Is Cannabis Rescheduling a Solution?
Experts Delve Into California Cannabis Retail Challenges At Benzinga Conference.
“I think the taxation structure makes it extremely difficult to make money given the impact of that,” said Seth Yakatan, co-founder at Katan Associates, during a dynamic Benzinga Cannabis Capital Conference panel discussion on the challenges and evolving landscape of the cannabis industry in California.
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See Also: The Real Cost Of Starting A Cannabis Business In California: Gone Are The $10,000 Startup Days
Rigid Regulations, Exorbitant Taxation & Complex Payment Processing Terrain
Sahar Ayinehsazian, a partner of Vicente LLP echoed Yakatan’s sentiment, zeroing in on the 280E tax code. “The difficulties that we're facing,” she said, succinctly encapsulating an industry beleaguered by regulatory shackles and a volatile payment processing ecosystem.
“It's like having two hands tied behind your back,” added Laurie Holcomb, founder and CEO of Gold Flora Corp, underscoring the shared sentiment of constrictive policies and taxing regimes.
Amidst these assertions, Ed Schmults, CEO at Statehouse Holdings Inc., lifted the veil on another pervasive issue: the enigmatic payment processing landscape in California. “I have no idea what's going on with payment processing in California,” Schmults confessed, laying bare a sector in desperate need of clarity and consistency.
Yet, despite these multifaceted challenges, California remains a hotbed of cannabis activity, a sentiment articulated by Schmults. “California is really tough out there,” he asserted, illustrating a terrain marked by stringent retail, product, and customer retention challenges.
In the midst of this, Yakatan’s grim observation rings clear. “Unless you're a unicorn,” he opined, no respite appears in sight amidst the aftermath of bespoke failure and Herbal’s demise.
Is Cannabis Rescheduling A Possible Solution For The CA Landscape?
Paul Weiss, CEO at PaperPlanes unveiled a nuanced perspective. “The cost of capitalism is a real tough problem in California,” Weiss acknowledged, yet optimism lurked in the background.
Ayinehsazian introduced a potential light at the end of the tunnel: cannabis rescheduling. A leap to Schedule III could spell a renaissance for California's beleaguered cannabis market.
“There's still hope for any retailers out there,” assured Drew Mathews CEO of Green Life Business Group, injecting a much-needed dose of optimism into a narrative marked by challenges.
Yet, with optimism comes caution, as Weiss refocused the lens on liquidity issues. “We then put pressure on other parts of the supply chain,” he underscored, unveiling an intricate tapestry of pressure and expectations.
In this nuanced narrative, Yakatan dropped a sobering truth. “Not every company needs to survive or deserves to survive... In our industry, there are a lot of what I call the zombies,” he stated, ushering in a candid examination of the volatile life cycles and survivalist dynamics punctuating the cannabis sector.
Holcomb amplified this, exposing the stark reality of mass consolidation and the ephemeral nature of capital in California’s cannabis milieu.
Yet, Not All Is Lost
“If you can survive, I would hold on,” advised Drew about the current state of the market for buying and selling retailers and dispensaries.
Drawing attention to the fluctuating market dynamics, Drew reminisced about a noteworthy deal in 2018 in LA where a $3 million medical sales business was sold for $10.5 million.
“Speed the clock today, every quarter, it's been declining little by little,” he noted, suggesting a trend of diminishing valuations but retaining a positive outlook. “I do believe in the tunnel,” Drew concluded, hinting at a future resurgence in market value.
by Joana Scopel
