purchase it legally at Costco, Safeway, CVS and your neighborhood convenience store? My neighbor makes really good beer in his garage. However, he can’t sell it anywhere because he doesn’t have a license to manufacture and sell alcohol. The same would be true with cannabis in the near future. Unless you had a license to grow cannabis, no one could legally purchase your product. Sure, you can grow it for personally consumption and give it to friends, but no cash would go in your pocket.

 

This ABC model would transform the cannabis industry as we know it today. Every farmer would have to submit a water plan to the state to obtain a license and environmental enforcement would become a hammer. Trespass grows would become obsolete. The pricing of cannabis would probably evolve along the lines of the Chicago Board of Trade where a farmer could purchase a forward contract to sell at a specific price six months to two years out. More importantly, taxes would be paid to the state per pound purchased and a 1099 would be issued to every farmer at the end of the year.

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