What’s Up in Weed

October 17, 2017

By: Andrea Hill

I am pleased to bring you this instalment of my blog, rounding up what’s currently happening in the cannabis industry in Canada and abroad.

Edibles!

• On October 6th, Bill C-45, the draft Cannabis Act, was updated after its second reading to:
  • remove the 100-cm home-grow plant height limit (good move – I, too, can think of better things for law enforcement to be doing than measuring the height of people’s personal horticulture), and
  • require that edibles and other cannabis concentrates become legal within a year of Bill C-45 becoming law. 
• Previously, we knew that edibles would be handled by a regulation to the Cannabis Act, but we had no insight into when that regulation would be enacted.
• Edibles are hot stuff. Hailed as the “next big thing”, and with nearly half of the respondents to a recent Dalhousie University study expressing interest in consuming them, edibles are easy (perhaps too easy) to consume.  They also, through their variety of forms, could offer licensed producers a business platform for differentiation in an industry where it seems all too possible for cannabis to become a commodity.  Companies like Colorado-based Dixie Elixirs have made signature edibles their entire business model.
• Edibles are easy to consume before bedtime, too.  That makes them ideal for the 47% of cannabis users who just want to go to sleep, according to a recent Denver study.
• With this announcement, the federal government appears to be absorbing the importance of edibles to a recreational cannabis market, at least to help legal cannabis sellers compete against the black market and illegal dispensaries.
• Other interesting updates to the Cannabis Act include the following:
  • Applications for dealer’s licences (currently governed by the Narcotic Control Regulations, a set of regulations designed for pharmaceutical dealers) for the purposes of dealing in cannabis are deemed to be applications under the Cannabis Act.  This is a way of resolving the overlap between the Cannabis Act and the NCR, and suggests that the government wants to centralize cannabis licensing applications under a single oversight system.
  • Contemplation is given to potential combinations of cannabis and each of nicotine, caffeine, and alcohol, although we don’t yet know which “classes” of cannabis, if any, might ultimately be permitted to be mixed with each substance.  Maybe none, ever.  We do know that mixing cannabis and alcohol increases the amount of THC in the bloodstream and raises the chance of crashing your car.  Don’t do it.
  • Good Samaritan carve-outs are added to the strict criminal consequences for possession of cannabis by individuals under 18 in the case of a “medical emergency” (rough definition: a life-threatening situation caused by a psychoactive substance).  Cool, but how is anyone who isn’t a medical professional supposed to know what constitutes a life-threatening situation?

Taxes!

• More big waves splashed around the media in the last few weeks as Prime Minister Trudeau proposed a tax of $1 per gram plus GST for cannabis sales up to $10, with a floor of 10% of the total price of cannabis sales over $10.  The federal government proposed splitting the tax proceeds 50/50 with the provinces – a plan which has met with surprise by some provinces, like British Columbia, and outright criticism by others, like Newfoundland and Labrador.
• It’s not clear whether the provinces will levy their own taxes on cannabis. Toronto Mayor John Tory has suggested that his city may impose levies to offset municipal costs.  That’s starting to sound like a lot of taxes. A policy analyst and economics professor have recently made the case that prices rise much above $7.50 per gram will encourage consumers to seek out black market cannabis. 
• Getting back to the federal tax proposal, at first glance, a dollar a gram seems straightforward.  But a speaker I heard recently called the tax a “clumsy” instrument because it may not be easy to apply to oils, edibles, and other cannabis derivatives.
• Clearly, more thought is required here. The “gram” of dried flower is an outdated measurement in a market where almost half of consumers want to eat, not smoke, the product. 
• Should taxes be flatly tied to price?  That seems easy, but doesn’t necessarily correlate to different risks of “social costs” arising from the consumption of various kinds of cannabis products.  For example, THC, being the main psychoactive cannabinoid (that we know of so far), has the potential to cause significant social and economic costs in the form of hospital visits, impaired driving incidents, and other cases of pot-gone-wrong. 
• CBD (cannabidiol), on the other hand, is a little angel – it doesn’t get you high, and it’s the subject of significant medical interest.  If the government’s policy objective in legalizing rec cannabis is to promote public safety, and taxes are a deterrent, perhaps THC should be the focus of taxation.
• Whatever they do, let’s not replicate the impenetrable jungle of Ontario alcohol taxes!

The Beer – er, Cannabis – Store!

• The Canadian Cannabis Co-op has been born.  Earlier this month, 12 licensed producers (ABCann, Aphria, Bonify, CannTrust, Cronos Group, Emblem, Emerald, Hydropothecary, MedReleaf, Newstrike (the parent company of Up Cannabis), Organigram, and Tilray) announced the creation of a co-op which is preparing to establish a retail solution in Alberta.

• Alberta had just released its proposed cannabis framework the day before, and is pondering the possibility of private licensed retail stores – making it  one of the first provinces to openly consider departing from the Crown-corporation model favoured by provinces such as Ontario and New Brunswick.
• In essence, the model is a lot like The Beer Store: a regulated retail business owned by producers – in this case, running the gamut from large and established (Cronos Group! Aphria!) to craft (hi there, Up Cannabis and Bonify!). 
• Notably missing from the group is industry giant Canopy Growth Corporation, even though the Co-op’s official press release states that “all LPs are welcome to join”. 
• I can’t help but wonder if Canopy, having had to blaze its own trail in so many ways in this industry (first publicly-listed LP, first major Bay Street-financed LP, first multi-site LP, first TSX-listed LP, etc.) has developed something of a taste (and flair) for independence. 

Rehash: quick links to interesting points

• In a surprise to absolutely no one, British Columbia’s premier has hinted that illegal cannabis dispensaries could have a role in BC’s recreational cannabis solution.  Shocker.
• BMO and TD are among the few chartered banks which have embraced the cannabis industry.  To be fair, though, Alterna Credit Union is the real MVP here – it stepped up to work with Canopy way back when it was still Tweed Marijuana Inc.  Probably one of their best decisions ever.
• “We don’t have any cheap, highly accurate, quick mechanism for screening large numbers of drivers for drugs. We just don’t,” says a University of Western Ontario law professor.  Coming up with a roadside test for possible cannabis impairment is a big challenge for law enforcement.

What’s Up in Weed is not legal or financial advice. It is a blog by SkyLaw which is made available for informational purposes only and should not be used as a substitute for professional advice from a lawyer. This blog is subject to copyright and may not be reproduced without our permission. 

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