Market Overview

Ask Our Experts 9/22/2019

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Ask Our Experts 9/22/2019

Q: While the U.S. federal government prohibits cannabis, the nation's capital itself has legalized it for both medical and adult use in Washington, D.C.; how are those contradictory policies reconciled in practice?

By New Frontier Data

Last week, momentum behind legal cannabis in the District of Columbia gained more ground as local and national government and business leaders gathered for a series of cannabis-themed events held around the Congressional Black Caucus Annual Legislative Conference. Speaking at "From Seed to Sales: A Cannabis Tech Salon", organized by the National Coalition of 100 Black Women, Mayor Muriel Bowser affirmed her support for the Safe Cannabis Sales Act of 2019, a bill to create a structured regulated framework for adult-use sales in the city.

Political leaders including Congressional representatives Barbara Lee (D-CA) and Joe Neguse (D-CO) explored the impact of cannabis prohibition's legacy on minority communities, and legislative remedies to ensure that those most affected by historically inequitable enforcement can participate in the legal market's opportunities. Meanwhile, cannabis business leaders including Elroy Sailor (a board member of multistate operator Harvest), Chanda Macias (who runs DC's largest dispensary), and Hope Wiseman (the youngest minority dispensary owner in the U.S.)  spoke to both the opportunities and challenges in building a minority business involving cannabis.

In 2014, facing overwhelming resident support for legalization but a threat of injunction from conservative Congressional opponents for even discussing a regulatory framework for a retail cannabis program, the city settled on a suboptimal balance by which it was legal for adults to grow, possess, consume, and give away small amounts of cannabis,  but illegal to sell or barter for cannabis products.

The framework made the nation's capital one of the country's most unique cannabis markets. Nevertheless, the home grow market is flourishing (the city has seen two of the nation's largest seed giveaways) and vendors have rushed in to serve its cultivation hobbyists.

The city's active donation-based programs are also unique, with companies offering products ranging from apparel to art in exchange for predetermined "donations" for which the suggested item comes with a cannabis "gift" of commensurate economic value. Debate abounds about the legality of such enterprises and activities,  but — as found in other major cities like Toronto and Vancouver, where cannabis is fully legal but with constraints on legal retail channels — law enforcement officials have generally limited their efforts to pursuing the most flagrant violators of the spirit of the law.

Indeed, legalization has dramatically changed prosecutorial practices in the District. In 2014, simple possession accounted for 67% of all arrests. By 2017, three years after possession was legalized the two most common charges were misdemeanor distribution of marijuana (35%) and public consumption (29%).

As policing priorities have shifted, the dramatic imbalance in the city's marijuana arrests have persisted. In 2010, black Washingtonians were more than 8x more likely to be arrested for marijuana offenses than were white residents (the country's second-highest racial disparity among marijuana arrests after Iowa); by 2017 (though total arrests had decreased by 56%), black suspects still made up a disproportional majority of arrests.

In 2017, black men accounted for approximately 20% of the city's population, yet 81% of the city's marijuana-related arrests, highlighting persistent challenges in constraining the city's gray market while trying to rectify the racial disparities which legalization was intended to address.

While Washington's adult-use environment is uncommon, the city's more conventionally run medical cannabis program has become more mainstream as Bowser's administration has worked to address years of operation-constraining regulations. The program got a recent boost when the city council voted to permit medical reciprocity to allow patients with valid medical cannabis cards from almost all legalized states to participate in the city's cannabis program.

Washington's discordant cannabis regime obscures the significant potential opportunity that legal cannabis represents for the city.

The local market extends far beyond the city's four quadrants. With more than 6 million residents in the greater Washington metro area, the region has the nation's sixth-largest metropolitan population and is the second-largest with legalized recreational use (after California's Los Angeles/Long Beach/Anaheim core). The deep integration of the surrounding Maryland and Virginia jurisdictions into DC's economy will expand the consumer base well beyond the city's four quadrants and will necessitate regional coordination between governments along neighboring sides of the porous District border, both for law-enforcement and public-health priorities.

Washington has high-earning, high-spending consumers. According to the American Community Survey, 10 of the nation's 25 highest-income counties are in either Maryland or Virginia, all of those being proximate to the District. Savvy entrepreneurs will serve Washington's affluent, sophisticated consumers by focusing on delivering refined cannabis experiences (e.g., high-end and well-appointed retail environments and brands), resulting in generally more polished consumer experiences than those found in less capitalized markets.

Washingtonians spend more than almost any Americans on cannabis. Crowdsourced pricing shows that Washingtonians pay among the nation's highest prices for cannabis, even more than 2x what Californians typically spend on cannabis. Given such, a legally active commercial program is projected to be exceptionally lucrative.

DC is among the country's most visited cities. With 23 million visitors annually, a vast tourism market would potentially attract millions of visiting medical and adult-use consumers. The diversity of visitors to Washington could make the capital an especially important canna-tourism destination, offering introduction to a regulated cannabis market for those from unregulated jurisdictions. Similarly, the city's outsized cultural importance and media market would likely provide striking juxtapositions between its municipal practices and the federal government's contradictory posturing.

The city has more embassies and consulates than any city in the country. With nearly 180 diplomatic missions plus major international institutions including the World Bank and International Monetary Fund, Washington hosts large cohorts of international policy decisionmakers and influencers. Their experiences within a legalized cannabis market — and those of the large international media contingent covering the city — will, (whether for better or worse) significantly shape the global narrative for cannabis and its direction for development.

The post Ask Our Experts 9/22/2019 appeared first on New Frontier Data.

Image Sourced from Pixabay

Posted-In: cannabis industry New Frontier DataCannabis Markets General

 

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