• Cultivated
  • Posts
  • Ontario wants bigger cannabis companies

Ontario wants bigger cannabis companies

Big grocery chain, but make it weed

Good morning. 

Almost there, everyone. Today, we’ve got a look at what’s happening Cultivated News’ spiritual homeland of Ontario, why border dispensaries continue to rake it in, and much more.

A 6-minute read from JB and JR

💡What’s the big deal?

Ontario wants cannabis companies to get…bigger

What happened: Unlike other jurisdictions, Ontario is doing something different with its cannabis policy: It wants companies to be able to grow more, and get bigger.

On January 1, the Ontario government doubled the number of stores individual operators could run, from 75 to 150. And, grocery giant Loblaws is pushing Ontario’s government to let them open cannabis retail within their already-existing grocery stores, Global News reports.

Why it matters: Retailers in Ontario’s competitive cannabis industry have struggled to turn a profit since Canada legalized it in 2018.

While the illicit market has been significantly stamped out (~60% of cannabis sales are in the legal market according to the Ontario Cannabis Store) in Toronto and Ontario’s other major cities, stores still have to contend with too-many legal shops and declining wholesale prices. All that means margins are slim and changes are needed to help some businesses stay afloat.

What else is happening: Canadian cannabis producers have destroyed nearly 1,700 tons of weed since legalization began, The Toronto Star reports.

🥊 Quick hits

Washington wants to raise the age to purchase high-potency cannabis products (upwards of 35% THC) to 25.

California’s Unified Cannabis Enforcement Taskforce has seized over $312 million in illicit cannabis in its first year of operation.

Dispensaries on the border rake it in

What happened: In a return to a Cultivated team favorite topic, dispensaries on the borders of states without legal pot continue to rake it in.

Dispensaries in Sunland Park, New Mexico, which is right on the border of El Paso, Texas, drove over $4 million in cannabis sales in December, according to The El Paso Times.

Why it matters: Cannabis is one of the few industries that’s legal in New Mexico, but can carry criminal penalties in Texas. That leaves Texans to drive across the border for their pot. First, that’s a waste of police resources, and second, that’s a lot of tax revenue, and job creation, going uncaptured by Texas. 

Back up: Texas has strict medicinal cannabis laws on the books, but recreational use remains a misdemeanor. That’s left Texas hemp companies in the lurch, The Dallas Observer reports.

Moving cannabis to Schedule III won’t bring states into compliance

What happened: The Congressional Research Service, a part of the National Library of Congress that helps lawmakers develop policy, says that moving cannabis to Schedule III won’t bring the state-legal cannabis industry into compliance under federal law.

In other words, moving cannabis to Schedule III wouldn’t suddenly flip a switch for cannabis companies. They’ll still be violating federal law.

It’ll be up to the Justice Department to create a rule that would let cannabis companies sell pot in states where it’s allowed without prescriptions. That would look something like the Cole Memo, which directs the DOJ to keep their hands off of state-legal cannabis. 

What would change: Moving cannabis to Schedule III would reduce criminal penalties associated with the production and sale of cannabis, but wouldn’t remove them entirely. 

And, the CRS says that the Schedule III change would get rid of the industry’s hated 280E tax, which would reduce tax burdens and help a lot of smaller businesses stay afloat. 

Our take: The move to Schedule III, coupled with that memo from the DOJ, plus some sort of congressional action on banking issues whether passing the SAFER Banking Act or similar legislation, could look like a form of quasi-legalization that’s far from perfect, as we’ve written

🎒 What we’re reading

What did you think of today's Cultivated Daily?

Login or Subscribe to participate in polls.