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The Cannabis Industry Is Booming But Companies Still Face Challenges
The first law in America regarding marijuana actually required farmers to grow cannabis in order to support the textile industry, yet today, the plant is banned at the federal level.
Yet finally, legislation is easing with more than half the United States ending prohibition. Social acceptance is also blossoming, but compared to other industries, it has far to go.
Cannabis companies today–from corporate conglomerates to small-time ganjapreneurs–are faced with challenges that business owners in other sectors don’t face. This is unfortunate for communities and dangerous to businesses. Ultimately, it’s not much different than prohibition.
Still Federally Illegal
The main challenge is any “legal” marijuana in the US is only legal at the state level and not federally.
Sure states are empowered to govern themselves, but unfortunately, there are no state-regulated financial institutions. All banks in the US financial system are federally regulated and adhere strictly to federal regulations. Federal regulations say that marijuana is illegal which means banks can’t engage with these businesses. Even when a state votes to legalize, medicinal or recreational, they’re still subject to federal (over)reach.
Cash Only Business
This means dispensaries and related businesses have to operate with cash only which subjects them to additional crime, potentially increased inaccurate business records and government scrutiny with regards to taxes.
Oh yeah, that’s right, even though the government says it’s illegal they still want their cut.
Cannot Write Off Business Expenses
And, while these dispensaries and grow facilities MUST still pay federal income taxes, they cannot write off ANY business expenses.
These cannabis companies pay taxes on gross revenue which is far more than their fair share in federal tastes.
Requires a Huge Investment
Cannabis companies must overcome hurdles just to get in the game.
In the cannabis industry, there are exorbitant amounts of administrative fees, licensing processes and standards to meet that just don’t exist in other industries. The total investment for opening a cannabis company will almost always be significantly more than that of another type of business.
Limited Licenses Available
Additionally, states limit the number of licenses which means even if you meet all the criteria and pay all the fees there’s still no guarantee that you’ll be awarded a license. Communities have expressed concerns in the past that this can cause corruption as some decision makers have vested interests in who does and doesn’t get a license.
Regardless, these types of situations just don’t exist if someone were to get into the car washing business or the retail space for example. And before you say well what about restaurants, doctors, etc? They all have to get licenses, pay fees and more. True, but the state doesn’t limit the number of restaurants they license.
Advertising Is a Nightmare
Advertising is a challenge for cannabis companies looking to reach further.
Most ad networks have terms that prohibit drug content in general including alcohol and prescriptions. Google and all the social media channels prohibit cannabis-related advertising.
There are networks specialize in this type of advertising, but unfortunately, those networks are microscopic compared to larger, mainstream search engines and networks. Also, local laws often govern how, where and whether or not cannabis companies can advertise.
Again, this doesn’t happen if you’re just looking to open a restaurant. To the relief of many, cannabis sells itself. Meaning in most cases, dispensaries are getting plenty of attention even with very little or no advertising at all.
Then there’s the social stigma – society’s perception of marijuana and its consumers.
Not only does the stigma make it challenging to reach investors and partners, but the stigma even has some towns enacting town-wide prohibition and refusing to allow cannabis businesses to work in their locale.
Within time, we’re sure to see the stigma decline and expect to see the federal laws relax, but for now, cannabis companies face these challenges as they navigate this budding industry. Fortunately, despite the challenges, the cannabis industry is thriving and expecting massive growth.
About the Author
Stone Everett is a Chief Editor/Writer at Relief Treats, a pro-marijuana e-commerce blog focused on the cannabis culture, consumption accessories, CBD products and more. Along with the rest of the crew, he enjoys attending local cannabis expos and strongly advocates for legalization of consumption of all marijuana products medicinally and recreationally.
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