California Marijuana and Out of State Investors
Other than the failure of the president's AFFORDABLE health care, Marijuana is one of the hottest topics in the news today. There are few newspapers or television news/talk shows that do not talk about it every day. California pot has the eye of every investor in the country - and why not?
The City of Los Angeles is the second largest city in the country… but that’s only half the story. There are somewhere between 16 and 20 million people who live in the Los Angeles Basin alone and about 12% or about 2 million people are 65 years or older. The older population is growing fast and quickly changing their attitude about medical marijuana. Marijuana Advocacy groups estimate that 3 to 4 percent of Californians are medical marijuana patients, but people in the industry feel that that this is a gross understatement. A more realistic estimate is about 10%. State wide, this is a market of about 3.8 million patients with the Los Angeles Basic market size around 2 million. Pretty strong numbers for out of state investors.
BUT, hold the phone there cookie monster. This market is tricky and dangerous. “Though you walk through the valley of death” you better fear all evil or you will suffer a painful and miserable death.
California voters approved Proposition 215 in 1996, codified as the Compassionate Use Act of 1996. It basically allowed people to possess or cultivate marijuana for personal medical purposes with the recommendation of a physician. Voters thought specifically of those struggling cancer patients who needed medical marijuana to help them keep down a cup of broth. It was a well meaning, but poorly written piece of legislation because it opened the flood gates for the medical profession to make a large sum of money writing medical marijuana recommendations for kids who whined that they were stressed out or anxious and gave them permission to get high.
Then in 2003, the Legislature enacted the Medical Marijuana Program Act which allowed
qualified patients to associate with one another in order to collectively or cooperatively cultivate marijuana for medical purposes. By 2009 all hell had broken loose. Thousands of "Medical Marijuana collective dispensaries" had opened up. City managers and elected officials as well as local law enforcement personnel were totally against them and most cities enacted total bans against them. For over a year, appellate courts were issuing various contrary opinions as to whether cities could or could not ban MMJ dispensaries. A small group of lawyers made names for themselves in the medical marijuana field - a few were ethical practitioners - but some were frauds. Then, finally, in May of 2013, the almighty California Supreme Court spoke from on high – “cities had the inherent right to ban medical marijuana dispensaries”. Within weeks, a few municipal law firms made millions closing down nearly every medical marijuana dispensary in Southern California except for about 150 in Los Angeles and less than a handful in other cities. Certain cities have allowed them but they are few and far between.
Right now, despite the fact that in Southern California there are about two million medical marijuana users, very few patients know where and how to get decent medicine. There are several “weed” locators on the internet advertising a significant number of delivery services as well as legal and illegal dispensaries. Most delivery services are no better than the cartels and you might as well be buying stuff from the corner dope dealer. There is a glut of crappie meds out there, but there are very few people who can produce top shelf - medical grade marijuana and who are doing so legally. From this writer’s perspective - I see a ton of young people coming into my office, talking to me for 45 minutes to an hour, and then walking out thinking they know everything they need to know about opening a collective - but they don't. Some I see again… from the inside of a jail cell. When they say 'I thought you said it was legal!' I tell them that they only heard what they wanted to hear. You can't expect a 20 something with a high school education, no experience in cultivation, no business management education or training, and no legal training or experience to step into a highly technical and complicated industry and excel. It is a recipe for a disaster.
First don't think you can represent yourself. Even a lawyer who represents himself knows he has a fool for a client. There are hundreds of nuances about the local political climate, the management design, the legal aspects, and the market that you cannot learn in a month or a year. When this country was first beginning, there were people who could read the signs in the wilderness. It was a skill that took years to develop. It’s the same in the case of investing in the medical marijuana business in California. Hire someone who can read the signs and knows the market.
Second, find a real expert. An honest and effective lawyer who has a team of business management experts, political connections, reputable growers and years of experience in business management, real estate law, land use and MMJ law. That kind of experience does not come overnight. A criminal defense lawyer may be an expert in defending you after you are arrested but the trick is keeping you not only from getting arrested, but making your business venture successful.
Finally, right now the medical marijuana business in California is in disarray. There is a lot of imported trash out there being sold as medicine and there are thousands of people in the business who don't know what they are doing. The time is right to enter the market - but only with the right advice. Legalization for recreational use is a long way off and it has already been tried once. California has made strides to legalized Medical Marijuana but you can't make cities tolerate the dispensaries and you can't mandate employers to allow it when it shows up in a pre-employment drug test. Furthermore, it is highly unlikely that the California legislature or the voters will change those mandates. There remains a distinct market, however, as well as a legal method to offer top shelf medicine to medical marijuana patients. You just need tracker who can read the signs!
Charles M Farano is a Medical Marijuana lawyer and Land use lawyer who has represented MMJ patients, Cultivators and MMJ Dispensaries for many years. He has been named as one of Southern California’s “Super Lawyers” by LA Magazine every year since 2009.