What the California Crackdown Means for Medical Marijuana Businesses in Other States

A thick haze of doom and gloom is hovering over the medical marijuana industry, with the recent crackdown on dispensaries in California setting off panic alarms across the country.The government’s recent actions in the Golden State include numerous raids and arrests that have resulted in the seizure of several hundred pounds of weed. It has also sent warning letters to landlords, saying they must sever ties with tenants selling medical marijuana or face possible prosecution. And it promises more moves to clamp down on the industry in the coming weeks and months.

Dispensary owners, growers, infused-product manufacturers and related businesses in states with medical marijuana laws are wondering who the federal government will target next.

It’s unclear how all of this is going to play out. But as the industry braces for the fallout, here are a few things worth noting:

- In California, federal officials are focusing on larger medical marijuana operations and dispensaries located close to schools at this point. If you’re a smaller operation far from an area where children congregate, you’re probably OK. What’s worrisome, however, is that the government is even targeting businesses that are fully compliant with state laws. This marks a turning point in the government’s stance toward medical marijuana, as in the past it has pretty much taken a hands-off to MMCs operating by the book. Many insiders fear that this is only the first step in a push by the government to rein in rapid – and largely unchecked – growth of the medical marijuana industrya cross the United States.

- Having said that, industry leaders in states like Colorado and Rhode Island are reassuring dispensary owners by emphasizing that California is in a completely different situation than the rest of the nation. Known as the Wild West of marijuana, California has a relatively weak and uneven regulatory framework, creating plenty of room for abuse. In Colorado, dispensaries must shell out tens of thousands of dollars to comply with strict state laws and regulations governing everything from tracking product and security to obtaining licenses. The Medical Marijuana Industry Group – a trade organization that focuses on lobbying efforts – has one word of advice for Colorado MMJ businesses: relax. “First, it’s important to remember that California does not have a comprehensive state regulatory scheme like Colorado,” the group wrote in an email to members. “Second, the feds had reasons to target those particular businesses in California – lack of compliance with local laws, too close to schools, pleas for help from local authorities, etc.”

In Rhode Island, the state has permitted just three dispensaries – vs. more than 1,000 in California. “It’s a completely different world,” JoAnne Leppanen, executive director of the Rhode Island Patient Advocacy Coalition., told the Providence Journal in Rhode Island. “It’s apples and oranges. The face of the patients has gotten lost in California.”

- The federal government has made similar threats in the past but never followed through. Officials have already told states that the government doesn’t have enough resources to focus on the medical marijuana industry. Nothing’s changed since then, and it would be surprising if we see an avalanche of raids in the next few weeks. More likely, the government is hoping tough words will lead to a contraction of the industry. By warning landlords that they face prosecution for allowing medical marijuana on their properties, the government is putting a stranglehold on dispensaries and related businesses without having to spend the money to go out and shut them down itself.