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Analysis: Are State-Run Cannabis Sales 'The Smart Way'?

March 6, 2019 8:30 am
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New Mexico's medical cannabis market finished 2018 with $106 million in sales across 35 licensed producers in the state. This represents a $19.6-million increase from the prior year.

After years of serving cannabis patients, an expansion to recreational use may soon occur.

New Mexico Legislators Consider Two Bills

According to a recent poll, 60 percent of New Mexico voters support marijuana legalization. Lawmakers have heard from voters and seen the figures that justify legislation.

With Gov. Michelle Lujan Grisham supporting the expanding the cannabis industry, the question is which marketplace model will be used in the Land of Enchantment.

Two bills have been submitted at this time. One, House Bill 356, is similar to cannabis legislation nationwide. The bill would legalize recreational sales and erase criminal records for certain marijuana-based offenses, among other actions.

It recently moved through the House Judiciary Committee after the bill was altered to allow companies to have zero tolerance work policies. It now heads to the full state House. 

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The other, Senate Bill 577, would treat cannabis sales like the alcohol industry. The bill, known as the Cannabis Regulation Act, would allow for state-run sales of cannabis instead of the private market other states currently use.

The bill's path to becoming law is nowhere close to complete: it needs to pass two more committees before reaching a Senate vote.

Attempts by Benzinga to reach the bill’s co-sponsor, Republican State Sen. Mark Moores, were not successful at time of publication.

In a previous phone interview, Moores explained his position.

"It’s a just matter of how we want to do it,” he said. “We should do it in a smart way.”

Looking To Canada

Despite its uncertain future, the model poses a relatively uncharted cannabis path in the U.S. Some insights may be gleaned from Canada.

Khurram Malik, CEO of Canada’s Biome Grow, operates in several provinces with varying regulations, including province-run sales. Federal regulations have been generally challenging, while provincial regulations haven’t been as much of an issue, he said.

The government control model is something Biome is still working through, and it has benefits and drawbacks, Malik said.

"Having government control helps in the early days because it gives some level of a cap on competition — a bit of a barrier to entry," he said.

Conversely, regulations do eventually hamper the industry, Malik said.

"At some point, the regulations handcuff what you can and cannot do."

In the CEO's view, most Canadians prefer a private market for the expanded offerings it brings.

"It gives them more choices and variety of options."

No Top Model

Jessica Billingsley, co-founder and CEO of cannabis compliance software MJ Freeway, provides technology to Pennsylvania and Washington government agencies for seed-to-sale regulation.

Of the numerous marijuana market models being experimented with, MJ Freeway’s data has not shown a clear-cut top choice.

The best approach for creating regulations is for lawmakers to work with the cannabis supply chain, Billingsley said.

"Where we do see clear winners are in thoughtful and constructive regulation that considers input from the industry and community,” she said.

The CEO acknowledged the work done by the National Cannabis Industry Association, which she co-founded, and its policy council think tank for shaping regulations with lawmakers.

When asked for examples of successful models in the U.S., Billingsley pointed to Colorado on the basis of its regulation and enforcement.

On the medical side, Billingsley noted Pennsylvania's early success, including registering over 100,000 patients.

New Mexico may not legalize adult use cannabis at all. Some Republicans are opposed to both proposed bills, including state GOP Chairman Steve Pearce.

"Because we fight for families and our children’s future, the Republican Party of New Mexico opposes SB 577, HB 356 and other attempts to legalize recreational marijuana," he wrote in a March guest column for the Albuquerque Journal.

Pearce cited additional crime, greater family instability and an uptick in traffic accidents as reasons for his opposition.

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